The Australian Competition and Consumer Commission today issued a draft decision proposing to reject Telstra's application for exemption from its obligations to supply regulated fixed line services to Optus within Optus's Hybrid Fibre Coaxial cable network footprint.

The ACCC also issued a draft decision that proposes to allow certain exemptions relating to the Domestic Transmission Capacity Service.

The ACCC is not satisfied that granting the 'HFC exemption' would promote the long term interests of end users. The ACCC's draft decision highlights two major concerns with the application:

  • the singling out of a particular competitor would represent a discriminatory access policy which would be likely to discourage investment in the telecommunications industry
  • Telstra's strong position in the pay TV market, through its interest in Foxtel, would be likely to limit any possible competitive benefits from granting the exemption.

"Good regulation is about promoting competition and not about particular competitors," ACCC Chairman, Mr Graeme Samuel, said today. "The ACCC is concerned that this exemption application from Telstra focuses too much on one competitor, rather than benefiting consumers and competition generally.

"The ACCC has significant concerns that singling out competitors on the basis of their investments could, contrary to Telstra's arguments, actually discourage efficient investment by competitive carriers.  This could undermine the potential for efficient facilities-based competition."

The ACCC also has concerns about the impact of the pay TV market, particularly Telstra's ownership of a competing HFC network, its interest in Foxtel and resulting control over content.

"As the ACCC has previously stated, Telstra's interest in Foxtel limits competition for content and services in the pay TV market," Mr Samuel said. "This acts to the detriment of consumers of other services, such as broadband and telephony, and impacts on the efficiency of further investment in the Optus HFC network."

The ACCC also issued today a draft decision proposing to grant Telstra exemptions from its obligations to supply the declared domestic transmission capacity service for:

  • capital-regional transmission on nine capital-regional routes
  • inter-exchange transmission in 16 CBD exchange service areas, and
  • inter-exchange transmission in 70 metropolitan exchange service areas
  • and to grant a class exemption to the same extent.

The ACCC, however, proposes to refuse Telstra's exemption applications for the supply of DTCS for tail-end transmission in metropolitan and CBD areas.

The ACCC's draft view is that certain DTCS services (of specified types) no longer represent an "enduring bottleneck" in the areas proposed for exemption.  This is on the basis of evidence of two alternative fibre networks, in addition to Telstra, which the ACCC considers to be competitive or able to feasibly contest the market for transmission services.

The ACCC's draft decisions on Telstra's exemption applications will be available on the ACCC website.

The ACCC is inviting interested parties to respond to the issues raised in these draft decisions by Monday 13 October 2008 for both the Optus HFC exemption and the DTCS exemptions.