The Australian Competition and Consumer Commission today made two decisions on related matters regarding fixed interconnection, local call resale and wholesale line rental.
The ACCC issued its final decision to reject Telstra's undertakings for fixed interconnection (PSTN) and local call resale (LCS) services and has released indicative prices for fixed interconnection, local call resale and wholesale line rental services.
Telstra's undertaking for fixed interconnection and local call resale
Telstra's proposed undertaking prices would involve a substantial reduction in the headline local call resale prices and a substantial increase in the headline fixed interconnection prices.
"The ACCC is not satisfied that Telstra's proposed prices, which have been presented to the ACCC as a package, are reasonable", ACCC Chairman, Mr Graeme Samuel, said today.
"Telstra's proposed pricing approach for the fixed interconnection and the local call resale services would represent a fundamental shift in the competitive dynamics in the fixed line services markets. Telstra's proposed pricing would significantly disadvantage facilities based access seekers".
The ACCC also continues to have concerns as to whether Telstra's proposed network cost estimates, which rely on its PIE II cost model, are reasonable. On the material available to the ACCC to date, the ACCC is not satisfied that Telstra's proposed charges were based on reasonable estimates of efficient costs.
Indicative prices for fixed interconnection, local call resale and wholesale line rental services
The ACCC also released its final determination on pricing principles for fixed interconnection and local call resale services, as well as for the wholesale line rental service. Associated with the pricing principles, the ACCC also issued indicative prices for all three services. The principles and indicative prices will operate up to 31 December 2007.
With the rejection of Telstra's undertakings, the price of access to the fixed interconnection, local call resale and wholesale line rental services will continue to be subject to agreement between Telstra and its wholesale customers. Where commercial agreement is unable to be reached, it will be subject to arbitral determination by the ACCC. The ACCC's pricing principles and indicative prices for the three services are used as a guide in any such arbitrations.
Consistent with the draft issued by the ACCC on 28 July 2006, the ACCC has determined a cost-based (TSLRIC+*) approach to the pricing of the fixed interconnection and maintained a retail minus retail cost approach for the local call resale and wholesale line rental.
"The ACCC's approach in applying a retail minus approach to both these services is to ensure that regulated pricing is explicit, transparent and, most importantly, competitively neutral", Mr Samuel said.
The ACCC notes that indicative access prices set out in a determination are non-binding on parties to arbitrations or undertaking assessments.
"The purpose of the determination is to provide guidance to industry on prices that are likely to guide the ACCC when considering an access dispute for these services".
The ACCC, however considers that any indicative prices relating to the pricing of LCS and WLR for 2006-07 will be transitional in nature. They will stay in place while the ACCC undertakes more detailed analysis on assessing efficient LCS and WLR costs and prices using appropriate costing models.
Copies of the ACCC's final reports and other documentation relevant to the access undertakings and pricing principles and indicative prices (including the undertakings, Telstra's supporting submissions and other material) will be available on the ACCC website.