ACCC releases final decision on prices for regulated transmission services

21 April 2016

The Australian Competition and Consumer Commission has released its final decision on the regulated prices for the declared Domestic Transmission Capacity Service (DTCS).

The ACCC’s 2016 DTCS final access determination (FAD) sets DTCS pricing which is significantly lower than the regulated prices set in the 2012 DTCS FAD. For example, compared to the 2012 FAD, it is estimated that:

  • average prices for short distance, low capacity services (2Mbps) decline by 13 percent in metro areas and 22 percent in regional areas, and
  • average prices for long distance, high capacity services (100Mbps) decline by 76 per cent in metro areas and 78 percent in regional areas.

 However, the extent of the reduction in pricing for a specific part of the market will depend upon the geographic route type, capacity, and distance of a particular service.

“We have seen a downward trend in commercial transmission prices in recent years and this trend is reflected in lower DTCS pricing, particularly on high capacity, regional routes,” ACCC Chairman Rod Sims said.

“Because transmission is an essential input for many services, we consider that lower prices will promote competition in downstream markets and put more downward pressure upon wholesale transmission prices, particularly in regional areas. We expect that these lower prices will be passed on to end users in the form of lower prices and new, innovative services.”

The prices for regulated transmission services are based upon a domestic benchmark of prices in competitive areas. Under this approach, transmission prices on competitive routes are used to determine prices that would be expected for declared (or regulated) routes if these routes were priced competitively by the market.

Following the publication of the draft decision in September 2015, the ACCC has undertaken further consultation and analysis of the data. This has resulted in some adjustments to the model, particularly for the pricing of low capacity, short distance services which are used to provide voice services in the corporate and government sectors.

The FAD also sets an uplift factor for services to Tasmania. The uplift factor seeks to account for the increased costs and risk in providing services which use an undersea cable component, such as those across Bass Strait. The current outage in the Basslink cable is an example of the increased costs that can be incurred when relying upon an undersea cable.

“It is important that regulated prices reflect, and allow for, the recovery of these costs, but still promote competition,” Mr Sims said.

“While the higher uplift factor provides pricing similar to current commercial pricing at the lower capacity levels, there are significant reductions in regulated prices for higher capacity services.”

The ACCC has provided a calculator on its website to assist access seekers and providers determine regulated prices for declared DTCS routes. The prices for the DTCS will apply from 21 April 2016 to 31 December 2019.

The ACCC’s inquiry has benefited significantly as a result of the engagement from and consultation with industry stakeholders during the development of the pricing model.

“We believe that this collaborative process has resulted in a model that better predicts prices for regulated routes and areas,” Mr Sims said.

The ACCC’s final decision and related materials are available at: Domestic transmission capacity service final access determination inquiry 2014

Background

Transmission, often referred to as backhaul, is a high capacity wholesale service used by telecommunications companies to carry large volumes of data between locations where they do not have their own infrastructure. The DTCS is the regulated transmission service.

While there is a lot of competition on transmission routes between capital cities and in metropolitan areas, the ACCC regulates transmission on routes in regional areas and outer metropolitan areas where there is insufficient competition.  The last pricing decision was in 2012. Since then, commercial prices have fallen considerably which is reflected in the revised regulated pricing.
 

Release number: 
MR 58/16
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