Australian Competition and Consumer Commission Acting Chairman, Mr Allan Asher, today attacked claims by Telstra that the ACCC is stifling investment in telecommunications infrastructure.
'The processes used by the Commission to identify network costs for the purpose of arbitrating access prices are well-known to the industry and were developed in consultation with it', said Mr Asher. 'They are applied in most other telecommunications jurisdictions world wide.'
Mr Asher was commenting following the release of the ACCC's supplementary submission to the Productivity Commission Review of telecommunications specific competition legislation.
'Claims by Telstra that the terms and conditions of access arbitrated by the Commission are based on a 'hypothetical' network configuration and do not enable it to recover its infrastructure costs are misleading' said Mr Asher. 'Criticism of regulatory decisions by Telstra is only to be expected and entirely self-interested. A monopolist will always want to maintain the sort of monopoly profits it earned prior to regulation. The ACCC's job is to remove that monopoly element in pricing for the benefit of all consumers while ensuring that providers of access such as Telstra are paid a reasonable price by competitors for access to network services.
Neither Telstra nor any other access provider should be entitled to guaranteed recovery of costs which result from inefficient operations or bad decisions in the past. This would not be in the interests of consumers and would not encourage efficient investment.' Mr Asher noted that the Commission's cost model provides for a return on equity of 11.39 per cent, which compares more than favourably with returns available elsewhere in the market and for other regulated businesses.
Mr Asher pointed out that the access regime had resulted in the development of both access-based and facilities-based competition in the Australian telecommunications market. 'The mix of these two forms of competition', he said, 'reflects the underlying characteristics of the markets where they have developed. In CBD areas, where population and traffic densities are high, relatively low per-line infrastructure costs and relatively high per-customer revenues mean that duplicate infrastructure is frequently cost-effective and efficient. In more sparsely settled areas, extensive duplicate infrastructure is less likely to be viable, and allowing competitors access to existing infrastructure at reasonable prices is the most efficient means of ensuring that customers in those areas can benefit from competition.
'Over time, of course, falling infrastructure costs and higher-value services are tipping the balance in favour of greater infrastructure investment, and I expect facilities-based competition to continue to intensify in this industry' Mr Asher said. 'There is also a high level of current investment in the industry. Telstra itself is reported as having invested $4.8 billion in capital expenditure during the 2000 financial year to support broadband and mobile service offerings and more than $500 million a year in regional areas to support ADSL technology. New mobile networks are being rolled out as are a range of other infrastructure investments detailed in our submission, many in regional or rural Australia.'
Mr Asher also noted recent comments by Telstra management encouraging the use of its network by competitors, such as, "finding ways to work with competitors so that they put traffic on Telstra's network rather than overbuilding… is a pretty sound commercial decision."
Mr Asher also disputed recent claims by Telstra that the ACCC has excessive discretion under the telecommunications access regime. The ACCC is required to hold a public inquiry into each potential service declaration and to take into account a range of specific considerations. Removal of regulation can be sought at any time and the ACCC itself is constantly monitoring the market to see where regulation can be removed.
'Many of the Commission's decisions are also subject to appeal to the Federal Court or the Australian Competition Tribunal (ACT)', he said. 'Telstra itself has recently lodged an appeal with the ACT, following the finalisation of a Commission determination concerning interconnection to the public switched telecommunication network (PSTN).'
Mr Asher emphasised that the Commission's priority in administering the telecommunications competition provisions is to ensure that competition and investment develop in ways which will advance the long term interests of Australia and Australians. 'Telecommunications infrastructure underpins the new services which are critical to the competitiveness of the Australian economy and which have the potential to greatly enhance the quality of life of Australian families and workers. We are crucially aware of the role our decisions play in the evolution of those services. We believe we get those decisions right.'