[AusNOG] Telstra goes after ACCC (AFR Article)

Bevan Slattery bevan at staff.pipenetworks.com
Sat Jan 14 20:04:41 EST 2006

A disturbing development.  What a shame the ACCC didn't take the Telstra
undertaking of de-averaged ULL and fought it later.  The new undertaking
(to my limited understanding) seems to suck ass.

As you need an AFR login to read the story I'll paste it here for the
lists digestion...

Telstra throws down gauntlet over ACCC row
David Crowe

Telstra has issued a new challenge to the competition regulator over
price controls that could wipe $1.4billion from annual revenue, laying
the groundwork for a landmark legal challenge.

The move intensifies pressure on the Howard government to lighten the
telco's regulatory load as cabinet is set to decide whether to proceed
with full privatisation this year.

The battle over prices to access basic Telstra phone lines is seen as
the biggest regulatory hurdle to the sale, given Telstra's warnings that
a harsh ruling could cut its market value by $6.1billion.

Telstra's detailed submission to the Australian Competition and Consumer
Commission, to be released in the coming week, insists the regulator
abandon the model it has used to derive the price Telstra should charge
others for access to basic line services.

Sources said the submission proposes a model that would raise the cost
for Optus and others that want to rent Telstra lines to offer their own
broadband services.
Telstra's arguments follow a decision by Prime Minister John Howard and
senior cabinet ministers to ask the ACCC to justify its approach. The
ministers expect to decide in February in favour of ACCC or Telstra. A
full cabinet meeting in February or March will decide whether to go
ahead with the sale.

The fight centres on the fees Telstra charges rivals such as Optus that
want to rent the copper lines between households and telephone
exchanges, known as the unconditioned local loop (ULL).

The ACCC has pressured Telstra to set wholesale ULL prices higher in
country areas, arguing the underlying cost is cheaper in the cities. But
Telstra has warned that higher wholesale prices in rural areas would
eventually force it to increase retail phone prices in the bush.

Telstra chief financial officer John Stanhope said the ACCC's model
could cut revenue by $1.4billion in 2007-08 and $1.9 billion in 2009-10
- wiping $6.1 billion off its market value.

Telstra proposes a national average wholesale price of $30 a month and
objects to the ACCC's plan to allocate underlying ULL costs - a
technical issue that sets the scene for a landmark legal battle.

The ACCC wants to spread the "service specific" ULL costs across about
10million phone lines, and Telstra wants to allocate the costs only to
those lines that adopt ULL services - a position that would add
significantly to the monthly ULL fee.

Telstra is understood to be preparing to appeal to the Australian
Competition Tribunal, on the principle of average pricing and on the
specific price to be set.

UBS analysts forecast the ACCC would compromise by suggesting a single
national average price of $24 a month.

"In our view, it would seem grossly unfair that Telstra should be left
with a proportion of sub-economic retail customers which would be of no
interest to ULL-based competitors," they said.

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