Lower prices are BAD FOR CONSUMERS, says Turnbull

(PS, ACCC, please don't spit in Telstra's soup, okay?)

Malcolm Turnbull

Communications minister Malcolm Turnbull has intervened in an Australian Consumer And Competition Commission (ACCC) inquiry, warning Australia's competition regulator not to cut the wholesale price of fixed line services.

The letter, co-signed by finance minister Matthias Cormann, warns the ACCC that varying the price of Telstra wholesale services puts the government's NBN model at risk.

The ACCC has been the regulator of fixed-line wholesale prices for more than a decade, a move which first established the basis of competitive ADSL broadband in Australia. As well as the LSS (line spectrum sharing) and ULL (unconditioned local loop – that is, naked copper), the ACCC's powers cover wholesale PSTN, line rental, and local carriage services.

The last declaration expired at the end of June 2014, and the ACCC has been working on its new determination for more than a year.

The problem is that this is the same copper as is covered by the 2011 agreement between Telstra and NBN Co, under which NBN Co pays Telstra for customer connection migrations as they happen. Telstra, Frontier Economics (for iiNet and TPG) said in its March submission, is already booking revenue from that agreement.

The competitors are essentially arguing that Telstra is therefore double-dipping: collecting payments for wholesale access to copper, while also collecting payments from NBN Co for those premises moved to its network.

They want the regulator to adjust its wholesale price models to reflect this – and that's what's gotten the warning flag raised by the government: “NBN Co's payments to Telstra should not be a consideration in determining the access price for fixed line services,” the letter states.

Referring to the deal between Telstra, NBN Co and the government, the letter states that a cut to wholesale prices “will undermine the integrity of this deal”, and that such a move might “weaken Telstra's commitment to current reforms”.

A move “may even prevent proposed amendments [to the deal] which provide NBN Co with access to existing infrastructure that enables the cost of the NBN to be reduced by an estimated $30 billion”, the letter states.

The government is also arguing that “price stability” is in the interest of access seekers, and that if access prices were temporarily reduced, “this may constitute a price shock”.

Analysis: As far as this author's memory and search skills can tell, it's somewhere between unusual and unprecedented for ministers to give the ACCC public advice as to the actions the regulator should take. For example, in spite of his famous bellicosity, previous minister Senator Stephen Conroy does not seem to have ever done so (we're happy to be corrected on this).

Vulture South has noted previously that the government's multi-technology model puts its entire broadband policy at the mercy of Telstra's goodwill, because the VDSL portion of the network can only exist with co-operation from Telstra.

The incumbent has no incentive to play nice, however, and has in the past stated that it won't play along with the multi-technology model if it can't get the full value of its agreement with NBN Co and the government for its shareholders.

Malcolm Turnbull has worked hard to maintain a confident demeanour in the face of this, but it now seems clear that a belligerent Telstra haunts his dreams – and he's prepared to give advice, along with Matthias Cormann to avoid upsetting the 900-pound gorilla, lest it seek a building to climb and aircraft to swat. ®

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