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Telstra ambit claim gets ACCC pushback

Tell 'em they're DREAMING, son

The stage is set for another drawn-out battle over wholesale telecommunication service pricing in Australia, with the Australian Competition and Consumer Commission (ACCC) indicating it's not going to rubber-stamp Telstra's request for a 7.2 per cent price hike.

In a media statement published today, the regulator's chair Rod Sims says while he agrees that migration of Australians to the National Broadband Network is an important factor in setting wholesale price services, the ACCC disagrees with how the carrier calculated the price it wants.

Telstra's argument, put forward in this submission to the ACCC earlier this month, was that as customers migrate to the NBN – whether on fibre or copper infrastructure – demand for Telstra infrastructure will fall faster than its costs.

The carrier also argued that the NBN Co payments (negotiated in the 2011 Heads of Agreement signed by the two carriers and the government) are irrelevant to the pricing consideration since “it is not right to take account of revenue unrelated to costs”.

So far, so good: the ACCC agrees on this point, with its media release noting “The ACCC will use the regulatory value of Telstra’s assets, not the higher payments agreed between Telstra and NBN Co in their Definitive Agreements, to adjust the cost base for NBN effects when determining regulated charges” (emphasis added).

The regulator doesn't believe the NBN is the only driver behind Telstra's loss of fixed line market share, citing customers' move to competitors (by way of naked DSL) and to mobile services. Competitive impacts, it says, will be “dealt with in the draft decision on the FAD primary price terms”, due in 2015.

Laying out the principles it intends to consider in looking at fixed line wholesale costs, the statement says: “The ACCC considers that an adjustment should also be made to account for assets becoming redundant as a consequence of the migration of customers to the NBN. The ACCC will adjust the cost base to remove the regulatory values of decommissioned assets and to account for the declining utilisation of assets due to NBN migration prior to full decommissioning. This will ensure that Telstra does not recover through regulated prices the costs of assets that are no longer used to supply the declared services.”

The full position statement from the ACCC is here. ®

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