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Telstra Told To Drop Prices By ACCC

Telstra Told To Drop Prices By ACCC The decision requires a one-off uniform fall in access prices of 9.6 per cent, to apply from October 1, 2015, until June 30, 2019, revising a 0.7 per cent fall estimated in the ACCC’s March draft decision.

The ACCC stated the March figure was an interim figure, subject to consideration of outstanding issues.

The ACCC noted the most important issue for the decision is the effect of the transition from Telstra’s fixed-line network to the NBN, with the NBN replacing Telstra’s legacy network as the infrastructure over which Australians receive fixed-line voice and broadband communications.

With services disconnected from the legacy network, some assets become redundant, while the efficiencies of servicing large numbers of customers are progressively lost, the ACCC stated.

“Users of Telstra’s network should not pay the higher costs that result from fewer customers as NBN migration occurs,” ACCC chairman Rod Sims commented.

“If there is no adjustment for these higher costs, then customers who have not been migrated to the NBN will pay significantly higher prices for copper-based services. Eventually these prices would reach absurd levels for the unlucky last copper customers.

“Our draft decision is that assets that become redundant as a result of migration will be removed from the asset base. Also, users of the copper network will not pay the higher prices that result from the loss of scale efficiencies as the number of services remaining on the copper network falls.”

Sims further commented that the decision reflects that Telstra “had the opportunity in its negotiations with NBN to ensure that it received consideration for the effects of service migration, including the costs associated with the loss of economies of scale and asset redundancy”.

The ACCC stated that other outstanding issues which it has now included in the draft decision are its views on Telstra’s efficient costs and its proposed cost allocation framework, adding that Telstra has provided “significantly more information” with regard to its operating and capital expenditures and has also revised its forecasts.

“The ACCC’s draft decision will now accept Telstra’s latest expenditure forecasts, subject to the exclusion of the capital and operating expenditures that are specific to the NBN and which should not be recovered from users of the copper network,” Sims commented.

With regard to the cost allocation framework to be used to determine prices, the ACCC stated it maintains its position to adopt the fully allocated framework proposed by Telstra.

Stakeholder submissions are due to the ACCC by July 17, 2015, with the ACCC intending to release its final decision at the end of September.