ACCC drafts price cut for Telstra copper

11/03/2015 - 09:35

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The competition watchdog has proposed to cut prices that other operators pay Telstra to use its copper network to provide telecommunication services to consumers.

ACCC drafts price cut for Telstra copper

The competition watchdog has proposed to cut prices that other operators pay Telstra to use its copper network to provide telecommunication services to consumers.

The Australian Competition and Consumer Commission’s draft decision is for a one-off 0.7 per cent uniform cut in access prices for the period from July 2015 to June 2019.

That’s compared to a 7.2 per cent one-off price increase covering the same period that Telstra sought in October last year.

“The draft decision on prices ensures nominal price stability in the wholesale market for telecommunications services and will promote competition in the transition to the national broadband network,” ACCC chairman Rod Sims said.

He said that given the current inflation, however, the uniform price meant the prices that access seekers pay would decline in real terms over the next four years by around 12 per cent.

Mr Sims said there were two conceptual underpinnings to the ACCC’s decision.

“First, Telstra will no longer bear all the costs of declining consumer demand for fixed line services,” he said.

“Second, access seekers will only pay for the assets needed to supply them, and not for any under utilisation caused by the NBN.”

In a statement today, the ACCC said the cost allocation framework allocated costs to NBN Co for its use of leased assets, while assets that are decommissioned or used less because of the NBN are removed from the cost base for the fixed line services.

“The ACCC is also not allowing Telstra to pass on the costs of capital expenditures that are incurred in making ready for the NBN,” the competition watchdog said.

The ACCC also said the NBN rollout created a high degree of uncertainty about future demand and the costs used to estimate the draft prices than is usual for network industries.

“The ACCC is addressing this uncertainty by detailing how we will respond if the NBN rollout deviates from current forecasts,” it said.

“The ACCC does not yet have all the information on costs needed to form a final view on efficient costs and has requested further information from Telstra.”

The watchdog said it was also considering whether rising unit operating costs due to the loss of economies of scale on Telstra’s network as customers migrate to the NBN should be excluded from the prices that access seekers pay.

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