The Australian Competition and Consumer Commission has officially called on Telstra to reduce its line sharing service costs, Perth-based iiNet has announced, but the giant intends to challenge the ruling.
The Australian Competition and Consumer Commission has officially called on Telstra to reduce its line sharing service costs, Perth-based iiNet has announced, but the giant intends to challenge the ruling.
iiNet subsidiary Chime Communications, formerly Arkane Pty Ltd and iiTel Pty Ltd, had initially challenged Telstra over the cost the company charged for use of its lines.
Chime uses Telstra's line sharing service, which enables broadband ISPs to use a Telstra copper pair to deliver ADSL services while it continues to provide a normal telephone system, when selling wholesale telephony and data services to corporate clients and ISPs.
Under the determination, a new rate of $2.50 per month replaces the interim rate of $3.20 per month, and will be backdated to June 1, 2004.
In an announcement, iiNet said it had 136,155 broadband services on LSS at the end of the financial year, resulting in reduced costs going forward of approximately $95,000 per month relative to the interim rate, or $885,000 per month if the previous rate of $9.00 had continued to be applied today.
The ACCC has directed that the settlement amount is to be paid by August 24 2007. The company said in an announcement that it expected a once-off settlement in the vicinity of $16 million.
But Telstra spokesman Jeremy Mitchell said his company would challenge the ruling.
"We will always protect our shareholder's assets from any third party who enjoys privileged regulatory protection so they don't have to worry about building, installing and maintaining their own infrastructure," he said.
The news comes after an announcement the previous day of an interim ACCC determination that Telstra reduce its wholesale line rental charges to $23.12 per month for home line rentals and $25.84 per month for businesses.
In an announcement last month, iiNet said this would mean a $5 drop in retail line rental costs, from $34.95 to $29.95.
However, the ACCC also ruled that local call costs on the service should be increased to offset the decrease in line rental, up to 32 per cent at the wholesale level, according to iiNet. This will increase local calls from 17c to 20c.
The full text of iiNet's LSS announcement is pasted below, followed by another on wholesale line rental charges.
ACCC Confirms Draft Final Determination for Line Sharing Service
iiNet Ltd, through its subsidiary Chime Communications Pty Ltd, has been advised by the Australian Competition and Consumer Commission that a Draft Final Determination issued in March this year, for Telstra's Line Sharing Service (LSS) charges, has now been issued as a Final Determination (FD).
"The ACCC has been consistent in its approach, despite an astonishing campaign by Telstra," said Managing Director Michael Malone. "The message from this decision is that carriers can invest with confidence. We all know the rules, and the independent umpire is there to ensure that all players play fair, even Telstra."
The LSS is a Declared Service and a key component of iiNet's award winning high speed broadband service. It has been the subject of an access dispute lodged with the ACCC in November, 2005. Receipt of the previous Draft was announced by the Company on 30 March 2007, with an expectation that the Draft would become Final by 30 June 2007.
The FD addresses a number of disputed issues including:
- Monthly charges;
- Once-off charges such as connection and disconnection fees;
- Non-price terms including those relating to, for example, management of mass migrations; and
- The settlement of backdated adjustments.
The FD is effective immediately, cannot be stayed and is binding and enforceable. The parties have no rights of appeal on the merit of the decision.
The new rate of $2.50 replaces the interim rate of $3.20 per month, and will be backdated to the 1 June 2004. At 30 June 2007 iiNet had 136,155 broadband services on LSS (see below), resulting in reduced costs going forward of approximately $95,000 per month relative to the interim rate, or $885,000 per month if the previous rate of $9.00 had
continued to be applied today.
The ACCC has directed that the settlement amount is to be paid by 24 August 2007. A once-off settlement in the vicinity of $16 million is expected.
The Final Determination is in line with expectations and was incorporated into the guidance given to the market on 3 May 2007, with the decision crystallising a $5.1 million benefit to FY07. Based on unaudited results at hand, on a normalised basis the full year FY07 EBITDA result should be in excess of $39 million. There will be an additional
positive adjustment to FY07 of approximately $6.9 million relating to the benefit arising from prior periods as a result of this determination.
"This conclusion to the LSS dispute is very significant for consumers," said Mr Malone.
"We are extremely satisfied with the way this has been handled by the ACCC and look forward to a period of certainty for ourselves, our shareholders and our customers."
"The LSS decision follows the positive ULL interim determination and the Australian Competition Tribunal's supportive judgements on both LSS and ULL. The process may not always be quick, but it is very thorough. We can be confident these determinations are delivering the right results for consumers."
The second iiNet announcement is pasted below
iiNet, through its subsidiary Chime Communications, has been notified by the ACCC that Telstra will have to reduce the wholesale line rental (WLR) for fixed line telephony that it charges Chime.
The ACCC has issued an Interim Determination following an Access Dispute lodged by Chime early in 2007. The Determination sets a wholesale rate of $23.12 monthly (for Home Line Part) and $25.84 monthly (for Business Line Part). It is, however, a case of "good news, bad news" as the determination also includes a 32% price increase for local calls at the wholesale level.
The ACCC currently links the WLR with local calls and the two services are not available separately. The interim result comes about after almost 18 months of dispute with Telstra following increased WLR prices in December 2005.
ADSL broadband, as provided by iiNet, requires the provision of an associated telephone service. WLR is used by iiNet to provide customers with the underlying telephony services in combination with a range of high speed broadband products.
As a result of these cost changes, the retail price of line rental can be reduced from $34.95 to $29.95, but it the retail price of local calls will increase from 17c to 20c per call. Customers on a qualifying broadband plan will be able to move to this new phone plan using toolbox, iiNet's self service portal.
"The pricing for line rental is important to customers," said iiNet CEO Mr Michael Malone. "We have approximately 90,000 customers purchasing a basic phone service from iiNet, but this number is lower than we would have liked because we haven't been able to provide a competitive price for line rental for the last year and a half. This decision is only an interim one but it gives us the chance to get line rental back in line with the market."
The price changes apply only to residential customers. iiNet previously absorbed the changes for business phone line rental.
