The Australian Competition and Consumer Commission (ACCC) has had second thoughts about Telstra exchanges that it had previously exempted from regulation, saying that some may not be living up to its expectations.
In August 2008, the ACCC decided that 248 Telstra exchanges would be exempt from regulation, as long as the exchange service areas (ESA) had three or more unconditioned local loop service (ULLS)-based competitors providing services to 14,000 or more customers.
Earlier this year, when the ACCC mandated that Telstra could charge $16 to its competitors for access to the ULLS in most areas, the telco said it would be considering the future of these exemptions.
Yesterday, the Commission said that, after almost three years, it seemed that some of these exchanges were not meeting their exemption requirements.
"The ACCC is concerned that competitive pressures on Telstra in the exempt exchanges may not be living up to expectations at the time of the original exemption decision. The ACCC is also concerned that wholesale service offers in the exempt exchanges may be on substantially less-favourable terms than those available in regulated exchanges," the commission said.
Optus' submission — to the fixed-line access determinations discussion paper that the ACCC released on the matter — noted that the regulation exemptions would lead to Telstra squeezing out its competitors at those exchanges.
"Contrary to the ACCC's wishful thinking, the removal of access to regulated resale services is not a significant driver of investment in DSLAM infrastructure, particularly given the overriding impact of the NBN on investment decisions in the current climate," he said. "The only impact of this exemption is to enable Telstra to raise its wholesale prices without constraint in exempted exchange areas."
Herbert Geer, acting on behalf of iiNet, Internode, Adam Internet and Aussie Broadband, said that incorporating the new access determinations would "lead to Telstra becoming unconstrained in the markets for wholesale and retail voice services", while Macquarie Telecom said that the exemption determinations had ceased to have an effect.
Telstra told ZDNet Australia that the company believes the ACCC should continue to apply the exemptions to exchanges that are competitive.
"Telstra considers that access seeker submissions against the exemptions are without merit, and will lodge a further submission with ACCC, which rebuts access seeker submissions and reinforces the appropriateness of the exemptions," the telco said.
Noting submissions received from Telstra's rivals, ACCC chair Graeme Samuel said that the ACCC would now seek more information before making a decision on the future of the exempted exchanges.
"The impact of the exemptions is significant — in practice, once the exemptions take effect, access seekers can no longer rely on regulated access to the services in these ESAs, and must commercially agree the terms and conditions of access," Samuel said. "In considering this important issue, we need to gather some additional information on matters such as access seeker investment, alternative supply and the impact of the NBN."
For now, the number of exempted exchanges sits at 215, and any new decision on exemptions will be made to take effect from 30 December 2011. The ACCC is also expected to make a final decision on the pricing for declared fixed-line services in the next four weeks.