The national competition regulator has broken with the differentiated pricing strategy it has used until now to set the wholesale cost of the underlying building block of ADSL broadband, instead mandating a flat rate of $16 per month for most of Australia.
The cost is for access to what is called the "unconditioned local loop service", or ULLS, a service provided by Telstra to other rival telcos which use its wholesale services. Telcos such as Optus, iiNet and Internode use ULLS to provide ADSL broadband using their own equipment in telephone exchanges.
In the past, the ACCC has mandated a differential pricing approach where the price depended on where ADSL services were provided. Prices ranging from $6.60 in certain areas — typically metropolitan centres — to $31.30 and even $48 per month further out of town. Now the regulator has set a flat monthly cost of $16 for most areas.
In a statement, the regulator's chairman Graeme Samuel said that the ACCC had decided to set a single ULLS price for most areas in order to promote industry stability during the transition to the new telecommunications access regime which came into place in January this year.
Wholesale prices for other services, such as Wholesale Line Rental and the Local Carriage Service, have fallen due to assessed lower costs of providing the services among other reasons.
"It is important to acknowledge the major shift in our approach to pricing these services and that the move to a Building Block model in telecommunications has been widely supported by industry for some time," Samuel said.
The new pricing model is not required to be adopted by telcos; they can still negotiate independently. However, it establishes what the ACCC described as a "benchmark" which Telstra and others could fall back upon when negotiating deals.
The ACCC is also planning to shortly commence a public inquiry into the making of fixed-line access determinations and will release its pricing model upon commencement of the inquiry.
The debate around what the ULLS input into broadband should cost has been raging for years now. In May last year, the Australian Competition Tribunal rejected Telstra's argument that the ULLS price should be almost doubled to $30 in metropolitan areas — an argument the telco has attempted to make numerous times.
Much of ULLS pricing will gradually become irrelevant over the next half-decade as the National Broadband Network fibre roll-out hits Australian premises. Basic wholesale prices for access to the NBN's fibre range from $24 per month to $150 a month for access seekers.