Telco competition regime hasn't cut it: ACCC

Competition in the telecommunications industry has not developed to the full extent that was expected in 1997 when the industry underwent partial deregulation, said the Australian Competition and Consumer Commission yesterday on the release of the body's three annual telco reports.The reports explore competitive safeguards in telecommunications, price changes in telecommunications services in Australia and "Telstra's compliance with price control arrangements" in the period from 2002-2003.

Competition in the telecommunications industry has not developed to the full extent that was expected in 1997 when the industry underwent partial deregulation, said the Australian Competition and Consumer Commission yesterday on the release of the body's three annual telco reports.

The reports explore competitive safeguards in telecommunications, price changes in telecommunications services in Australia and "Telstra's compliance with price control arrangements" in the period from 2002-2003. The ACCC said the reports would help to guide future regulation of the industry.

ACCC commissioner Ed Willett said the competitive safeguards report shows that the carriers that have emerged since 1997 have "few directly connected customers".

"One result of this is that Telstra continues to account for the majority of directly-connected fixed-line services, and indeed Telstra and Singtel Optus account for around 99 percent of these services between them," said Willett.

The competitive safeguards report shows that for the most part "effective competition" between service providers is limited to the provision of service or access, and is most evident at the retail level or in niche markets.

Willett said despite its benefits access or service based competition does not really drive market competition.

"The ACCC believes that in the longer term, facilities-based competition is required to continue to drive efficiency, wider choice of services and price competition," he said.

However, the Department of Communications and Information Technology (DCITA) released a statement following the issue of the reports stating that "there have been a number of signs that competition is again improving".

"Competing service providers appear to be enjoying greater levels of revenue growth," stated the DCITA release.

Yet, the competition safeguards report revealed a "slow down in new carrier investment" and a "drop off in price reductions and, in some cases, price increases".

The second report titled "Prices Paid for Telecommunications Services" showed that prices paid by consumers for telco services has increased by 1 percent, marking the first rise in the index since the period from 1996-1997.

The ACCC attributes the rise to increases in fixed line (PSTN) and mobile service charges.

"With regard to PSTN services, the most significant increase was in the average price paid for basic access (or line rental) services", said Willett. "While there was a decrease in the average prices paid for local, national long distance, international and fixed-to-mobile calls, these decreases were insufficient to outweigh the increase in charges for basic access".

The telco price changes report also detected a widening gap between service charges in the residential markets and medium to large business costs.

"In 2002-03, residential consumers paid on average 5 per cent more for PSTN services than the year before, and small business consumers paid 1.1 per cent more on average", said Willett. "In contrast, however, other [medium to large] business consumers paid 8.6 per cent less, on average, for PSTN services during 2002-03."

A similar trend was also picked up in fixed-to-mobile charges, with residential consumers paying 5 percent more in 2002-2003 from the previous report, while the medium to large businesses paid 10.9 percent less.

"It is not clear whether this disparity arises from the fact that big businesses are able to negotiate more favourable deals with carriers, or whether it reflects stronger facilities-based competition in more densely populated CBDs," said Willett.

The price report also showed that mobile phone vendors sought out pre-paid customers more aggressively in 2002-2003, over post-paid subscribers.

The third report detailing Telstra's compliance with price control arrangements found that Telstra had "adequately complied with all price control requirements established by the government" and that the debate between the ACCC and Telstra over line rental price controls had been resolved.

The ACCC report said that the matter had been settled by Telstra agreeing not to use the credits remaining in the 2003-04 price cap to further increase line rentals.

"The ACCC believes that this is the appropriate way to ensure the benefits of the price control arrangements are passed onto end-users," stated the report.

DCITA stated that the three reports show an improvement in the "choice, service and prices" offered for telecommunication consumer.

"The government recognises the need for continued scrutiny of the regulatory framework and will continue to monitor industry developments and respond where necessary to facilitate industry outcomes that are in the best interests of consumers," the DCITA statement said.

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