Telstra: ADSL competition better than regulation

Telstra has argued that the ACCC should not regulate 289 of its wholesale ADSL exchanges, as competition is enough to ensure the market remains fair.

Telstra has disagreed with the draft decision by the Australian Competition and Consumer Commission (ACCC) to continue regulating wholesale ADSL (WADSL) internet services for the next five years at 289 exchange service areas (ESAs) in particular, saying competition would be more effective than regulation.

While Telstra said it is "broadly supportive" of the draft decision, it argued in its submission [PDF] that those 289 ESAs should not be declared, as it would disincentivise other providers from investing in their own infrastructure and networks.

Telstra also suggested that the ACCC had been "compelled to make a decision that is inconsistent with regulatory best practice in the current context, despite geographic exemptions having been implemented or contemplated in other contexts".

"Competition is better able to deliver reasonable price and non-price terms than regulation," Telstra said.

"Rather than promoting competition in national markets, Telstra considers that declaration of the 289 ESAs could have a negative impact, to the extent that all carriers come to rely on Telstra's wholesale ADSL service. This could potentially occur even where some carriers have their own DSLAM networks, to the extent that their existing capacity on, and incentives to invest in, these networks are limited (eg due to the NBN rollout)."

Competition and broader competition law already removes Telstra's ability to engage in anti-competitive processes, Telstra added.

Rival telecommunications providers Optus and Macquarie Telecom, however, argued in favour of declaring those 289 ESAs during the rollout of the National Broadband Network (NBN), with Optus' submission [PDF] calling Telstra's arguments "problematic".

"Telstra remains in a unique position as the only supplier with a national network. The existence of alternative inputs and alternative downstream services does not address the fact that the inputs and retail services are not effective substitutes for Telstra's WADSL service," Optus pointed out.

"Geographic exemptions can be problematic, particularly given that the retail broadband market requires RSPs to compete on a national basis, which often requires access to alternative wholesale services as inputs where they do not have an existing network. Further, even where alternate inputs are available it would not be efficient to encourage investment in these services given that they will be shared by the NBN rollout."

Macquarie Telecom's submission [PDF] focused on the extra costs it would face were it forced to split each customer's network between several WADSL suppliers, particularly during the NBN rollout.

"Macquarie Telecom Group strongly supports the need for all 289 ESAs to be declared," the telco said in its submission.

"ADSL is a national service and a national market, and in the transition to NBN, we would expect it would become impossible to deploy in the exchange to acquire ULLS [Unconditioned Local Loop, wherein a third-party provider must rent copper from Telstra], which will be decommissioned as NBN connects, leaving WADSL as the only commercially viable access technology. It is therefore important to ensure regulated access to WADSL to ensure a competitive market for retail services to end users."

Optus added that the decision to declare WADSL services has seen "near unanimous industry support", while Macquarie Telecom expressed its "strong" support for the draft decision.

The ACCC last month announced its draft decision to continue regulating WADSL for the next five years in order to ensure any-to-any connectivity, encourage the economically efficient use of and investment in fixed-line infrastructure, and promote competition -- particularly in the face of Telstra's continuing dominance.

The ACCC in July announced its inquiry into deregulating ADSL services, saying it should reconsider the regulation considering the Australian government's NBN rollout, the increasing use of mobile data rather than fixed-line services, and the higher volumes of data being downloaded.

"Telstra retains its dominant position in both the wholesale and retail markets for the supply of ADSL fixed-line broadband services on a national level," ACCC Commissioner Cristina Cifuentes said at the time.

"Continuing regulation will ensure network providers continue to have access to Telstra's copper network at reasonable prices. This will encourage them to continue competing in the retail market to develop and offer different ADSL broadband products to meet the needs of customers as they prepare to shift to the NBN."

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