ACCC investigates deregulating ADSL

With the rollout of the NBN and continuing high usage of mobile internet services, the telecommunications regulator is looking into whether to regulate ADSL from 2019.

The Australian Competition and Consumer Commission (ACCC) has announced commencing an inquiry into whether wholesale ADSL internet services should continue being regulated in the face of the federal government's National Broadband Network (NBN) rollout, the use of mobile data, and the higher volumes of data being downloaded.

According to the ACCC, ADSL services are still the dominant broadband technology in use within Australia for fixed-line services, but technological progress -- such as "super-fast" broadband being provided on fibre and hybrid fibre-coaxial (HFC) NBN networks -- needs to be taken into consideration.

"A number of changes have occurred since the wholesale ADSL service was first declared in 2012, including the progressive rollout of the National Broadband Network," ACCC Commissioner Roger Featherston said.

"This inquiry will assist the ACCC in determining whether continued declaration of the wholesale ADSL service is in the long-term interests of end users."

In making a decision on whether to extend, revoke, or vary the declaration of wholesale ADSL services, the ACCC must take into account telecommunications services competition, the availability of any-to-any connectivity, and promoting economical use of and investment in telecommunications infrastructure.

Taking these and the changes in the market into account, the ACCC noted that ADSL services are "likely" to attract regulation into the future, as mobile services are used to complement rather than replace fixed-line broadband.

"Given these recent considerations, the ACCC is of the view that high-speed fixed-line broadband markets supplied by ADSL services are likely to be relevant to this declaration inquiry. The ACCC is conscious, however, that customers appear to be substituting out of the high-speed fixed-line broadband market (supplied on ADSL networks) into the super-fast fixed-line broadband market, suggesting that ADSL price/service offerings are likely to be constrained by services offered on fibre and HFC networks," the Wholesale ADSL service declaration inquiry: Discussion paper [PDF] said.

"While there are a significant number of customers with mobile broadband connections, the ACCC has previously found most consumers use a mobile broadband service as a complement to a fixed-line broadband service. This reflects the pricing of mobile broadband services and the related data rates and usage, as well as the data intensity of particular activities. While the ACCC also noted that more recently some consumers with very low data requirements appear to be using mobile broadband as a substitute for fixed-line broadband services, it is not considered the current pricing of mobile broadband services across the full range of data usage result in complete substitutability.

"The ACCC also notes that the wireless services provided by NBN Co have a maximum monthly download limit of 200GB, as laid out in its Fair Use Policy. This constrains the extent to which these wireless services would be considered substitutes."

The ACCC is inviting submissions by interested parties, with those parties to address: Whether mobile, fixed-wireless, and satellite broadband services are substitutes for fixed-line services; whether delays in negotiating wholesale DSL charges after Telstra's retail price change impacted access seekers' ability to compete; how the wholesale terms imposed on Telstra compare with those of other wholesale ADSL providers; whether it is "imperative" prior to the NBN's rollout to have an existing subscriber base, and whether there are barriers to shifting to different NBN service providers; whether the wholesale ADSL service is being used to attain a subscriber base for the purposes of the NBN transition; whether the NBN transition poses risks to competition if ADSL is not regulated; what impact the NBN has on use of and investment in wholesale ADSL services; whether the declaration of wholesale ADSL services would encourage use of and investment in NBN infrastructure; and whether the ADSL wholesale declaration date should align with the completion date for the NBN.

The regulator also wants submissions to address what markets are relevant to the inquiry; whether markets should be examined on a geographic or national basis; whether the ACCC should assess both retail and wholesale markets; to what extent fixed-line technologies with different data rates can be substituted; what evidence suggests that high-speed and super-fast broadband services are in separate markets; what the state of competition is for high-speed fixed-line broadband markets; whether the wholesale and retail market levels have effective competition as based on subscriber numbers and market share data; whether there are any geographic areas where wholesale or retail competition is considered effective; what the barriers to entry affecting competition in high-speed fixed-line broadband wholesale or retail markets are; whether there exist any issues on the "technical feasibility of supplying the wholesale ADSL service"; whether advancements in ADSL technology or the markets involved necessitate a change in the service description; and what the duration for a declaration should be.

Lastly, the ACCC has asked submissions to deal with whether there are competition implications for price differentials between on-net and off-net ADSL pricing; whether and how the declaration of the wholesale ADSL service promotes competition; whether concerns about competition evident in 2012 still exist; whether commercial wholesale ADSL service terms and conditions are set according to the ACCC determinations or independently, and whether they inhibit competition or allow discrimination between prices for different access seekers; whether there are any opportunities remaining for investment in competing DSL networks; whether declaration of wholesale ADSL would cause a considerable increase in regulatory burden; whether any specific costs should be taken into account for such a regulatory burden; and whether there are implications for other regulatory processes to be considered during the wholesale ADSL declaration inquiry.

The ACCC is accepting submissions until July 29, 2016, with its decision to be finalised in February 2017.

Last October, the ACCC similarly published its final decision on fixed-line pricing, including ADSL, slashing the prices that Telstra can charge its wholesale customers for use of its legacy copper network during the transition to the National Broadband Network (NBN) by 9.4 percent.

While the competition watchdog had originally planned to reduce prices across seven of its fixed-line wholesale services by just 0.7 percent, it then amended this to 9.4 percent in its final decision. The prices came into effect on November 1, 2015, and will remain in place until June 30, 2019.

Telstra then took the matter to the Federal Court of Australia, arguing that the decision to slash wholesale prices will prevent it from recovering "substantial" depreciation and maintenance costs associated with the copper network. CEO Andrew Penn has previously stated that the determination will reduce Telstra's revenue by up to AU$80 million for FY16 alone.

The hearing wrapped up in early March, with the parties still waiting to hear the Federal Court's judgment on the matter.