Competition watchdog stands firm on caps

Australia's competition watchdog has recommended Telstra should cap local calls at 22 cents for the next three years.In a report released yesterday afternoon, the Australian Competition and Consumer Commission (ACCC) confirmed recommendations originally drafted in November last year.

Australia's competition watchdog has recommended Telstra should cap local calls at 22 cents for the next three years.

In a report released yesterday afternoon, the Australian Competition and Consumer Commission (ACCC) confirmed recommendations originally drafted in November last year. The report recommended current caps of 22 cents for local calls and calls to Internet service providers and 40 cents for local calls from payphones should remain. The recommendations cover the three-year period starting July 2005. The current price control regime ends in June.

The report also said a phone package containing line rental, local calls, domestic and international long distance and fixed-to-mobile calls should decrease in price by an average of 4 percent per year in real terms.

The report recommended a similar price cap for connection services, along with other controls on price movements of Telstra's HomeLine and BusinessLine products.

However, Telstra violently disagrees with the recommendations. The telecommunications heavyweight said shortly after the report's release it believes "the methodology in this report is so flawed that the government should consider referring the report to the Productivity Commission for analysis".

Telstra's group managing director, regulatory, corporate and human relations, Bill Scales said of the report that it contained fundamental errors that cast serious doubt on the ACCC's key recommendations. "The likely outcome of the recommendations in the report would be to create a disincentive for telecommunications providers to enter or stay in the consumer market," he said, "therefore compromising consumer welfare long term."

"The Australian regulator has proposed a regime in stark contrast to international trends of winding back price controls in line with increasing competition," Scales continued. He added that the report failed to recognise the original policy aim of the price control regime, which was to provide a control on pricing at a time when Telstra was the only carrier.

However the federal Opposition was just as quick to release its own statement. "The government should immediately accept the ACCC's final view on the future of Telstra's price control arrangements," Senator Stephen Conroy, Shadow Minister for Communications and Information Technology, said.

"The Minister's failure to promply accept the ACCC's recommendations on the issue is just another example of how the government is more concerned with fattening Telstra up for privatisation than protecting consumers," the statement said.

The federal government has remained non-committal on the ACCC report, only saying that it was still committed to a price control regime. Senator Coonan, the Minister for Communications, Information Technology and the Arts said "the government will need to consider the report very carefully and consult closely with key industry and consumer stakeholders."