Tribunal explains Telstra price decision

The Australian Competition Tribunal has explained last week's decision to reject a Telstra's proposal which would have doubled wholesale costs.

The Australian Competition Tribunal (ACT) has explained last week's decision to reject a Telstra proposal which would have doubled wholesale costs.

Telstra had proposed a price change to its unconditioned local loop service (ULLS), which allows carriers to access and sell their services over Telstra's copper network between the exchange and premise. Currently, the service costs around $16 per connection per month — a price set by the Australian Competition and Consumer Commission (ACCC).

The ACCC price stands for the period 31 August 2009 to 31 December 2010. Telstra's proposal would have increased this cost to $30 for metropolitan band 2 exchange service areas, which make up around 70 per cent of the population.

The competition tribunal supported the ACCC's decision from 2009, saying that the ULLS pricing should be based on "the up-to-date costs of replacing a historical relic while keeping most of its essential design features and merely updating its equipment".

The Tribunal said that Telstra would use the cost increase for a commercial return on the past investment, not in order to provide a new investment.

Telstra first applied for the ULLS undertakings in 2004, with five other applications following; one of which was withdrawn. The ACCC rejected all of the applications. The tribunal was called in to review three decisions, in which it supported the ACCC's stance.

Following the tribunal's rejection of Telstra's proposal last week, Optus director of government and corporate affairs Maha Krishnapillai said Telstra needed to realise that "its war on ULL wholesale prices has now been lost".

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