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ACCC makes final decision to regulate ADSL during NBN transition

The ACCC will regulate wholesale ADSL nationwide for the next five years as the NBN is rolled out, rejecting Telstra's request for 289 areas to be unregulated.
Written by Corinne Reichert, Contributor

The Australian Competition and Consumer Commission (ACCC) has made the final decision to continue regulating wholesale ADSL internet services for the next five years during the migration of customers onto the National Broadband Network (NBN), saying it will help promote competition against Telstra's continuing dominance.

The regulation of ADSL is designed to ensure any-to-any connectivity and the long-term interests of end users (LTIE), encourage the economically efficient use of and investment in fixed-line infrastructure, and promote competition.

"Continued access to wholesale ADSL services remains in the transition to the NBN and is critical to enable retail providers to compete with the dominant provider, Telstra, in the supply of high-speed broadband services nationally," ACCC Commissioner Cristina Cifuentes said.

"Declaring the ADSL service will lead to a more competitive retail sector, which is likely to deliver greater choices for end users in the form of better prices, service quality, and service options."

The ACCC in July 2016 announced its inquiry into deregulating ADSL services, and in October made the draft decision to continue regulation. ADSL regulation will now continue until February 13, 2022.

"Telstra, as the vertically integrated national supplier, would have similar incentives and opportunities as it did prior to the 2012 declaration to engage in entry-deterring or expansion-deterring conduct to maintain and grow its market share," the ACCC said in its Wholesale ADSL service declaration inquiry: Final decision [PDF].

"Given future DSL investment is unlikely, competition for customers beyond the capacity of existing DSL infrastructure would only be able to occur via the wholesale ADSL service. This would likely increase the incentive and potential for Telstra to engage in conduct that raises competition concerns.

"The ACCC considers that without declaration, the ability of access seekers to compete with Telstra in supplying wholesale ADSL services in the national wholesale and retail markets would be reduced."

The ACCC revealed that in a submission to the inquiry, Telstra pushed for 289 exchange service areas (ESAs) to be excluded from the ADSL declaration, saying that those regions have sufficient competition from other providers as they have four or more competitors that have a market share of at least 30 percent in those areas.

"Telstra submitted that declaration in highly competitive areas will not promote the LTIE," the decision said.

"Telstra argued that exemption of the 289 ESAs would not reduce the ability of access seekers with DSLAM networks to compete on a national basis in wholesale and retail markets. Rather, declaration of the 289 ESAs could have a negative impact on competition, to the extent that all carriers come to rely more on Telstra's wholesale ADSL service.

"Telstra disagreed that absent declaration in the 289 ESAs, it would have the incentive to potentially engage in anti-competitive conduct."

The ACCC has decided, however, to declare wholesale ADSL on a national basis with no exemptions -- a view supported by Telstra's rivals Optus and Macquarie Telecom in their own submissions to the inquiry.

"The ACCC's final view is that Telstra remains the dominant provider in a number of the ESAs proposed for exemption and that in the transition to the NBN, without declaration, Telstra would have the incentive and ability to leverage its position in the 289 ESAs to favour its own operations over those of its competitors," the ACCC's decision said.

"The ACCC does not consider that exemptions can better deliver reasonable price and non-price terms and conditions in these 289 ESAs as submitted by Telstra."

Last month, the ACCC also announced its draft decision on pricing for access to super-fast broadband services (SBAS), local bitstream access services (LBAS), and Telstra fibre access broadband (FAB) services during the NBN rollout.

The pricing will see SBAS and LBAS services charged at AU$27 initially per port per month for speeds of 25/5Mbps, with subsequent pricing to be the price of the NBN's AVC TC-4 25/5Mbps product price as amended in future. The initial aggregation charge per 1Mbps per month will be AU$15.25, and will then be subsequently amended as per the pricing for the NBN's connectivity virtual circuit (CVC) TC-4 product.

Telstra FAB services, meanwhile, will be priced according to their zones, and will be updated each year.

The pricing determinations will expire on July 28, 2021, and the ACCC is seeking submissions on the draft decision until February 17.

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