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NBN-Telstra deal must be part of copper network prices: iiNet

iiNet has told the ACCC that it should consider Telstra's AU$11 billion deal with NBN Co in setting wholesale line rental prices.
Written by Josh Taylor, Contributor

Australia's third-largest internet service provider, iiNet, has argued that prices for accessing Telstra's copper network should take into account the fact that NBN Co will be paying Telstra for the copper network.
The argument came in response (PDF) to a draft report published by the ACCC in late December over regulation of fixed line networks in Australia.

The ACCC said it would look to keep regulation on the existing line rental services on Telstra's copper network, but would also remove exemptions currently in place for regulation in the CBD areas in Sydney, Melbourne, Brisbane, Adelaide and Perth.

iiNet broadly welcomed the ACCC's decision, but said that the ACCC should go further, and consider that under Telstra's existing AU$11 billion deal with NBN Co, it stands to receive payments for decommissioning the copper network infrastructure and transferring customers onto the NBN. iiNet also acknowledged this could be changed to a rental of the infrastructure under the new government's proposed fibre-to-the-node network plan.

iiNet said that the money Telstra will receive should be considered when determining the price set for line rental for Telstra's retail competitors, such as iiNet.

"iiNet believes that a highly relevant consideration in setting price terms for the Fixed Line Services in the payments that Telstra has and will receive from NBN Co for the rental and/or decommissioning of Telstra infrastructure which is used in the provision of the fixed line services," the company said.

"iiNet submits that the payments that Telstra receives from NBN Co should be properly accounted for when the ACCC sets price terms for the fixed line services."

The ISP also argued that Telstra's recent decision to challenge the ACCC's powers over setting the prices for competitors to access its infrastructure facilities also highlighted the need for the authority to launch a new inquiry into facilities access.

"iiNet believes that Telstra's recent judicial review proceedings, which see to challenge the ACCC's jurisdiction to arbitrate terms and conditions for facilities access under the Telecommunications Act in circumstances where a contract is in existence between Telstra and the access seeker, further demonstrates the extreme difficulty that access seekers have in relying on the Telecommunications Act, and the ability of Telstra to exercise monopoly power with little regard for regulatory scrutiny."

Optus, too, said in its submission (PDF) that more needed to be done to "address the imbalances" caused by the Telstra-NBN Co deal, which Optus said could result in "Telstra making a windfall gain" if it was not accounted for in the pricing of line rental.

Telstra strongly rejected the proposed removal of the CBD exemptions, stating (PDF) that the ACCC had given "insufficient consideration" to the availability of fibre network alternatives in the CBDs. Telstra commissioned an independent expert report that rejected the ACCC's findings and questioning whether removing the exemptions would improve the availability of services in the CBD locations.

Macquarie Telecom noted some of Telstra's claims in its submission (PDF), and said that if competition was as healthy in CBD locations as Telstra claims, it "would not be able to set prices for wholesale line rental services in CBD areas at the level that it currently does."

"The inescapable truth is that the CBD exemption provides an opportunity for Telstra to exploit, and it does so because competition is not effective and this is to the detriment of end-users."

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