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Tech threats to Telstra can't be "strangled at birth": ACCC

Australia's competition regulator has warned it will act to ensure technological innovations that pose a serious threat to Telstra's dominance of the telecommunications sector are not "strangled at birth".
Written by Abby Dinham, Contributor
Australia's competition regulator has warned it will act to ensure technological innovations that pose a serious threat to Telstra's dominance of the telecommunications sector are not "strangled at birth".

In a hard-hitting speech to the Australian Telecommunications Summit this week, Australian Competition and Consumer Commission commissioner Ed Willett said technological developments in infrastructure such as telephone exchange switchgear and communications modes such as fixed wireless and satellite "offer the prospect of serious challenges to Telstra's dominance and opportunities for Telstra's competitors".

Willett reiterated the ACCC's contention that competition in the industry has not developed to the level expected at the time of substantial deregulation in 1997.

He warned that "while technology may be the saviour of competition, we must ensure this serious challenge to Telstra's current market power is not strangled at birth".

"These emerging markets and technologies will only survive if they are supported by effective regulation designed to promote sustainable competition in which competitors are less reliant on Telstra infrastructure," he said.

Willett attributes the uneven development of competition in the telecommunications market to Telstra, calling the heavyweight "one of the most vertically-integrated telecommunications companies in the world".

"It [Telstra] continues to be the major wholesale supplier across the full range of telecommunications services, from fixed-line and mobile voice services, through to Internet services and pay TV," said Willett. "Telstra's market power across these services provides it with the ability and, most importantly, the incentive, to impede entry into new and emerging markets."

The commission also released this week a "Snapshot of Broadband Deployment" that shows as of March 2004 broadband take-up stood at 829,300 services, an increase of 130,600 from December 2003.

"This data illustrates not only the early stages of increased growth following the changes in pricing structures that began in February this year, but also the emerging nature of the take-up of broadband services in Australia more generally," said Willett.

The increase of broadband services could also help to shake Telstra from its powerful position in the telecommunications market, according to Willett.

"Telstra's ownership of both the copper access network that connects virtually every Australian home, and the largest HFC network in Australia provides it with effective control over the market for delivery of downstream DSL and cable modem broadband services," he said. "Yet, despite being the retail broadband market leader, Telstra's share of this market has remained relatively low compared to the other services it offers."

Willett adds that earlier this year Telstra attempted to "reverse this situation" by offering slashed retail broadband prices below the wholesale customer charges, which provoked outrage amongst competing ISP's and lead the ACCC to issue a competition notice.

"It is entirely proper for Telstra to chase more customers by cutting prices, our very strong view is that Telstra's dominance over the local loop must not be used improperly to dominate the retail broadband market and squeeze out its competitors," he said.

According to Willett the commission "still has reason to believe that Telstra is engaging in anti-competitive conduct of the kind described in the notice" and as such it continues to keep the notice in force.

"The commission has been allowing negotiations between Telstra and its wholesale customers and retail competitors to take place while gathering evidence to assess the effect upon competition of Telstra's pricing," he said. "At present, the ACCC remains of the view that Telstra's pricing is likely to result in significant anti-competitive effects."

Willett said the ACCC is "quickly gathering further evidence" that will be presented in court "if necessary".

"When determining what should be done after obtaining this material, the ACCC will need to be conscious of the way the conduct would affect competition in the broadband market," he said.

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