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Telcos slam 'dangerous' government fixed-line pricing submission

A coalition made up of telcos other than Telstra has argued that the Department of Communications must withdraw its Telstra-aligned submission on fixed-line pricing.
Written by Corinne Reichert, Contributor

The Competitive Carriers' Coalition (CCC) has demanded that the Department of Communications withdraw its submission to the Australian Competition and Consumer Commission (ACCC) on its draft decision to cut the prices that Telstra can charge its wholesale customers for use of its legacy copper network.

In its submission (PDF), the federal government department mirrored Telstra's perspective, saying that the ACCC's decision should be amended -- both to allow Telstra to recover its costs, and to prevent cost discrepancies from dissuading customers from migrating to the National Broadband Network (NBN).

"The ACCC's treatment of redundant assets and adjustments to cost allocation to deal with asset under-utilisation and loss of economies of scale appear to prevent Telstra recovering relevant costs, and this is inconsistent with fixed principles," the department put forward in its submission.

"The department is concerned that the proposed price decrease for fixed-line services will discourage migration throughout the migration window, and could lead to a significant number of customers remaining on the old network in the lead-up to the disconnection date."

The CCC -- made up of Vodafone, Macquarie Telecom, iiNet, Nextgen Networks, and MyNetFone -- argued on Thursday afternoon that government involvement in an independent price debate is "dangerous", especially when calling for consumers to pay higher prices.

"The Department of Communications' intervention in the ACCC's independent price-determination process to advance the interests of Telstra is extraordinary, unwelcome, unwarranted, and sets a dangerous precedent," the CCC said.

"For a government department to be calling for higher prices for ordinary consumers, and against the interests of competition, is surely a first at the federal level... For it to be doing so in the context of fixed-line communications services, where we Australia has (sic) the national disgrace of the highest prices in the developed world, beggars belief."

The CCC accused the government of wanting "to see millions of dollars transferred from the pockets of Australian consumers to Telstra, one of the most profitable telecommunications companies in the world".

Telstra spoke out against the ACCC's draft decision in both a blog post and its submission (PDF) to the ACCC, warning that the price slash could impact the migration of customers onto the NBN, as retailers would "have a profit motive to keep their customers on the higher-margin copper network for as long as possible".

"This would make migration to the NBN even harder to achieve, and put important revenue to NBN Co at risk. In this way, a cut to prices on the legacy network poses a serious danger to the success of the NBN policy," Telstra said on Wednesday.

The government released its draft Migration Assurance Policy detailing the process for customers to be migrated from Telstra's legacy copper network to the fixed-line NBN on Monday. An estimated 3.27 million premises could be serviced by the hybrid fibre-coaxial (HFC) networks being taken over from Telstra and Optus, with customers beginning to be connected from March 2016.

While the ACCC had originally planned to reduce prices across seven of its fixed-line wholesale services by 0.7 percent, its revised price cut, announced late last month, said the amount that Telstra charges retailers for use of its broadband internet services is to be cut by 9.6 percent from October 2015 to ensure that customers stuck on Telstra's legacy copper network during the transition would not be forced to pay higher prices while waiting for an NBN connection.

"If there is no adjustment for these higher costs, then customers who have not been migrated to the NBN will pay significantly higher prices for copper-based services. Eventually, these prices would reach absurd levels for the unlucky last copper customers," ACCC chairman Rod Sims said in June.

Telstra suggested that the consumer watchdog had ignored the NBN and its resultant rise in maintenance and investment costs for Telstra.

"The allocation adjustment involves scaling down Telstra's 'real-world' unit costs so that they reflect a view of unit costs in a hypothetical world in which NBN does not exist at all," Telstra's submission said.

"The costs that the ACCC is removing through the adjustments are not related to the NBN, to the migration of services to the NBN, or to the provision of NBN services. Rather, the costs that the ACCC is denying Telstra the opportunity to recover are costs faced by Telstra in supporting the fixed-line network and supplying the fixed-line services. "

Telstra had previously argued in October that it should conversely be permitted to increase its wholesale fixed-line prices, because it will lose the economies of scale and face higher costs to maintain its network as it progressively hands over ownership to NBN.

"Telstra's argument that it needed to be compensated by competitors and consumers for the equipment it turns off as it is replaced by the NBN was always an extraordinary claim," CCC chairman Matt Healy said in response last month.

The ACCC on Wednesday published the submissions it received from Telstra, Optus, iiNet, and the Department of Communications in relation to the issue.

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