Telstra to drop its wholesale prices following ACCC decision

Telstra will drop its wholesale prices for operators using its network by 9.6 per cent, following a draft decision released today by the Australian Competition and Consumer Commission (ACCC).

The ACCC decision requires this drip in prices of 9.6 per cent and the change will be effective from 1st October this year until 30 June 2019. The decision revises the 0.7 per cent fall estimated in the ACCC’s March draft decision.

Supporting its decision, the ACCC stated the most important issue for this draft decision on prices is the effect of the transition from Telstra’s fixed line network to the NBN, as the NBN replaces Telstra’s network as the infrastructure over which Australians receive fixed line voice and broadband communications.

Prices would reach absurd levels for the unlucky last copper customers

ACCC chairman, Rod Sims, said: “Users of Telstra’s network should not pay the higher costs that result from fewer customers as NBN migration occurs. 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.”

“Our draft decision is that assets that become redundant as a result of migration will be removed from the asset base. Also, users of the copper network will not pay the higher prices that result from the loss of scale efficiencies as the number of services remaining on the copper network falls,” he added.

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Sims said this draft decision reflects the fact Telstra had the opportunity in its negotiations with NBN, to ensure it received consideration for the effects of service migration, including the costs associated with the loss of economies of scale and asset redundancy.

Other outstanding issues which the ACCC has now included in the draft decision are the ACCC’s views on Telstra’s efficient costs and its proposed cost allocation framework.

On the first of these issues, Telstra has provided significantly more information on its operating and capital expenditures and has also revised its forecasts.

“The ACCC’s draft decision will now accept Telstra’s latest expenditure forecasts subject to the exclusion of the capital and operating expenditures that are specific to the NBN and which should not be recovered from users of the copper network,” Sims said.

Regarding the cost allocation framework to be used to determine prices, the ACCC maintains its position to adopt the fully allocated framework proposed by Telstra.

The ACCC invites stakeholder views on this further draft decision and submissions are due by 5pm on Friday 17 July 2015. The ACCC will release its final decision at the end of September 2015.

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