Telstras local loop access price of $30 per month rejected by ACCC

A recent proposal for metropolitan areas to be provided with unconditioned local loop services for $30 a month made by Telstra has been rejected in a final decision issued by the ACCC.

The largest cost component for ADSL broadband service providers that use DSLAMs of their own is this service, which is charged at around $16 per month at the moment, and many would be unable to compete with services offered by Telstra if they were forced to accept these figures from Telstra and had to raise their prices.

This charge would be substantially higher than the $16.75 that is currently charged, which is mandated by the ACC when it has to arbitrate disputes, and covers Band 2 or metropolitan areas and applies to about 70 percent of the 10 million lines that Telstra owns.

The new prices proposed by Telstra would discourage investment in the Telecommunications infrastructure and would be unlikely to promote competition within the telephony and broadband markets were the conclusions made by the ACCC.

It was also considered by the ACCC that Telstra would recover more than was needed to propose its business interest legitimately in providing this service if a monthly charge of $30 was imposed. The estimates that had been derived from benchmarking against comparator countries were also significantly less than the monthly charge proposed by Telstra it was noted.

Three of the four undertaking applications that have been submitted by Telstra have been rejected by the ACCC since 2004 and a fourth was withdrawn by the telco. The Australian Competition Tribunal affirmed the decisions made by the ACCC on both of the earlier decisions when Telstra appealed against the decisions.

The fact that the proposal by Telstra for a uniform $30 a month charge for all parts of Australia had already been rejected back in August 2006 was particularly noted by the ACCC. The ACCC said “it [is] surprising that Telstra chose to submit an undertaking proposing a $30 price for metropolitan areas – a price, in effect, significantly higher than that which had been rejected in 2006.”