Telstra hits back at ACCC over wholesale price cuts

Telco disappointed with draft decision that will see 9.6 per cent cut in prices

Telstra has described as "disappointing" a draft decision by the Australian Competition and Consumer Commission that will see a significant drop in the prices the telco charges for a number of wholesale services on the copper network.

The ACCC earlier this year said it was eyeing a a uniform 0.7 per cent price drop in the services.

However today it released a further draft decision under which Telstra would see a 9.6 per cent drop in the prices it charges for the period 1 October 2015 to 30 June 2019.

The ACCC said that there were a number of factors behind the change in the original draft decision and the further draft decision today. A key factor is how the regulator is approaching the migration of users from Telstra's copper network to the National Broadband Network.

The shift of end users on to the NBN will result in a loss of economies of scale, the ACCC said. "The ACCC considers that such costs should not be reflected in regulated revenues or charges," the further draft decision states.

"The ACCC considers that Telstra has been provided with an opportunity to ensure that it would receive consideration through the [Definitive Agreements with NBN Co] for the impact of the NBN on its fixed line assets."

A Telstra spokesperson said that the ACCC has overlooked that the telco's agreement with NBN does not account for costs incurred on its legacy network in the switch to the new network.

"Indeed, if the ACCC reduce access prices on the legacy network, they risk making the transition to the NBN harder for everyone – consumers, industry and NBN Co," the spokesperson said.

"There is still a few months to run in this process. We will use this time to review the draft in detail and provide further input to the ACCC so their final decision can reflect actual costs and treat all users of the network equally."

"In the draft decision, the ACCC is at odds with all the data which shows per unit costs on the copper network are set to rise, not fall, over the next few years," the spokesperson said.

"They also appear to be disconnected from their own pricing principles, which commit them to setting prices that mean all companies using the copper network bear the costs of operating the network equally."

The Competitive Carriers' Coalition, which brings together a number of rival telcos, backed the ACCC's draft price reduction.

"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," the organisation's chairperson, Matt Healy, said.

Read more: Telstra launches its telemedicine service

"Telstra negotiated a handsome payout from NBN for migrating customers off this equipment – billions of dollars in tax payer money.

"Asking the ACCC to allow it to increase charges to people still using the old copper network to compensate Telstra again for the loss of scale caused by migration to the NBN was the height of cheek."

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Tags TelstraAustralian Competition and Consumer CommissionAustralian Competition and Consumer Commission (ACCC)

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