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AUS: ACCC Discussion Paper On Interconnection

ACCC Issues Discussion Paper On Interconnection Charges

The Australian Competition and Consumer Commission today issued a discussion paper which suggests that Telstra has scope to reduce the charges imposed on other carriers in connecting with its fixed network to around 1.6 cents per minute as a result of changes to Telstra's price caps.

In the ACCC's final decision on Telstra's PSTN undertaking, the ACCC stated that it would undertake further work considering the impact on interconnection charges of changes to Telstra's price caps. The discussion paper carries forward the ACCC's analysis presented in the undertaking assessment and is consistent with the ACCC's powers to provide information to guide industry parties as to the carrying out of its powers and functions under the Trade Practices Act 1974.

Around one third of the cost to Telstra of providing interconnection results from a contribution to Telstra's access deficit, that is, the shortfall that Telstra incurs because of line related revenue being less than line costs. In the undertaking assessment, the ACCC accepted that Telstra's capacity to raise line rentals to costs was constrained by Government price cap regulation and that there was therefore a need for other carriers to contribute to funding the access deficit in their interconnection payments.

The Government has introduced new retail price caps with effect from 1 July 1999. These provide Telstra with greater scope to rebalance its line rentals and call charges (rebalancing means increasing line rentals to cover a greater proportion of line costs and at the same time reducing call charges).

"The actual speed and magnitude of rebalancing that occurs within the new price caps is a matter for Telstra, rather than the ACCC to determine. Accordingly, the ACCC has taken the view that it is the potential for rebalancing and not Telstra's actual extent of rebalancing which is relevant to determining interconnection charges," ACCC Chairman, Professor Allan Fels, said.

"Consistent with this approach, the ACCC's preliminary view is that the changes to the price caps provide Telstra with greater scope to reduce interconnection charges to allow cheaper long-distance and fixed to mobile telephone calls," Professer Fels said.

The ACCC's preliminary analysis suggests that interconnection charges could be reduced to between 1.4 and 1.8 cents per minute. This compares to the ACCC's estimate of about 2 cents per minute under the previous price cap arrangements and Telstra's proposed charges of around 4.73 cents per minute in its PSTN undertaking. However, the ACCC will only make a final determination of interconnection charges either in assessing a new undertaking submitted by Telstra or in an arbitration.

The discussion paper, and submissions received on it, should assist in the development of future undertakings and will serve as inputs into the ACCC's determinations in arbitrations.

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