Assessment of Telstra’s core services
undertakings – preliminary view
12 December 2003
Preface
Telstra Corporation Limited (‘Telstra’) lodged access undertakings (‘the
Undertakings’) with the Australian Competition and Consumer Commission (‘the
Commission’) on 14 November 2003. The Undertakings specify certain terms and
conditions upon which Telstra undertakes to meet its standard access obligations
(‘SAOs’) in respect of the domestic PSTN originating and terminating access services
(‘the domestic PSTN O/T services’), the unconditioned local loop service (‘the
ULLS’) and the local carriage service (‘the LCS’). At the same time, Telstra has
withdrawn the Undertakings in respect of the same services that it lodged on 9
January 2003.
Under Part XIC of the Trade Practices Act 1974 (‘the Act’), the Commission must
accept or reject the Undertakings. The process the Commission will follow to assess
the Undertakings will be open and public, allowing parties to express their views and
provide relevant information to the Commission.
The Commission published Telstra’s supporting statement to the previous
(9 January 2003) undertakings, and the previous undertakings themselves, as well as
the submissions made by interested parties in respect of them. In addition, the
Commission published its own papers and the submissions made by interested parties
commenting on the model price terms and conditions that are to apply in respect of
these services. Finally, in releasing this discussion paper, the Commission has
published the revised Undertakings and the relevant supporting submissions of
Telstra. All of the above can be found at the Commission’s website www.accc.gov.au.
It is important to note at the outset that the Commission has undertaken extensive
work on the assessment of appropriate price terms and conditions for the supply of the
PSTN O/T services, the LCS and the ULLS and has consulted widely with interested
parties on all relevant issues. This means, in contrast to its previous assessments, the
Commission is well placed to provide its preliminary views about the revised
undertakings at this time. However, these views are still subject to any further input
from interested parties.
Given the nature of this paper in also putting forward its preliminary views, it is the
Commission’s intention, following submissions from interested parties, to provide its
final views on the reasonableness of the Undertakings and avoid the need for any draft
views or report.1
In deciding whether to accept or reject the Undertakings, the Commission will
consider all submissions made in this current process. Interested parties can also
make submissions by reference to submissions previously provided in both the 9
January 2003 undertaking process and the model price terms and conditions
determination process, as appropriate.
1
It should be noted that under section 152BV of the Act, the Commission is not obliged to
provide a draft view, however, this has become common practice to provide interested
parties a reasonable opportunity to comment on the Commission’s initial findings
following the taking of public and confidential evidence. In this case, this is not
considered necessary given previous consideration of the issues.
ii
The Commission seeks submissions on the Undertakings, and the preliminary views
expressed in this paper no later than 5 weeks from the date upon which Telstra
makes any confidential information contained in the Undertakings, or supporting
submissions, available for industry assessment. Interested parties wishing to obtain
access to confidential materials must notify Telstra by 19 December 2003. If no
parties notify interest in obtaining access to confidential information by this time, the
5 week deadline period will effectively begin from this date. The closing date for
submissions will therefore be no earlier than 23 January 2004, but is more likely to be
after this date and will be notified on the Commission’s website.
The Commission considers that the process established by industry participants for
obtaining access to Telstra’s previous 9 January 2003 undertakings and the terms that
were agreed, should again be used as a basis upon which to access confidential
information. Parties wishing to obtain confidential information from Telstra should
contact Christine Williams of Telstra on (07) 3898 6161 by 19 December 2003.
Following this process the Commission intends to then proceed to make a final
decision in respect of the Undertakings.
Please forward written submissions to:
Claire Preston
Assistant Director
Australian Competition and Consumer Commission
GPO Box 520J
MELBOURNE VIC 3000
Ph:
Fax:
e-mail:
(03) 9290 1885
(03) 9663 3699
[email protected]
iii
1 Introduction
Part XIC of the Act establishes a regime for access to certain services in the
telecommunications industry. Under Part XIC, carriers or carriage service providers
of an active declared service (‘access providers’) have an obligation to supply that
service.
Telstra has lodged the Undertakings specifying the price-related terms and conditions,
and certain limited non-price terms, upon which it undertakes to meet its SAOs to
supply the domestic PSTN O/T services, the ULLS and the LCS (referred to
collectively as the ‘services the subject of the undertakings’ or ‘the Undertaking
Services’).
Telstra has, by letter dated 14 November 2003, withdrawn from assessment by the
Commission the undertakings that it had lodged on 9 January 2003. Accordingly, the
Commission does not propose to make any decision in respect of those undertakings
and has discontinued the assessment that was formally commenced with the
Commission’s discussion paper, on 14 March 2003.
As such, the Commission will assess the Undertakings, lodged on 14 November 2003,
as part of a new decision-making process. Having said that, as the current
undertaking proposals in effect replace those lodged on 9 January 2003, the
Commission intends to have regard to information relevant to its current assessment
that it obtained during its consideration of the earlier undertakings. To do so,
interested parties are encouraged to make submissions by reference to previous
submissions provided to the Commission, as well as including additional views and
information considered relevant. It would assist the Commission for parties to
highlight in their submissions any matters that they have not raised previously.
Both Telstra’s earlier decision to submit undertakings, and its most recent decision to
submit revised undertakings, follow from amendments to the Act in 2002 which
encourage the lodgement of undertakings as the main means of addressing industry
wide aspects of access to declared services.2
The Commission must consider each of the Undertakings that Telstra lodged on 14
November 2003 and decide to accept or reject them. The purpose of this preliminary
view paper is to:



publish Telstra’s undertakings for PSTN O/T service, the ULLS and the LCS;
outline the Commission’s preliminary views on the terms and conditions proposed
in the Undertakings; and
seek public comment on the Undertakings and the Commission’s preliminary
view.
The Commission considers that given the extensive work already done on the
assessment of appropriate price terms and conditions for the supply of the PSTN O/T
services, the LCS and the ULLS, and in contrast to its previous assessments, it is well
2
See Explanatory Memorandum, Telecommunications Competition Bill 2002, p. 1.
1
placed to provide its preliminary views at this time. Industry participants are
encouraged to provide their views in relation to both the Undertakings, and the
associated supporting submissions, as well as the preliminary views detailed in this
paper.
Given the nature of this paper in putting forward its preliminary views, it is the
Commission’s intention that following submissions from interested parties to provide
its final views on the reasonableness of the Undertakings and avoid the need for any
draft views or report.3
The remainder of this paper is structured as follows. Chapter 2 details the regulatory
background and the nature of the services which are the subject of the Undertakings.
In Chapter 3 the model terms and conditions determination process and outcomes are
detailed, while Chapter 4 summarises the Undertakings. Chapter 5 outlines the basis
for assessing the Undertakings, both in terms of satisfying the SAOs and meeting the
reasonableness criteria. In Chapter 6 a preliminary assessment is made of the
Undertaking’s consistency with the SAOs. Chapters 7 and 8 outline the
reasonableness criteria in greater detail and provide a preliminary assessment of
whether the Undertakings are reasonable.
3
It should be noted that under section 152BV of the Act, the Commission is not obliged to
provide a draft view, however, this has become common practice to provide interested
parties a reasonable opportunity to comment on the Commission’s initial findings
following the taking of public and confidential evidence. In this case, this is not
considered necessary given previous consideration of the issues.
2
2 Background
2.1 Regulatory framework
The domestic PSTN O/T services, the ULLS and the LCS have been declared, or are
taken to have been declared, under Part XIC of the Act.
Once a service is declared, access providers supplying the declared service to
themselves or others are subject to SAOs. These obligations concern the manner in
which those access providers supply the declared service.
Section 152AR of the Act sets out the SAOs. In summary4, if requested by a service
provider, the access provider is required to:





supply the declared service;
take all reasonable steps to ensure that the declared service supplied to the service
provider is of equivalent technical and operational quality as that which the access
provider is supplying to itself;
take all reasonable steps to ensure that the fault detection, handling and
rectification which the service provider receives in relation to the declared service
is of equivalent technical and operational quality as that provided by the access
provider to itself;
permit interconnection of its facilities with those of the service provider; and
provide particular billing information to the service provider.
The Act does not prescribe the particular terms and conditions upon which an access
provider must comply with the SAOs. Rather, section 152AY(2) of the Act provides:
The carrier or carriage service provider must comply with the obligations:
(a) on such terms and conditions as are agreed between the following parties:
(i)
the carrier or carriage service provider, as the case requires;
(ii)
the access seeker; or
(b) failing agreement:
4
(i)
if an access undertaking given by the carrier or carriage service provider is in
operation and specifies terms and conditions about a particular matter – on such
terms and conditions relating to that matter as are set out in the undertaking; or
(ii)
if an access undertaking given by the carrier or carriage service provider is in
operation, but the undertaking does not specify terms and conditions about a
particular matter – on such terms and conditions relating to that matter as are
determined by the Commission under Division 8 (which deals with arbitration of
disputes about access); or
There are some exceptions to these obligations. These are set out in s. 152AR, and in any
exemption issued under s. 152AS or s. 152AT of the Act.
3
(iii)
if there is no such undertaking – on such terms and conditions as are determined by
the Commission under Division 8 (which deals with arbitration of disputes about
access).
If an undertaking is accepted by the Commission, it becomes binding on the access
provider. Should an access provider breach an undertaking, the Federal Court can
make an order requiring compliance with the undertaking, the payment of
compensation, or any other order that it thinks fit. Another consequence of accepting
an undertaking is that should an access dispute be notified, the Commission could not
make a determination that is inconsistent with the undertaking for so long as it is in
operation.
2.2 Declared PSTN O/T services
The Commission declared the domestic PSTN O/T service in July 1997. The declared
domestic PSTN O/T services are, in general, provided by means of a fixed-line
network. They are used as inputs by service providers primarily to supply longdistance, fixed-to-mobile and mobile-to-fixed calls to end-users in Australia. They
can also be used by other network operators to interconnect with Telstra’s fixed
network.
2.2.1 Previous undertakings for PSTN O/T services
Apart from the January 2003 undertaking proposals, Telstra has previously lodged
two separate undertakings to the Commission in respect of the domestic PSTN O/T
service, in 1997 and 1999 respectively. Both undertakings were formally rejected by
the Commission on the basis that it was not satisfied that the price or non-price terms
and conditions were reasonable.
2.2.2 Arbitrations regarding PSTN O/T services
A number of access disputes were also notified to the Commission in respect of this
service between 1998 and 2000, and in particular, the Commission made three final
arbitration determinations in 2000. Two of these determinations were subsequently
appealed by Telstra to the Australian Competition Tribunal but the proceedings were
withdrawn in 2002 following a commercial agreement being reached by the parties to
the relevant access disputes.
2.3 Declared Local Carriage Service
The LCS is a service for local call resale. That is, for the carriage of telephone calls
from customer equipment at an end-user’s premises to separately located customer
equipment of an end-user in the same standard zone.5 After holding a public inquiry,
the Commission declared the LCS in August 1999.
In July 2002 the Commission revoked the LCS declaration in the central business
districts of Sydney, Melbourne, Brisbane, Adelaide and Perth. For Telstra, this
decision took effect in July 2003.
5
Standard zone has the same meaning as in Part 4 of the Telecommunications (Consumer
Protection and Service Standards) Act 1999.
4
2.3.1 Arbitrations regarding the Local Carriage Service
Following the declaration of the service, nine access disputes were notified to the
Commission in relation to Telstra’s supply of the LCS. All of these disputes were
resolved by commercial negotiation, after the Commission made clear its views about
pricing of this service, and there have been no further arbitration disputes in relation
to the LCS.
2.3.2 Past indicative pricing of the Local Carriage Service
The Commission released a revised final report on LCS pricing in April 2002,
following relevant work on the LCS arbitrations, which discussed the Commission’s
pricing methodology and included indicative prices determined in accordance with it.6
As in the case of the ULLS, the purpose of this report was to inform industry,
government and other interested parties on the principles and indicative prices that are
likely to guide the Commission when arbitrating an access dispute or assessing an
undertaking in relation to pricing for the LCS.
2.4 Declared Unconditioned Local Loop Service
The Commission declared the ULLS in August 1999. The ULLS involves the use of
unconditioned cable, primarily copper pairs, between end-users and a telephone
exchange, where the unconditioned cable terminates. It is generally used in
conjunction with xDSL technologies to supply high speed data services, but can also
be used to provide voice services.
2.4.1 Arbitrations regarding the Unconditioned Local Loop Service
Following declaration of the ULLS, four access disputes have been notified to the
Commission in relation to the supply of the service by Telstra. All these notifications
were eventually withdrawn by November 2001, after the Commission had made draft
final determinations in relation to the three remaining disputes7, but prior to the
Commission issuing any final determinations.
2.4.2 Past indicative pricing of the Unconditioned Local Loop Service
In March 2002, the Commission released its final report on the pricing of ULLS.8
This report incorporated the work developed through the finalisation of the ULLS
arbitrations and the Commission’s pricing consideration. The Commission’s decision
to finalise its earlier ULLS draft pricing discussion paper was intended to provide
similar information to the market place about ULLS pricing as would have been
accomplished by the publication of its final ULLS arbitration determinations.
6
ACCC, Local Carriage Service pricing principles and indicative prices – Final Report
(Revised), April 2002.
7
One dispute involving OneTel and Telstra had been withdrawn at an earlier stage.
8
ACCC, Pricing of unconditioned local loop services (ULLS) – Final Report, May 2002.
5
3 Model price terms and conditions for core
telecommunications services
Following amendments to the Act in December 2002, section 152AQB requires the
Commission to make a written Determination setting out model terms and conditions,
including prices, relating to access to each core telecommunications service (‘core
service’). The core services currently comprise the Undertaking Services.
The final model price terms and conditions determination was issued in October 20039
and will remain in force for a period of 5 years, unless sooner revoked. In making
this determination, the Commission noted that it would be relevant to the
Commission’s assessment of access undertakings relating to a core service (as well as
in any arbitrations).
The principal purpose of the model or indicative prices was to provide clear guidance
about the Commission’s views as to what constitute fair terms and conditions of
access to these services. Parties now have an indication of the likely outcome of a
particular issue, thereby encouraging them to reach commercial agreement on access
or consider submitting an access undertaking on similar terms.10
To further this purpose, the Commission determined the model terms and conditions
having regard to the same long-term interest of end-user (‘LTIE’) and reasonableness
criteria under Part XIC that are applicable to the Commission’s arbitration and
undertaking decisions. Chapter 5 provides further details in respect of these criteria.
The model price terms and conditions determination included the following indicative
prices:



1.25, 1.15 and 1.0 cents per minute for PSTN O/T access in 2003-04, 2004-05,
and 2005-06 respectively, conditional upon Telstra providing a commitment not to
seek an Access Deficit Contribution (ADC) from 2006-07;
13.61 cents per call for LCS in 2003-04 and 2004-05; and
$13, $22, $40 and $100 per month for the ULLS in Bands 1, 2, 3 and 4
respectively for 2003-04, 2004-05, 2005-06 with a $1 increase/decrease for each
10 per cent of deviation (with a maximum deviation of 60 per cent) of the actual
ULLS demand from the expected demand in 2004-05 and 2005-06
9
ACCC, Final Determination for model price terms and conditions of the PSTN, ULLS and
LCS services, October 2003. A draft determination was made in June 2003.
10
In this regard, see Explanatory Memorandum, Telecommunications Competition Bill
2002, p. 39
6
4 Summary of the undertakings
Telstra lodged a set of access undertakings with the Commission on 14 November
2003, which in the main specify the price-related terms and conditions upon which
Telstra undertakes to meet its SAOs to supply the PSTN O/T access service, the
ULLS and the LCS.
Specifically the Undertakings:



describe the technical attributes of the services that Telstra will supply;
specify the prices that Telstra proposes to charge for the Undertaking Services;
and
set out limited non-price terms and conditions on which the Undertaking Services
are to be supplied.
The Undertakings cover the 2003-04 to 2005-06 financial year periods and propose
the following headline rates:



1.25, 1.15 and 1.0 cents per minute for PSTN O/T access in 2003-04, 2004-05,
and 2005-06 respectively;
13.61 cents per call for LCS11; and
$13, $22, $40 and $100 per month for the ULLS in Bands 1, 2, 3 and 4
respectively for 2003-04, 2004-05, 2005-06 with a possible adjustment to monthly
charges of up to $6 should the expected take-up of ULLS not eventuate.12
4.1 PSTN O/T and Local Carriage Service undertakings
The proposed PSTN O/T charges in the Undertakings are disaggregated according to
the geographic area and separated into flagfall and end-minute-of-use charge.
Combined with the average call duration and the percentage of traffic attributable to
each geographic area, which is confidential information, these disaggregated rates
yield the headline rates referred to above. The disaggregated PSTN O/T rates
proposed by the Undertakings are:
Table 4.1.1 – 2003-04 undertaking PSTN O/T charges
2003-04
Flagfall
EMOU charge
CBD
1.1132
0.4946
Metropolitan
1.1052
0.6356
Provincial
1.2187
0.8472
Rural
2.5129
4.1244
11
The LCS undertakings only relate to the financial years 2003-04 and 2004-05.
12
Further, in a letter dated 14 November 2003, Telstra agreed not to claim an ADC in
regulatory proceedings regarding the price for any of the Undertaking Services for the
2006-07 financial year and beyond provided the Commission accepts the Undertakings.
7
Table 4.1.2 – 2004-05 undertaking PSTN O/T charges
2004-05
Flagfall
EMOU charge
CBD
0.9891
0.4484
Metropolitan
0.9827
0.5863
Provincial
1.0958
0.7922
Rural
2.3405
3.8610
Table 4.1.3 – 2005-06 undertaking PSTN O/T charges
2005-06
Flagfall
EMOU charge
CBD
0.7583
0.3780
Metropolitan
0.7534
0.5128
Provincial
0.8661
0.7131
Rural
2.0630
3.5863
The LCS prices for 2003-04 and 2004-05 are as detailed above at 13.61 cents per call.
4.2 Unconditioned Local Loop Service undertakings
The proposed ULLS charges in the Undertakings relate only to the services connected
to an RSS/RSU. Telstra has not submitted proposed charges for services connected to
an IRIM/RIM/CMUX as currently there is only a limited demand for these
connections. The following table outlines the ULLS monthly charges for 2003-04
and the base ULLS monthly charges for 2004-05 and 2005-06.
Table 4.2.1 – ULLS charges
Monthly ULLS charge for
services connected at
RSS/RSU
Band 1
$13
Band 2
$22
Band 3
$40
Band 4
$100
The undertakings for 2004-05 and 2005-06 provide for the monthly charges to be
adjusted should the expected demand for ULLS not eventuate. Tables 4.2.2 and 4.2.3
8
outline the increase/decrease in the 2004-05 ULLS charge should a particular demand
be determined at 30 June 2004.
Table 4.2.2 – 2004-05 downward price adjustment schedule
Number of total ULLS
connected as at 30 June 2004
Decrease in monthly
ULLS charge
58,301 - 63,600
$1
63,601 - 68,900
$2
68,901 - 74,200
$3
74,201 - 79,500
$4
79,501 - 84,800
$5
84,801 - 90,100
$6
Table 4.2.3 – 2004-05 upward price adjustment schedule
Number of total ULLS
connected as at 30 June 2004
Increase in monthly
ULLS charge
42,400 - 47,699
$1
37,100 - 42,399
$2
31,800- 37,099
$3
26,500 - 31,799
$4
21,200 - 26,499
$5
15,900 - 21,199
$6
Similarly, tables 4.2.4 and 4.2.5 outline the increase/decrease in the 2005-06 ULLS
charge should a particular demand be determined at 30 June 2005.
9
Table 4.2.4 – 2005-06 downward price adjustment schedule
Number of total ULLS
connected as at 30 June 2005
Decrease in monthly
ULLS charge
154,001 - 168,000
$1
168,001 - 182,000
$2
182,001 - 196,000
$3
196,001 - 210,000
$4
210,001 - 224,000
$5
224,001 - 238,000
$6
Table 4.2.5 – 2005-06 upward price adjustment schedule
Number of total ULLS
connected as at 30 June 2005
Increase in monthly
ULLS charge
112,000- 125,999
$1
98,000 - 111,999
$2
84,000 - 97,999
$3
70,000- 83,999
$4
56,000 - 69,999
$5
42,000 - 55,999
$6
10
5 Basis for assessing the undertaking
5.1 Contents of an undertaking
Section 152BS of the Act provides that an access undertaking is a written document
given to the Commission under which the relevant access provider undertakes to
comply with the terms and conditions specified in the undertaking in relation to the
applicable SAOs.
Section 152BS sets out that an undertaking may be one of the following types:


an undertaking containing terms and conditions that are specified in the
undertaking; or
an undertaking where the terms and conditions are specified by adopting a set of
model terms and conditions set out in the telecommunications access code, as in
force from time to time.
Telstra’s undertakings fall into the first category; i.e. the terms and conditions are
specified in the undertakings.
5.2 Criteria for acceptance of an undertaking
Section 152BV of the Act sets out the obligations of the Commission in assessing an
undertaking.
(1) This section applies if:
(a)
an ordinary access undertaking is given to the Commission by a carrier or a carriage
service provider; and
(b)
the undertaking does not adopt a set of model terms and conditions set out in an
approved telecommunications access code.
(2) The Commission must not accept the undertaking unless:
(a)
the Commission has:
(i)
published the undertaking and invited people to make submissions to the
Commission on the undertaking; and
(ii)
considered any submissions that were received within the time limit
specified by the Commission when it published the undertaking; and
(b)
the Commission is satisfied that the undertaking is consistent with the standard
access obligations that are applicable to the carrier or provider; and
(c)
if the undertaking deals with a price or a method of ascertaining a price – the
Commission is satisfied that the undertaking is consistent with any Ministerial
pricing determination; and
(d)
the Commission is satisfied that the terms and conditions specified in the undertaking
are reasonable; and
(e)
the expiry time of the undertaking occurs within 3 years after the date on which the
undertaking comes into operation.
11
5.2.1 Public process (s.152BV(2)(a))
As noted earlier, the proposed Undertakings follow the release of the Commission’s
model price terms and conditions determination and effectively replace Telstra’s
undertakings proposals for Undertakings Services of 9 January 2003. As part of the
combined processes of assessing the previous undertakings, and of determining model
price terms and conditions, the Commission scrutinised the majority of information
and contentions relied upon by Telstra in supporting the current undertakings.13 The
Commission also received and assessed numerous submissions from interested parties
on these matters. Further, the Commission noted that any future assessment of
undertakings on the Undertakings Services will have regard to the model price terms
and conditions determination.
Therefore, the Commission believes it is in a strong position to arrive at a preliminary
view on the reasonableness of the proposed terms and conditions outlined in the
Undertakings.
The Commission published Telstra’s supporting statement to the 9 January 2003
undertakings, and the undertakings themselves, as well as the submissions made by
interested parties. It published a number of its own papers and a number of
submissions in the model price terms and conditions determination process. Finally,
the Commission has published the Undertakings as revised in November 2003 and the
relevant supporting submissions on xx December 2003.
Telstra’s submissions to the Undertakings largely refer to the submissions it made in
respect of 9 January 2003 undertakings, and through the model price terms and
conditions process. However, Telstra updated its submissions in relation to costs. In
particular, the updates generally relate to the inputs into Telstra’s PIE II model, and
the resulting changes in modelled costs.
All of the above can be found at the Commission’s website www.accc.gov.au.
In deciding whether to accept or reject the Undertakings, the Commission will
consider all submissions made in this current process. Interested parties are
encouraged to make submissions by reference to submissions previously provided in
both the 9 January 2003 undertaking process and the model price terms and
conditions determination process.
The Commission seeks submissions on the Undertakings, and the preliminary views
expressed in this paper, as early as possible but by no later than 5 weeks from the
date upon which Telstra makes any confidential information contained in the
Undertakings, or supporting submissions, available for industry assessment.
Interested parties wishing to obtain access to confidential materials must notify
Telstra by 19 December 2003. If no parties notify interest in obtaining access to
13
Telstra has previously relied on this information to support proposed access prices which
are higher than those contained in the Undertakings. It continues to rely on this
information. In particular, as detailed in its initial supporting submission for the
Undertakings, it considers the proposed access prices are reasonable because, amongst
other reasons, they are below the efficient costs of providing the Undertakings Services
which Telstra claims is established by the information and submissions it has previously
supplied.
12
confidential information by this time, the 5 week deadline period will effectively
begin from this date. The closing date for submissions will be notified on the
Commission’s website.
The Commission considers that the process established by industry participants for
obtaining access to Telstra’s previous (9 January 2003) undertakings should again be
used for negotiating terms upon which to access confidential information. Parties
wishing to obtain confidential information from Telstra should contact Christine
Williams of Telstra on (07) 3898 6161 by 19 December 2003.
Following this process the Commission intends to then proceed to make a final
decision in respect of the Undertakings.
5.2.2 Consistency with standard access obligations (s.152BV(2)(b))
The SAOs are set out in s.152AR of the Act. Subject to class or individual
exemptions made by the Commission, an access provider must comply with the SAOs
in regard to declared services it supplies either to itself or to other persons.14 In
particular, s.152AR requires access providers to, among other things:









14
supply an active declared service if requested to do so by a service provider;
take all reasonable steps to ensure that the technical and operational quality of the
active declared service supplied to the service provider is equivalent to that which
the access provider provides to itself;
take all reasonable steps to ensue that fault detection, handling and rectification
which the service provider receives in relation to the declared service is of
equivalent technical and operational quality as that provided by the access
provider to itself;
permit the interconnection of the facilities an access provider either owns,
controls, or is responsible for, with the facilities of a service provider for the
purpose of enabling the service provider to be supplied with active declared
services;
take all reasonable steps to ensure that the technical and operational quality and
timing of the interconnection is equivalent to that which the access provider
provides to itself;
if a standard is in force under s. 384 of the Telecommunications Act 1997, take all
reasonable steps to ensure that the interconnection complies with the standard;
take all reasonable steps to ensure that the service provider receives
interconnection fault detection, handling and rectification of a technical and
operational quality and timing that is equivalent to that which the access provider
provides to itself;
provide billing information (if requested by the service provider) at certain
intervals and in a certain manner and form; and
supply additional services in circumstances where a declared service is supplied
by means of conditional-access customer equipment.
Refer to s.152AS and s.152AT of the Act. As noted in section 2.3, the Commission
previously exempted the LCS in the central business districts of Sydney, Melbourne,
Brisbane, Adelaide and Perth.
13
This criterion is considered in Chapter 6 of this paper.
5.2.3 Consistency with Ministerial pricing determinations (s.152BV(2)(c))
Division 6 of Part XIC provides that the Minister can make a written determination
setting out principles dealing with price or a method of ascertaining price relating to
the SAOs. Section 152CI(1) of the Act provides that if provision of an access
undertaking is inconsistent with any Ministerial pricing determination, the provision
will have no effect to the extent of the inconsistency.
The Minister has not made a pricing determination under Part XIC to date.
5.2.4 Reasonableness of terms and conditions (s.152BV(2)(d))
An important part of the access regime is the terms and conditions of access
(including the price or a method for ascertaining the price). Under Part XIC of the
Act, the Commission cannot accept an undertaking unless it is satisfied that the terms
and conditions specified are reasonable. In determining whether terms and conditions
are reasonable, regard must be had to the following matters:






whether the terms and conditions promote the LTIE;
the legitimate business interests of the access provider concerned, and the access
provider’s investment in facilities used to supply the declared service concerned;
the interests of persons who have rights to use the declared service concerned;
the direct costs of providing access to the declared service concerned;
the operational and technical requirements necessary for the safe and reliable
operation of a carriage service, a telecommunications network or a facility; and
the economically efficient operation of a carriage service, a telecommunications
network or a facility.15
This does not, by implication, limit the matters to which regard may be had.16
In considering whether the terms of an access undertaking promote the LTIE, the
Commission must consider the achievement of the following objectives:



promoting competition in markets for telecommunications services;
achieving any-to-any connectivity in relation to carriage services that involve
communication between end-users; and,
encouraging the economically efficient use of, and the economically efficient
investment in, the infrastructure by which telecommunications services are
supplied.17
These criteria are detailed in greater detail in Chapter 7 of this paper, while Chapter 8
assesses the reasonableness of the terms and conditions specified in the Undertakings
against these criteria.
15
Sub-section 152AH(1) of the Act.
16
Sub-section 152AH(2) of the Act.
17
Sub-section 152AB(2) of the Act.
14
5.2.5 Expiry time (s.152BV(2)(e))
Under s.152BV the expiry of an undertaking must occur within three years after the
date on which the undertaking comes into operation.
From the terms of the Undertakings, the expiry date of each undertaking (for each
service in each financial year) cannot be more than one year from the date upon which
it comes into operation. Further, with respect to the domestic PSTN O/T service and
the ULLS, the Undertakings cover the period from no earlier than 1 July 2003 until no
later than 30 June 2006, whereas with respect to the LCS, the Undertakings cover the
period from no earlier than 1 July 2003 to no later than 30 June 2005. However, the
Undertakings are of no effect in respect of the period that precedes any acceptance by
the Commission, and may be withdrawn by Telstra before their expiry date.
15
6 Consistency with the standard access obligations
Under s. 152BV(2)(b), the Commission must not accept the Undertakings unless it is
satisfied that they are consistent with the SAOs that are applicable to Telstra.
6.1 The standard access obligations
The SAOs are set out in s. 152AR of the Act and require that an access provider that
supplies a declared service to itself or others must comply with the specified
obligations. These obligations were detailed above in section 5.2.2.
In relation to the declared PSTN O/T services, the ULLS and the LCS most of the
SAOs detailed in section 5.2.2 apply to Telstra. However, there is no relevant
standard in force under s. 384 of the Telecommunications Act 1997. Also, it is not
apparent to the Commission that Telstra is supplying, or will supply, these declared
services by means of conditional-access customer equipment. Accordingly, it appears
these obligations do not apply to Telstra in relation to the declared PSTN O/T
services, the ULLS and the LCS.
6.2 Approach to assessing consistency with the standard access
obligations
The Act does not detail a specific approach to be adopted for assessing whether the
terms and conditions in an undertaking are consistent with the access provider’s
SAOs. In this regard, the Commission finds it useful to consider whether the terms
and conditions specified in an undertaking raise any inconsistencies with the SAOs.
That is, if the terms and conditions are not inconsistent with the obligations, the
Commission is likely to regard them as being consistent with the obligations.
The Commission considers that terms and conditions specified in an undertaking
would be inconsistent with the SAOs if an access provider acting in accordance with
those terms and conditions could not satisfy each of the obligations. Such
inconsistency could arise either expressly, or by implication from the circumstances in
which the terms and conditions could be satisfied.
The purpose of this assessment is to ensure that an access provider would comply
with the SAOs should the Undertaking be accepted. The Commission is not here
concerned with the reasonableness of the terms and conditions of the Undertakings.
Reasonableness is assessed separately.
In making this assessment, it has been necessary for the Commission on occasion to
interpret how the Undertakings would operate. Any such occasions that are
considered as having a material impact on the Commission’s assessment are noted
below.
6.3 Assessment
Clause 3.1 of each of the respective undertakings provides that Telstra will comply
with the terms and conditions specified in the various attachments to the Undertakings
in relation to the SAOs that are applicable to Telstra.
16
These terms and conditions principally relate to matters of pricing, although the
attachments also contain clauses that may be classified as non-price terms and
conditions.
The Undertakings adopt as a drafting technique the specification of services of
particular technical attributes (which are referred to as ‘Telstra services’) and to then
set out the terms and conditions upon which these Telstra services will be supplied.
These terms and conditions are not exhaustive of all the matters upon which an access
provider and access seeker would be required to reach agreement in respect of the
supply of the services.
6.3.1 Non-exhaustive scope of the undertakings
While the price and non-price terms and conditions that are contained in the
Undertakings do not cover all of the matters relating to the supply of a service, it is
not necessary for an undertaking to exhaustively address all matters that could relate
to the applicable SAOs. Any relevant matters that are not addressed in the
Undertakings would instead be settled by commercial negotiation and, should the
parties be unable to reach agreement on them, could be determined by the
Commission in an arbitration if a dispute was notified.
Accordingly, the Commission considers that the absence of terms and conditions
about certain matters does not make an undertaking inconsistent with the SAOs.
6.3.2 Whether the undertakings specify terms and conditions in respect of
services other than the Telstra services
The Commission notes that there could be some uncertainty as to the scope of the
Undertakings as they specify terms and conditions concerning the supply of the
Telstra services rather than the declared services themselves. Importantly, the Telstra
services are not defined in the Undertakings in the precise form as were the Declared
services in the relevant instruments in which they were declared or taken to be
declared. Further, in certain respects the Telstra services would appear of more
limited scope. Some of these limitations are noted below.
The Commission interprets the Undertakings, such that the price and non-price terms
specified in the Undertakings, would apply only in respect of the Telstra services and
not the corresponding declared services. In other words, Telstra could not be required
pursuant to its undertakings to supply on the price and non-price terms set out in the
Undertakings an instance of the declared service that was outside the scope of the
Telstra service.
On the other hand, the Commission interprets the Undertakings as not specifying
terms and conditions upon which Telstra would supply such an instance of the
declared service i.e. an instance of the declared service that falls outside the scope of
the Telstra service. In other words, the Undertakings specify the terms and conditions
upon which Telstra will satisfy its SAOs in respect of only the Telstra services, and
not any other instance of the declared services.
The latter aspect of this issue is of some importance to the current analysis. If the
Undertakings were interpreted instead as specifying terms and conditions in respect of
all instances of the declared services, then Telstra could in accordance with the
17
Undertakings refuse to supply any instance of the declared service other than the
Telstra service. Were such an interpretation to be given to the Undertakings, the
Commission could not be satisfied that they were consistent with Telstra’s SAOs in
respect of the full scope of the declared service.
Accordingly, the views expressed below have been formed on the basis that the
Undertakings specify terms and conditions only in respect of the supply of the Telstra
services and not every aspect of the corresponding declared services more generally.
The practical consequence of this distinction of the scope of the Undertakings
depends upon the extent to which a Telstra service would not cover all instances of
the corresponding declared service and the materiality of any such limitation.
Because of the way in which the Commission interprets the Undertakings, it has not at
this time considered the full extent to which the Telstra service would differ to the
corresponding declared service, or the materiality of any such limitation.
By way of illustration, the Commission notes the following limitations in respect of
the domestic PSTN originating access service:

the Telstra service is provided for the purpose of supplying the end-to-end
services listed at clause 2.3 of Attachment A of the PSTN/LCS undertakings.
There is no requirement for the Telstra service to be supplied in respect of other
end-to-end services in respect of which the deeming statement may require
domestic PSTN originating access to be supplied.
The Commission also notes the following limitations in respect of the ULLS:


the Telstra service will support a connection with DC continuity – there is no
requirement for the Telstra service to support any other service; and
the Telstra service involves the use of a continuous metallic twisted pair, whereas
the declared service involves the use of an unconditioned copper based wire.
Further, the Commission notes the following limitations in respect of the LCS:

the Telstra service excludes carriage of local calls for the purposes of supplying
the services listed at clause 1.2 of Attachment E of the PSTN/LCS undertakings.
To the extent that any of the services there listed would be an instance of the
declared service, they are excluded from the Telstra service.
6.3.3 Supply, quality and fault handling in relation to the declared services
The attachments to the Undertakings specify technical aspects relating to supply of
the Telstra services. The Commission has previously sought industry comment on the
appropriateness of these or quite similar technical attributes. The Commission has not
however received submissions contending that these technical attributes would be
inconsistent with the obligation to provide services of an equivalent technical and
operational quality. On their face, the provisions of the Undertakings do not appear to
be inconsistent with this obligation insofar as they relate to the Telstra services.
The Undertakings do not contain provisions specifying how Telstra will satisfy its
obligations in respect of the quality and timing of fault detection, handling and
rectification in respect of the Telstra services. Nor do they contain provisions relating
to the commencement, refusal, suspension or termination of supply.
18
The Commission does not consider that this makes the Undertakings inconsistent with
the SAOs specified in section 152AR(3) of the Act. Rather, Telstra has simply chosen
not to specify in these undertakings all aspects concerning how these obligations will
be satisfied in respect of the Telstra services. The Commission considers that should
agreement not be reached in respect of these matters, any such disagreement could fall
for resolution by the Commission in arbitration.18
The Commission is of the view that the Undertakings are not inconsistent with the
standard access obligations in relation to the supply and quality of the Telstra services
and related fault handling obligations.
6.3.4 Interconnection of facilities
The attachments to the Undertakings concerning domestic PSTN O/T services specify
how the location of points of interconnection (POI) between Telstra’s network and the
service provider’s network are to be determined. In particular, the Undertakings
specify that calls provided using the declared PSTN services will be handed over at a
POI agreed by Telstra and the service provider.
In this regard, these undertakings state that Telstra will provide a ‘POI Availability
List’ setting out where the POI may be located. A service provider may request
interconnection at a location other than one listed and, where such a request is made,
Telstra will negotiate in good faith and subject to the reasonableness and feasibility of
establishing additional points of interconnection.
The Undertakings do not contain further provisions relating to the technical and
operational quality and timing of interconnection, or provisions in relation to
interconnection, fault detection, handling and rectification.
The Commission considers that these terms and conditions would not make the
Undertakings inconsistent with the SAO to permit interconnection of facilities
(s. 152AR(5)). Further, while Telstra has chosen not to specify in its undertakings all
the terms concerning interconnection of facilities, the Commission does not consider
that this makes the Undertakings inconsistent with the SAO to permit interconnection
of facilities (s. 152AR(5)). Should the negotiations contemplated by the terms and
conditions, or negotiations concerning other aspects of facilities interconnection, not
result in agreement, the Commission considers that those matters could fall for
determination by the Commission in arbitration.
The Commission considers that the Undertakings are not inconsistent with the SAOs
relating to interconnection of facilities.
6.3.5 Provision, timing and content of billing information
Sub-section 152AR(7) of the Act provides that the billing information that must be
provided by an access provider to a service provider must be given at such times and
in a manner ascertained in accordance with the Trade Practices Regulations.
18
It should be noted that the Commission has also published its views on the model (nonprice) terms and conditions of these core services and this determination would also
inform any dispute in relation to such matters.
19
Regulation 28S provides that billing information must be given in a manner and form,
and at the times, agreed by the access provider and service provider. It also sets out
the type of billing information that must be given.
In this regard, the Undertakings in respect of the Domestic PSTN Originating Access
service states that Telstra will provide service providers with ‘Communication
Information’. ‘Communication Information’ is defined as the information to be
provided by Telstra in accordance with the regulation made under s. 152AR(6) and
(7) of the Act, or in the absence of such a regulation, the information agreed by
Telstra and the service provider. The Undertakings do not contain further terms and
conditions in relation to the provision, timing and content of billing information.
The Commission is of the view that the Undertakings are not inconsistent with the
SAOs in relating to billing information.
20
7 Reasonableness of terms and conditions
The Commission cannot accept an undertaking unless it is satisfied that the terms and
conditions are reasonable. In forming a view about whether particular terms and
conditions are reasonable, the Commission must have regard to the range of matters
which are set out in s. 152AH(1) of the Act and detailed in section 5.2.4 above.
Set out below is a summary of the key phrases and words used in s. 152AH(1).
While, in general, these phrases and words have not been the subject of judicial
interpretation, in order to have regard to those matters it is necessary for the
Commission to form a view as to what they mean. Chapter 8 then assess the
Undertakings in terms of these matters.
7.1 Long-term interests of end-users
The Commission has published a guideline explaining what it understands is meant by
the phrase ‘long-term interests of end-users’ in the context of its declaration
responsibilities.19 A similar interpretation would seem to be appropriate in the context
of assessing an undertaking.
In the Commission’s view, particular terms and conditions promote the interests of
end-users if they are likely to contribute towards the provision of goods and services
at lower prices, higher quality, or towards the provision of greater diversity of goods
and services.20
To consider the likely impact of particular terms and conditions, the Act requires the
Commission to have regard to whether the terms and conditions are likely to result in
the achievement of the following objectives:



the objective of promoting competition in markets for carriage services and
services supplied by means of carriage services;
for carriage services involving communications between end-users, the objective
of achieving any-to-any connectivity; and
the objective of encouraging the economically efficient use of, and economically
efficient investment in, infrastructure by which carriage services and services
provided by means of carriage services are supplied.21
In the Commission’s view, the phrase ‘economically efficient use of, and
economically efficient investment in... infrastructure’ refers to the concept of
economic efficiency. This concept consists of three components:

Productive efficiency. This is achieved where individual firms produce the goods
and services that they offer at least cost.
19
ACCC, Telecommunications services — Declaration provisions: a guide to the
declaration provisions of Part XIC of the Trade Practices Act, July 1999.
20
ibid, at pp. 32 – 33.
21
Subs. 152AB(2) of the Act.
21


Allocative efficiency. This is achieved where the prices of resources reflect their
underlying costs so that resources are then allocated to their highest valued uses
(i.e. those that provided the greatest benefit relative to costs).
Dynamic efficiency. This reflects the need for industries to make timely changes
to technology and products in response to changes in consumer tastes and in
productive opportunities.
7.2 Legitimate business interests and direct costs
The Commission is of the view that the concept of legitimate business interests should
be interpreted in a manner consistent with the phrase ‘legitimate commercial interests’
used elsewhere in Part XIC of the Act. Accordingly, it would cover the access
provider’s interest in earning a normal commercial return on its investment.
This does not, however, extend to receiving compensation for loss of any ‘monopoly
profits’ that occurs as a result of increased competition. In this regard, the
Explanatory Memorandum for the Trade Practices Amendment (Telecommunications)
Bill 1996 states:
... the references here to the ‘legitimate’ business interests of the carrier or carriage service
provider and to the ‘direct’ costs of providing access are intended to preclude arguments that the
provider should be reimbursed by the third party seeking access for consequential costs which the
provider may incur as a result of increased competition in an upstream or downstream market.
When considering the legitimate business interests of the access provider in question,
the Commission may consider what is necessary to maintain those interests. This can
provide a basis for assessing whether particular terms and conditions in the
undertaking are necessary (or sufficient) to maintain those interests.
7.3 Interests of persons who have rights to use the declared service
Persons who have rights to use a declared service will, in general, use that service as
an input to supply carriage services, or a service supplied by means of carriage
services, to end-users. In the Commission’s view, these persons have an interest in
being able to compete for the custom of end-users on the basis of their relative merits.
Terms and conditions that favour one or more service providers over others and
thereby distort the competitive process may prevent this from occurring and
consequently harm those interests.
While s. 152AH(1)(c) directs the Commission’s attention to those persons who
already have rights to use the declared service in question, the Commission can also
consider the interests of persons who may wish to use that service. Where
appropriate, the interests of these persons may be considered to be ‘any other relevant
consideration’.
7.4 Economically efficient operation of a carriage service, etc
In the Commission’s view, the phrase ‘economically efficient operation’ embodies the
concept of economic efficiency set out in section 7.1. It would not appear to be
limited to the operation of carriage services, networks and facilities by the access
provider supplying the declared service, but would seem to include those operated by
others (e.g. service providers using the declared service).
22
To consider this matter in the context of assessing an undertaking, the Commission
may consider whether particular terms and conditions enable a carriage service,
telecommunications network or facility to be operated in an efficient manner. This
may involve, for example, examining whether they allow for the carrier or carriage
service provider supplying the declared service to recover the efficient costs of
operating and maintaining the infrastructure used to supply the declared service under
consideration.
In general, there is likely to be considerable overlap between the matters that the
Commission takes into account in considering the LTIE and its consideration of this
matter.22
22
Relevantly, in considering whether particular terms and conditions will promote the LTIE,
the Commission must have regard to their likely impact on the economically efficient use
of, and economically efficient investment in, the infrastructure by which carriage services
and services provided by means of carriage services are supplied.
23
8 Assessment of reasonableness of terms and conditions
As noted earlier, the Commission recently determined model price terms and
conditions for the Undertaking Services. The reasonableness criteria used in
determining model price terms and conditions are equivalent to the reasonableness
criteria that need to be applied in assessing undertakings. These were detailed in the
previous chapter.
During the model price terms and conditions process, the Commission made it clear
that it would consider the then lodged undertakings and model price terms and
conditions simultaneously, although given statutory timeframes the model price terms
and conditions were determined first. Further, the Commission indicated that its
assessment of future undertakings would have regard to the model price terms and
conditions.
Therefore, in outlining its preliminary view, the Commission believes it is appropriate
to assess the reasonableness of the proposed charges by comparing them against those
outlined in the model price terms and conditions determination. For a full assessment
of the charges set out in model price terms and conditions, the Commission refers to
its model price terms and conditions determination.23
8.1 PSTN O/T undertakings
In its model price terms and conditions determination the Commission stated that
reasonable PSTN O/T headline rates for 2003-04, 2004-05 and 2005-06 are 1.25, 1.15
and 1.0 cents per minute respectively. These are identical to the headline rates
proposed in the Undertakings.
The Commission disaggregated these charges according to various geographic areas,
and comprising flagfall and per end minute of use charge components. The following
tables compare the disaggregated rates set by the Commission with those proposed by
Telstra in its undertakings.
23
ACCC, Final Determination for model price terms and conditions of the PSTN, ULLS and
LCS services, October 2003.
24
Table 8.1.1: Disaggregated model and Telstra’s proposed access prices for PSTN O/T services in
2003-04
Model charges
Undertaking proposed charges
2003-04
Flagfall
EMOU
charge
Headline
rate
Flagfall
EMOU
charge
Headline
Rate*
CBD
1.14
0.51
0.80
1.1132
0.4946
0.7743
Metropolitan
1.14
0.65
0.93
1.1052
0.6356
0.9133
Provincial
1.24
0.84
1.15
1.2187
0.8472
1.1534
Rural
2.47
3.96
4.58
2.5129
4.1244
4.7558
*Calculated by the Commission assuming an average call duration
Table 8.1.2: Disaggregated model and Telstra’s proposed access prices for PSTN O/T services in
2004-05
Model charges
Undertaking proposed charges
2004-05
Flagfall
EMOU
charge
Headline
rate
Flagfall
EMOU
charge
Headline
Rate*
CBD
0.98
0.44
0.69
0.9891
0.4484
0.6969
Metropolitan
0.97
0.58
0.82
0.9827
0.5863
0.8332
Provincial
1.08
0.79
1.06
1.0958
0.7922
1.0675
Rural
2.27
3.98
4.55
2.3405
3.8610
4.4491
*Calculated by the Commission assuming a call duration of 3.98 minutes
Table 8.1.3: Disaggregated model and Telstra’s proposed access prices for PSTN O/T services in
2005-06
Model charges
Undertaking proposed charges
2005-06
Flagfall
EMOU
charge
Headline
rate
Flagfall
EMOU
charge
Headline
Rate*
CBD
0.85
0.35
0.57
0.7583
0.3780
0.5685
Metropolitan
0.84
0.49
0.70
0.7534
0.5128
0.7021
Provincial
0.94
0.68
0.91
0.8661
0.7131
0.9307
Rural
2.06
3.66
4.18
2.0630
3.5863
4.1046
*Calculated by the Commission assuming a call duration of 3.98 minutes
Further, the Commission’s model price terms and conditions determination states that:
25
…disaggregated rates … are only indicative rates and only approximate the appropriate
disaggregation of Commission’s indicative headline rates. They should not be taken as definitive. The
Commission will be willing to consider alternate (but not too dissimilar) disaggregation of PSTN
headline rates should they be proposed, for example, in an undertaking. 24
The tables above indicate that the prices proposed in the Undertakings are similar on a
disaggregated level to those set by the Commission in its model price terms and
conditions determination. Therefore, it is the Commission’s preliminary view that
terms and conditions of supply of PSTN O/T service proposed in the Undertaking are
reasonable.
That said, the Commission disagrees with a number of aspects of Telstra’s supporting
submission, particularly with regard to the quantification of efficient costs. As noted
in the model price terms and conditions determination, the Commission has
significant concerns over the appropriateness of the PIE II model to calculate the
efficient costs of the Undertaking Services. Further, the Commission believes a case
no longer exists for the inclusion of an Access Deficit Contribution (‘ADC’) in the
efficient cost calculations. That said, for reasons stated in the model price terms and
conditions determination, regulatory pricing of the domestic PSTN O/T services
should transition to cost over a period of time.
Therefore, while the Commission finds the price terms and conditions proposed in the
Undertaking reasonable, it does so for the reasons set out in its model price terms and
conditions determination, and not for those outlined by Telstra in its submission
supporting the Undertakings. In this regard, it should be noted that in setting out its
views on appropriate indicative prices, the Commission specifically considered and
dismissed most of Telstra contentions regarding the efficient costs of these services
and the need for an ADC.
8.2 Local Carriage Service undertakings
Both the Commission’s model price terms and conditions determination and the
Undertakings propose a GST exclusive LCS charge of 13.61 cents per call (this
charge is based on access seekers receiving no discount on line rental). For the
reasons outlined in the Commission’s model price terms and conditions
determination, Telstra’s proposed terms and conditions of supply of LCS appear
reasonable.
8.2.1 PSTN Local Calls
The Commission notes that late in the process of setting model terms and conditions,
an issue arose over the treatment of local calls delivered through the use of the
domestic PSTN O/T services. In its determination, the Commission did not form any
final view on this issue.
The Undertakings do not specify terms and conditions upon which Telstra would
supply the domestic PSTN originating access service where a 14xy-override code
prefixed a local call. This is the means by which local calls have generally been
24
ACCC, Final Determination for model price terms and conditions of the PSTN, ULLS and
LCS services, October 2003, page 69.
26
delivered through the use of the domestic PSTN O/T services. While the Commission
does not intend to make any finding in respect of PSTN local calls in its current
assessment, it notes however that Telstra is able to provide further undertakings for
Commission consideration in respect of this matter should it wish to do so. In the
absence of any such agreed undertakings, any future disputes over the supply of the
domestic PSTN originating access service in connection with PSTN local calls are
capable of being determined in arbitration.
8.3 Unconditioned Local Loop Service undertakings
The Commission’s model price terms and conditions determination found that the
following starting prices satisfy the reasonableness test:
Table 8.3.4 – ULLS charges
Monthly ULLS charge for
services connected at
RSS/RSU
Band 1
$13
Band 2
$22
Band 3
$40
Band 4
$100
In addition, the Commission noted that:
…these access prices are starting prices only and an adjustment mechanism will operate to either
increase or decrease them for the 2004-05 and 2005-06 financial years. Specifically, for every 10 per
cent increase or decrease above or below forecasted demand, there will be a corresponding $1
decrement or increment to the prices for the subsequent period with a cap at a 60 per cent deviation
from those forecasts.
Telstra’s adjustments schedules detailed above in tables 4.2.2 – 4.2.5 are broadly
consistent with this adjustment mechanism. Therefore, in the Commission’s
preliminary view, the ULLS terms and conditions set out in the Undertakings appear
reasonable.
As with the case of the PSTN O/T services, the ULLS charges appear reasonable for
the reasons outlined in the Commission’s model price terms and conditions
determination, and not for those in Telstra’s supporting statement. In this regard, it
should be noted that in setting out its views on appropriate indicative prices, the
Commission specifically considered and dismissed most of Telstra contentions
regarding the efficient costs of these services.
27
9 Conclusions
Based on the evidence to date, including the information assessed by the Commission
during its model price terms and conditions deliberations, it is the Commission’s
preliminary view that the terms and conditions in the Undertakings satisfy the relevant
SAOs and are reasonable (as defined in s. 152AH of the Act). Therefore, it is the
Commission’s preliminary view that the Undertakings should be accepted.
28