Re Telstra Corporation Ltd (No 3) - [2007] ACompT 3

AUSTRALIAN COMPETITION TRIBUNAL
Telstra Corporation Ltd (No 3) [2007] ACompT 3
TRADE PRACTICES – application pursuant to s 152CE(1) of the Trade Practices Act 1974 (Cth) – application for review of decision of Australian Competition and Consumer Commission to reject access undertakings – unconditioned local loop service (“ULLS”) – whether monthly charge is reasonable – consistency with standard access obligations – averaging of network costs – retail price parity obligation – universal service obligation – universal service fund – whether averaging promotes the long‑term interests of end‑users – whether averaging is in the legitimate business interests of access provider – whether averaging is in the interests of persons who have rights to use the ULLS – direct costs of providing access to the ULLS – reasonableness of network modernisation provisions – efficient costs – reasonableness of PIE II model – international benchmarking – allocation of costs – weighted average cost of capital (“WACC”)
Trade Practices Act 1974 (Cth): ss 152AB, 152AH, 152AL, 152AR, 152AY, 152BS 152BU(2), 152BV(2), 152CE(1), 152CF(3)
Pts IV, V, XIB, XIC
Telecommunications Act 1997 (Cth)
Telecommunications Competition Bill 2002
Legislative Instruments Act 2003 (Cth): ss 55(2), 55(3)
Telecommunications (Consumer Protection and Service Standards) Act 1999 (Cth): ss 11, 11A, 12D, 154, 155, 157
Telecommunications (Universal Service Levy) Act 1997 (Cth)
Telstra Corporation Limited [2006] ACompT 4, applied
Application by Optus Mobile Pty Limited & Optus Networks Pty Limited [2006] ACompT 8, applied
Application by Vodafone Network Pty Limited & Vodafone Australia Limited [2007] ACompT 1, applied
Sydney International Airport (2000) ATPR 41‑754, distinguished
Seven Network Limited (No 4) [2004] ACompT 11, distinguished
Re Queensland Co‑Operative Milling Association and Defiance Holdings (1976) 8 ALR 481, applied
Sydney Services Pty Limited [2005] ACompT 7, cited
R v Hunt Ex parte Sean Investments Pty Ltd (1979) 180 CLR 322, applied
FILE No 8 of 2006
RE:FINAL DECISION BY THE AUSTRALIAN COMPETITION AND CONSUMER COMMISSION DATED AUGUST 2006 IN RESPECT OF ORDINARY ACCESS UNDERTAKINGS SUBMITTED BY TELSTRA CORPORATION LIMITED FOR THE UNCONDITIONED LOCAL LOOP SERVICE
TELSTRA CORPORATION LTD (ACN 051 775 556)

Applicant
JUSTICE GOLDBERG (PRESIDENT), MR R DAVEY & PROFESSOR D ROUND
17 MAY 2007
MELBOURNE

IN THE AUSTRALIAN COMPETITION TRIBUNAL

FILE No 8 of 2006
RE:FINAL DECISION BY THE AUSTRALIAN COMPETITION AND CONSUMER COMMISSION DATED AUGUST 2006 IN RESPECT OF ORDINARY ACCESS UNDERTAKINGS SUBMITTED BY TELSTRA CORPORATION LIMITED FOR THE UNCONDITIONED LOCAL LOOP SERVICE
TELSTRA CORPORATION LTD (ACN 051 775 556)

APPLICANT

JUDGE:
JUSTICE GOLDBERG (PRESIDENT), MR R DAVEY &

PROFESSOR D ROUND

DATE OF ORDER: 17 MAY 2007

WHERE MADE: MELBOURNE
THE TRIBUNAL DECIDES THAT:
1.The decision of the Australian Competition and Consumer Commission on 25 August 2006 rejecting the two ordinary access undertakings given to it by Telstra Corporation Limited on 23 December 2005 is affirmed.

IN THE AUSTRALIAN COMPETITION TRIBUNAL

FILE No 8 of 2006
RE:FINAL DECISION BY THE AUSTRALIAN COMPETITION AND CONSUMER COMMISSION DATED AUGUST 2006 IN RESPECT OF ORDINARY ACCESS UNDERTAKINGS SUBMITTED BY TELSTRA CORPORATION LIMITED…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2007] ACompT 3
Decision Date: 17 MAY 2007

CaseChat Overview and Summary

The Tribunal was asked to review a decision of the Australian Competition and Consumer Commission to reject two ordinary access undertakings given by Telstra Corporation Limited to the Commission. The undertakings related to the Unconditioned Local Loop Service (“ULLS”) and set out the price and certain non-price terms and conditions upon which Telstra would provide its ULLS. The Commission rejected the two undertakings on the basis that it was not satisfied that the price and certain non-price terms and conditions specified in the undertakings were reasonable. The Tribunal found that the averaged charge for access to the ULLS of $30 per line per month in the undertakings was not reasonable and that the Network Modernisation Provisions in the undertakings were not reasonable. The Tribunal also found that Telstra’s estimated network costs set out in the undertakings were not a reasonable estimate of its projected network costs for the periods covered by the undertakings. The Tribunal further found that Telstra’s allocation of its ULLS specific costs across ULLS lines only was not reasonable. The Tribunal found that the use by Telstra of two WACCs, one for the assets in the CAN, and one for the ULLS specific assets, was not reasonable and that the calculation and estimate of the WACC by the addition of an amount equal to one standard deviation in order to allow for the alleged asymmetry and the social consequences of errors made in estimating the WACC, for the purpose of determining and estimating Telstra’s specific ULLS costs, was not reasonable. The consequence is that the Tribunal was not satisfied that the terms and conditions specified in the undertakings in the respects to which the Tribunal has referred were reasonable and therefore the decision of the Commission was affirmed.

Orders