Pricing Principles for the Local Carriage Service (LCS) Determination 2009

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Legislation au F2009L04490 Not in force Legislative Instrument

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EXPLANATORY STATEMENT

Pricing Principles for the Local Carriage Service Determination 2009

Trade Practices Act 1974

Legislative Provisions

The Pricing Principles for the Local Carriage Service Determination 2009 (the Determination) has been made by the Australian Competition and Consumer Commission (the ACCC) in accordance with section 152AQA of the Trade Practices Act 1974 (the Act).

Under Part XIC of the Act, the ACCC is responsible for arbitrating access disputes concerning access to particular declared services, and for assessing access undertakings relating to access to such declared services.

The ACCC concluded its strategic review of the fixed network services in July 2009 and has extended the declaration of the local carriage service (LCS) for a period of five years until 31 July 2014 pursuant to section 152AL of the Act.

Subsection 152AQA(1) of the Act provides that the ACCC must, in writing, determine principles relating to the price of access to a declared service.

Subsection 152AQA(2) of the Act provides that the determination may also contain price-related terms and conditions relating to access to the declared service.

Before making a pricing principles determination, the ACCC is required by subsection 152AQA(4) of the Act to publish a draft determination, invite interested parties to make submissions and consider any submissions received.

Subsection 152AQA(6) of the Act provides that the ACCC must have regard to the determination if it is required to arbitrate an access dispute under Division 8 of the Act in relation to the declared service.

However, although the ACCC must have regard to the determination when arbitrating an access dispute, the pricing principles and indicative prices are not binding and parties to arbitrations are still able to address the ACCC on the relevance and applicability of the Determination to the circumstances of their particular disputes.

The Determination adopts the pricing principles and indicative prices that applied until 31 July 2009 under the retail-minus-retail-cost (RMRC) approach and maintains this approach for the period 1 August 2009 to 31 December 2010.

The Determination is a legislative instrument for the purposes of the Legislative Instruments Act 2003.


Purpose

The purpose of the Determination is to inform industry and other interested parties of the principles and price-related terms and conditions that are likely to guide the ACCC when considering an access dispute or assessing an undertaking in relation to pricing for the LCS.

Background

In November 2008 the ACCC commenced a public declaration inquiry for six fixed line services. In July 2009 the ACCC released its final decision and maintained declaration for all six fixed line services including the LCS until 31 July 2014 pursuant to section 152AL of the Act.

On 21 August 2009 the ACCC commenced a public inquiry into the pricing principles and indicative prices that should apply for the six fixed line services, including the LCS, by issuing a draft determination and a supporting report for public comment.

After reviewing submissions from interested parties, the ACCC has made this Determination consolidating pricing principles and indicative prices from previous determinations for the following periods:

  •                  any period up to 31 December 2007;
  •                  1 January 2008 to 31 July 2009;
  •                  1 August 2009 to 31 December 2010.

The ACCC’s analysis regarding the pricing principles and indicative prices for the LCS is set out in the ACCC’s Fixed Services Review – Final pricing principles and indicative prices, available on the ACCC’s website at www.accc.gov.au.

The Determination adopts the RMRC pricing principles and indicative prices that applied for the service until 31 July 2009. Pricing to 31 December 2007 was established by the instrument Pricing Principles for the Local Carriage Service, Wholesale Line Rental Service and Public Switched Telephone Originating and Terminating Access Services made under section 152AQA of the Act on 29 November 2006.

Pricing for the period 1 January 2008 to 31 July 2009 was established by the instrument Pricing Principles for the Local Carriage Service and the Wholesale Line Rental Service made under section 152AQA of the Act on 30 July 2008.  Both of these instruments have been repealed.

The pricing principles and indicative prices for the period 1 August 2009 to 31 December 2010 continues to adopt the RMRC approach.

Regulation Impact Statement

The Office of Best Practice Regulation advises (ID 10753) the ACCC that a Regulation Impact Statement is not required for determinations made under section 152AQA.

Consultation

Before making a pricing principles determination, the ACCC is required by subsection 152AQA(4) of the Act to publish a draft determination, invite interested parties to make submissions and consider any submissions received.

On 21 August 2009 the ACCC released the Fixed Services Review – draft pricing principles and indicative prices for public comment. The report was published on the ACCC’s website www.accc.gov.au and included draft pricing principles and indicative prices for the six fixed line services. Interested parties were invited to make submissions within 5 weeks. The timeframe for submissions was subsequently extended by a further 2 weeks following a number of requests from interested parties. The ACCC received submissions from:

  • SP Telemedia Limited
  • Australian Telecommunications Users Group Limited
  • TransACT Communications Pty Limited
  • Adam Internet Pty Ltd, Agile Pty Ltd / Internode Pty Ltd, Amcom Pty Ltd, Chime Communications Pty Ltd / iiNet Limited, EFTel Limited, Netspace Networks Pty Ltd, Network Technology (Australia) Pty Ltd, TSN Communications / Saunders Properties and Wideband Networks Pty Ltd
  • AAPT Limited
  • Macquarie Telecom Pty Limited
  • Competitive Carriers’ Coalition Inc
  • SingTel Optus Pty Limited
  • Primus Telecom
  • Telstra Corporation Limited

The ACCC has taken all of these submissions into account in making the Determination.

Commencement of Determination

The Determination commences on the day it is made.


Notes on the Determination

The ACCC’s principles relating to the price of access to the LCS are set out in Schedules 1, 3 and 5 of the Determination.  The ACCC’s indicative prices are set out in Schedules 2, 4 and 6 of the Determination.

The pricing principles in Schedules 1, 3 and 5 state that the price of the WLR should be determined on the basis of an RMRC pricing approach.  Under an RMRC methodology, the access price is determined by deducting the access provider’s avoidable costs of retailing a given service to end-users from the retail price paid for that service.

Schedules 2, 4 and 6 set out the ACCC’s indicative prices for the LCS for the following periods:

  •                  any period up to 31 December 2007 (Schedule 2);
  •                  1 January 2008 to 31 July 2009 (Schedule 4); and
  •                  1 August 2009 to 31 December 2010 (Schedule 6).

 

Overview

The Pricing Principles for the Local Carriage Service Determination 2009 was enacted under the Trade Practices Act 1974 to provide clear guidelines for the pricing of access to the local carriage service, which is a declared service under the Act. This legislation was introduced to address the need for regulated pricing principles that ensure fair and efficient access to the local carriage service, thereby supporting competition and consumer welfare in the telecommunications sector. The Australian Competition and Consumer Commission (ACCC), established under the Trade Practices Act, is responsible for determining these pricing principles. The policy objective of the Determination is to establish consistent and transparent pricing principles that will guide the ACCC in arbitrating access disputes and assessing access undertakings, thereby fostering a competitive market environment. In making the Determination, the ACCC followed the legislative requirements outlined in the Trade Practices Act, including publishing a draft determination and considering submissions from interested parties. The Determination adopts the retail-minus-retail-cost (RMRC) approach for setting prices, which has been in place previously for the local carriage service. This approach ensures that the price of access is determined by subtracting the access provider’s avoidable retail costs from the retail price. The Determination extends these pricing principles for the period from 1 August 2009 to 31 December 2010, maintaining continuity in the regulatory framework for the local carriage service.

Scope and Application

The Pricing Principles for the Local Carriage Service Determination 2009, made by the Australian Competition and Consumer Commission (ACCC) under the Trade Practices Act 1974, applies to the pricing principles and indicative prices for access to the local carriage service (LCS) within Australia. The Determination maintains the retail-minus-retail-cost (RMRC) approach for the period 1 August 2009 to 31 December 2010. It serves to guide the ACCC in arbitrating access disputes or assessing undertakings related to the pricing of LCS. The ACCC must consider the Determination when arbitrating disputes, although it is not binding on the parties involved. The Determination consolidates pricing principles and indicative prices from previous determinations for periods up to 31 December 2007, 1 January 2008 to 31 July 2009, and 1 August 2009 to 31 December 2010, continuing the RMRC approach. The Determination was made following a public inquiry and submissions from various industry stakeholders, and it comes into effect on the day it is made.

Key Provisions

The Pricing Principles for the Local Carriage Service Determination 2009 (the Determination) made by the Australian Competition and Consumer Commission (ACCC) under section 152AQA of the Trade Practices Act 1974 (the Act) sets out the pricing principles and indicative prices for access to the local carriage service (LCS). These principles apply to the period from 1 August 2009 to 31 December 2010 and maintain the retail-minus-retail-cost (RMRC) approach that was in place until 31 July 2009. The Determination consolidates the pricing principles and indicative prices from previous determinations for periods up to 31 December 2007, from 1 January 2008 to 31 July 2009, and from 1 August 2009 to 31 December 2010. The ACCC is required to have regard to these principles and prices when arbitrating access disputes or assessing access undertakings concerning the LCS. The Determination imposes obligations on the ACCC to ensure that the pricing principles and indicative prices for LCS are adhered to when arbitrating access disputes or assessing access undertakings. Specifically, under subsection 152AQA(6) of the Act, the ACCC must consider the Determination when required to arbitrate an access dispute. While the principles and prices are not binding, they provide a framework that the ACCC must take into account in its decision-making processes. The ACCC is also mandated to publish a draft determination, invite submissions from interested parties, and consider those submissions before making the final determination, as stipulated in subsection 152AQA(4) of the Act. Breach of the obligations set out in the Determination may not directly result in civil or criminal penalties. However, non-compliance with the principles and indicative prices set by the ACCC could potentially lead to disputes being arbitrated in a manner that the ACCC did not consider. This could lead to outcomes that diverge from the intended pricing framework, impacting the fairness and effectiveness of the access to the LCS. While the Determination itself does not specify maximum penalties, breaches of the broader provisions of the Trade Practices Act 1974 can result in significant penalties, including fines of up to $1.1 million for corporations and $110,000 for individuals, as well as other civil or criminal consequences depending on the nature and severity of the breach.

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