EXPLANATORY STATEMENT
Pricing Principles for the Public Switched Telephone Network Originating Access and Terminating Access Services (PSTN OTA) 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 public switched telephone network originating and terminating access (PSTN OTA) 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) 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 pricing principles 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 December 2007 under the total service long-run incremental cost (TSLRIC) approach. The TSLRIC approach is maintained for pricing for the period 1 August 2009 until 31 December 2010. No pricing principles or indicative prices for the period 1 January 2008 to 31 July 2009 were made.
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. This inquiry consolidated services which had previously been assessed independently. In July 2009 the ACCC released its final decision and maintained declaration for all six fixed line services including the PSTN OTA until 31 July 2014 pursuant to section 152AL of the Act.
In August 2009 the ACCC commenced a public inquiry into PSTN OTA pricing, in the context of a broader inquiry into pricing for the six fixed line services, by issuing a draft determination for public comment. After reviewing submissions from interested parties, the ACCC has made the Determination consolidating pricing principles and indicative prices from its previous determination for the following periods:
- any period up to 31 December 2007; and
- 1 August 2009 to 31 December 2010.
The ACCC’s analysis regarding the pricing principles applicable to the PSTN OTA 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 TSLRIC pricing principle and indicative pricing that applied until 31 December 2007. Pricing to 31 December 2007 was established for 2006-2007 by Schedule 3 of the Pricing Principles for the Local Carriage Service, Wholesale Line Rental Service and Public Switched Telephone Originating and Terminating Access Services instrument made under section 152AQA of the Act on 29 November 2006. This instrument has been repealed.
Pricing from 1 August 2009 to 31 December 2010 continues to adopt TSLRIC pricing principles and indicative pricing.
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) 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. It was published on the ACCC’s website www.accc.gov.au and included draft pricing principles and indicative prices. Interested parties were provided 5 weeks within which to make submissions which was subsequently extended by a further 2 weeks following a number of requests. 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 PSTN OTA are set out in Schedules 1 and 3 of the Determination. The ACCC’s indicative prices are set out in Schedules 2 and 4 of the Determination.
The pricing principles in Schedules 1 and 3 state that the price of the PSTN OTA should be determined on the basis of TSLRIC pricing approach.
The TSLRIC approach can be considered by breaking the concept into components:
- “Total service” refers to the cost of production of an entire service, rather than the cost of a particular unit. The cost is usually expressed on a per-unit basis by dividing by the number of units supplied.
- “Long run” means that the concept refers to a period where all factors of production can be varied, as opposed to the short run, where the amount of at least one factor of production is fixed.
- “Incremental cost” means that the concept refers to the additional costs of supplying the service over and above the situation where the service was not supplied, assuming the scale of all other production activities remains unchanged. Strictly speaking, the concept refers to only those costs that can be attributed to the production of the service. In practice, the strict TSLRIC concept is often expanded to include a contribution for indirect and overhead costs (TSLRIC+).
Schedules 2 and 4 set out the ACCC’s indicative prices for the PSTN OTA for the following periods:
- any period up to 31 December 2007 (Schedule 2); and
- 1 August 2009 to 31 December 2010 (Schedule 4).