EXPLANATORY STATEMENT
Pricing Principles for the Wholesale Line Rental Determination 2009
Trade Practices Act 1974
Legislative Provisions
The Pricing Principles for the Wholesale Line Rental 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 wholesale line rental (WLR) 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 July 2009 under the retail-minus-retail-cost (RMRC) approach. The RMRC approach is maintained for pricing from 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 WLR.
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 WLR until 31 July 2014 pursuant to section 152AL of the Act.
In August 2009 the ACCC commenced a public inquiry into WLR 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 this Determination consolidating pricing principles and indicative prices from previous determinations for the following periods:
- the 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 applicable to the WLR 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 pricing that applied 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.
Pricing from 1 August 2009 to 31 December 2010 continues to adopt the RMRC 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 WLR service 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 WLR service 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).