EXPLANATORY STATEMENT
Pricing Principles for the Digital Data Access Service
Trade Practices Act 1974
Legislative Provisions
In November 2007, the Australian Competition and Consumer Commission (Commission) initiated an inquiry into the declaration of the Digital Data Access Service (DDAS), in accordance with subsection 152ALA(7) of the Trade Practices Act 1974 (Act). As a result of that inquiry the Commission decided to extend the declaration of the DDAS in regional areas until 30 June 2009, pursuant to section 152ALA of the Act.
At the same time, the Commission also made the Pricing Principles for the DDAS (the Determination) in accordance with section 152AQA of the Act.
The DDAS allows for the domestic carriage of data between a digital data interconnect terminal point located at the access seeker’s exchange or network facility and a network termination unit, unimux or modem located at the customer’s premises, where the customer is directly connected to the access provider’s network.
Subsection 152AQA(1) of the Act provides that the Commission must, by 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.
Subsection 152AQA(6) of the Act provides that the Commission 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, the pricing principles are not binding on the Commission. Parties to arbitrations are still able to address the Commission on the relevance and applicability of the pricing principles to the circumstances of their particular dispute.
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, government and other interested parties of the principles that are likely to guide the Commission when considering an access dispute or assessing an undertaking in relation to pricing for the DDAS.
Background
In 1997 the Commission determined that deeming the DDAS as a declared service would promote the long term interests of end-users.[1]
In June 2005 the Commission issued its final decision following its DDAS services review. The Commission announced the removal of the existing service declaration in CBD and metropolitan areas of capital cities from 30 June 2006. In relation to regional areas, however, the Commission decided that the lack of competition meant the declaration should remain in force until 30 June 2008.[2]
In November 2007 the Commission commenced a public inquiry regarding the declaration of the DDAS. The Commission also sought public comment about the appropriate principles related to the price of access that should apply to the DDAS, should the service continue to be declared. Following the public inquiry, the Commission has made the decision to extend the declaration of the DDAS in regional areas until 30 June 2009. The Commission’s decision and reasons are set out in its June 2008, Final Report on declaring the Digital Data Access and Integrated Services Digital Network Services, which is available on the Commission’s website at www.accc.gov.au.
The inquiry also concludes with the making of the Determination. The Commission’s analysis regarding the pricing principles that are to apply to the DDAS is set out in the Commission’s Final Pricing Principles for Declared DDAS and ISDN Services — a guide which is also available from the Commission’s website at www.accc.gov.au.
Regulation Impact Statement
The Commission has obtained the advice of the Office of Best Practice Regulation (formerly the Office of Regulation Review) that a Regulation Impact Statement is not required for determinations made under section 152AQA.
Consultation
Before making a pricing principles determination, the Commission is required by subsection 152AQA(4) to publish a draft determination, invite people to make submissions and consider any submissions received.
On 14 March 2008, the ACCC released its Draft Pricing Principles for declared DDAS and ISDN Services – a guide for comment. Interested parties were provided four weeks within which to make submissions on the ACCC’s preliminary views on the appropriate pricing principles for the DDAS. The ACCC received individual submissions from Telstra and Primus and a joint submission was received from AAPT/PowerTel, Macquarie Telecom, Optus and Primus.
The Commission has taken all of these submissions into account in making the Determination.
Commencement of Determination
The Determination commences on the day after registration.
Notes on the Determination
The Commission’s principles relating to the price of access to the declared DDAS are set out in Schedule 1 of the Determination. An explanation of the principles is set out below.
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Schedule 1
The Determination provides that wherever it is reasonably practicable a TSLRIC pricing principle should be applied to the DDAS.
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.
The Determination also provides that where it is not reasonably practicable to set prices on the basis of TSLRIC, the price of the DDAS should be set having regard to the price of an appropriate benchmark.
A service will be an appropriate benchmark where: (a) it is supplied in a competitive market or it is subject to cost based regulation; and (b) its physical attributes are comparable to the DDAS in question.
[1] ACCC, Deeming of Telecommunications Services, June 1997.
[2] ACCC, DDAS and ISDN Services: Final Report reviewing the declarations for the Digital Data Access and ISDN Services, June 2005, pp. 57-58.