EXPLANATORY STATEMENT
Pricing Principles for the domestic mobile terminating access service (MTAS)
Trade Practices Act 1974
Legislative Provisions
Under Part XIC of the Trade Practices Act 1974 (Act), the Australian Competition and Consumer Commission (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. One of the prime issues arising under these processes is the determination of an appropriate access price. Under section 152AQA of the Act, the ACCC must, by writing, determine principles relating to the price of access to a declared service.
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.
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, the pricing principles are not binding and parties to arbitrations are still able to address the ACCC on the relevance and applicability of the pricing principles to the circumstances of their particular disputes.
The MTAS Pricing Principles Determination for the period 1 January 2009 to 31 December 2011 (Determination) is expressed to operate beyond the notional expiry date of the current MTAS declaration (30 June 2009). There are two reasons for this. Firstly, the current declaration may be extended or further extended pursuant to subsection 152ALA(4) of the Act. The ACCC notes that its Draft Report on reviewing the declaration of the MTAS proposes to extend the current declaration for a period of five years.[1] Without prejudging the outcome of the declaration review, if the declaration is ultimately extended, it is intended that the Determination will continue to apply to the declared service (up to 31 December 2011). Secondly, an arbitration under Division 8 of Part XIC of the Act may still be on foot at the date the current declaration is due to expire. It is intended that this determination will apply to the setting of prices in such an arbitration.
However, if the MTAS is re-declared the ACCC is obliged to make a new pricing principles determination under subsection 152AQA(3) of the Act. The ACCC will decide at that time how the determination is to be applied in relation to the period before a new pricing principles determination is 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 that are likely to guide the ACCC when considering an access dispute or assessing an undertaking in relation to pricing for the MTAS.
Background
The MTAS is a wholesale input, used by providers of calls from fixed line and mobile networks, in order to complete calls to mobile subscribers connected to other networks.
The ACCC declared the MTAS for all voice services terminating on all digital mobile telecommunications networks.[2] The declaration of the MTAS is due to expire on 30 June 2009. The ACCC is currently conducting a public inquiry into the declaration of the MTAS.
Since declaring the MTAS in 2004, the ACCC released the MTAS Pricing Principles Determination for the period 1 July 2004 to 30 June 2007 and the MTAS Pricing Principles Determination for the period 1 July 2007 to 31 December 2008. In November 2008, the ACCC commenced a third public inquiry into MTAS pricing by issuing a draft determination for public comment. After reviewing submissions from interested parties, the ACCC made the Determination relevant for the period of 1 January 2009 to 31 December 2011. The ACCC’s analysis regarding the pricing principles applicable to the MTAS is set out in the ACCC’s Domestic Mobile Terminating Access Service Pricing Principles Determination and indicative prices for the period 1 January 2009 to 31 December 2011, available on the ACCC’s website at www.accc.gov.au.
Regulation Impact Statement
The Office of Best Practice Regulation (formerly the Office of Regulation Review) advises 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 14 November 2008, the ACCC released the Draft MTAS Pricing Principles Determination for the period 1 January 2009 to 30 June 2011 for public comment. It was published on the ACCC’s website www.accc.gov.au and included draft MTAS pricing principles and indicative prices. Interested parties were provided four weeks within which to make submissions. The ACCC received submissions from Australian Telecommunications Users Group, Competitive Carriers' Coalition, Hutchison 3G, Optus, Telstra, Unwired and Vodafone. 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 MTAS are set out in Schedules 1 of the Determination.
The pricing principles state that cost–based pricing principles should be adopted in determining indicative prices for the MTAS and that a total service long run incremental cost framework (TSLRIC+) is an appropriate pricing methodology in informing the ACCC of the efficient cost of supplying the MTAS.
TSLRIC is the incremental or additional cost the firm incurs in the long run in providing a specified volume of the service, assuming all of its other production activities remain unchanged. Alternatively, it is the cost the firm would avoid in the long run if — everything else being equal — it ceased to provide the service. As such, TSLRIC represents the costs the firm necessarily incurs in providing the service and captures the value of society’s resources used in its production. The TSLRIC+ approach includes a mark-up for a portion of organisational level common costs.
Schedule 2 sets out the indicative price for the MTAS for the period of 1 January 2009 to 31 December 2011.
[1] ACCC, Mobile Terminating Access Service — An ACCC Draft Report on reviewing the declaration of the mobile terminating access service, March 2009, p. 4.
[2] ACCC, Mobile Terminating Access Service — Final Decision on whether or not the Commission should extend, vary or revoke its existing declaration of the mobile terminating access service, June 2004.