Trade Practices Act 1974 - Determination under section 152AQA - Pricing Principles for the Domestic Mobile Terminating Access Service

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Legislation au F2009L01176 Not in force Legislative Instrument

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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.

Overview

The Trade Practices Act 1974, enacted by the Parliament of Australia, established the Australian Competition and Consumer Commission (ACCC) to arbitrate access disputes and assess access undertakings relating to declared services. The Act aims to ensure fair competition and consumer protection in the market. The MTAS Pricing Principles Determination, which applies to the period from 1 January 2009 to 31 December 2011, was introduced to address the issue of determining an appropriate access price for the domestic mobile terminating access service (MTAS). The MTAS, a wholesale input used by providers to complete calls to mobile subscribers, was declared by the ACCC in 2004. This determination aims to inform industry and other interested parties of the principles that will guide the ACCC in considering access disputes or assessing undertakings in relation to MTAS pricing. The ACCC is required to consult with interested parties and consider their submissions before making a pricing principles determination. The determination adopts cost-based pricing principles and a total service long run incremental cost framework (TSLRIC+) to inform the efficient cost of supplying the MTAS.

Scope and Application

The MTAS Pricing Principles Determination 2009 under the Trade Practices Act 1974 applies to the mobile terminating access service (MTAS) which is a wholesale service used by providers of calls from fixed line and mobile networks to complete calls to mobile subscribers connected to other networks. The determination is primarily concerned with establishing principles for the pricing of access to the MTAS. It applies to entities involved in the provision or consumption of this service, particularly telecommunications companies and their customers. While the determination sets out the principles that the Australian Competition and Consumer Commission (ACCC) must consider when arbitrating disputes or assessing access undertakings related to the MTAS, these principles are not binding. The jurisdiction of this determination is national, as it operates under the Commonwealth law as stipulated by the Trade Practices Act 1974. The determination extends its application beyond the expiry date of the current MTAS declaration to ensure continuity in arbitrations that might still be ongoing by the time of the declaration's expiry. The principles outlined are intended to guide the ACCC in its decision-making process regarding the MTAS, ensuring a fair and efficient market environment.

Key Provisions

Under the Trade Practices Act 1974, the Australian Competition and Consumer Commission (ACCC) is tasked with determining principles related to the price of access to declared services, as stipulated in section 152AQA. Specifically, the ACCC must articulate these principles in writing, which may include price-related terms and conditions (subsection 152AQA(1) and (2)). The determination of these pricing principles is crucial when the ACCC arbitrates access disputes under Division 8 of Part XIC of the Act (subsection 152AQA(6)). Although these pricing principles are advisory and not binding, they play a significant role in guiding the arbitration process. If the Mobile Terminating Access Service (MTAS) is re-declared, the ACCC must issue a new set of pricing principles (subsection 152AQA(3)). The obligations imposed by the Act on the ACCC include the necessity to consult with interested parties before making a pricing principles determination. This process involves publishing a draft determination, inviting public submissions, and considering these submissions before finalizing the determination. For instance, the ACCC released a draft MTAS Pricing Principles Determination for the period of 1 January 2009 to 30 June 2011 for public comment and incorporated feedback from entities such as the Australian Telecommunications Users Group, Competitive Carriers' Coalition, and major telecommunications companies like Optus, Telstra, and Vodafone. The MTAS Pricing Principles Determination outlines that cost-based pricing principles should be adopted for setting indicative prices for the MTAS, with a specific emphasis on using the total service long run incremental cost framework (TSLRIC+) as the appropriate methodology. This approach ensures that the pricing reflects the efficient cost of supplying the MTAS, capturing both the necessary costs incurred by the firm and the value of societal resources used in its production. Furthermore, the TSLRIC+ approach includes a mark-up for a portion of organisational level common costs. Breaching the obligations outlined in the Act, such as failing to consult with interested parties or not adhering to the specified pricing principles, could lead to civil or administrative consequences. While the Act does not explicitly state the penalties for such breaches, non-compliance could potentially result in legal challenges or regulatory actions against the ACCC. However, the primary enforcement mechanism lies in the regulatory oversight and the potential for industry disputes to be arbitrated based on the established pricing principles.

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