EXPLANATORY STATEMENT
Pricing Principles for the Local Carriage Service (LCS) & the
Wholesale Line Rental (WLR) Service
Trade Practices Act 1974
Legislative Provisions
In April 2005, the Australian Competition and Consumer Commission (ACCC) initiated the Local Services Review, which considered the declaration of the local carriage service and the wholesale line rental service, in accordance with subsection 152ALA(7) of the Trade Practices Act 1974 (Act). As a result of that inquiry, the ACCC decided in July 2006 to continue the declaration of the LCS for a period of three years and to declare the WLR service for three years, pursuant to section 152ALA of the Act.
In November 2006, the ACCC made a pricing principles determination for the LCS and WLR service relevant for the 2006–2007 period in accordance with section 152AQA of the Act. In July 2008, the ACCC made the pricing principles determination for the LCS and WLR (the Determination) relevant for the 2008–2009 period.
The LCS is used by service providers to supply local calls to end-users. It allows competitive entrants to resell local calls without deploying substantial alternative infrastructure.
The WLR service allows access seekers to resell the basic line rental that allows an end-user to connect to the traditional voice network, make and receive voice calls, and have a telephone number.
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 even though the pricing principles are not binding on the ACCC. 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 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 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 LCS and WLR.
Background
The ACCC declared the LCS in August 1999.[1]
In July 2006, the ACCC issued its final decision following its Local Services Review in which it decided to continue the declaration of the LCS and declare the WLR for a period of three years. In November 2006, the ACCC made final pricing principles and indicative prices for LCS and WLR relevant for the 2006–2007 period.[2]
In April 2008, the ACCC issued draft pricing principles and indicative prices for the 2008–2009 period. After reviewing submissions from interested parties, the ACCC decided to issue final pricing principles and indicative prices for the 2008–2009 period. The ACCC’s analysis regarding the pricing principles applicable to the LCS and WLR service are set out in the ACCC’s Local carriage service and wholesale line rental—final pricing principles and indicative prices for 2008–2009, 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 30 April 2008 the ACCC released the Draft Pricing Principles for the local carriage service and wholesale line rental – a guide for comment. Interested parties were provided two weeks within which to make submissions. The ACCC received submissions from Telstra, the Competitive Carriers’ Coalition, Primus and AAPT.
The ACCC 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 ACCC’s principles relating to the price of access to the LCS and WLR service are set out in Schedules 1 and 2 of the Determination.
They state that an interim retail–minus–retail–cost (RMRC) pricing approach should be applied to the LCS and WLR service for the 2008–2009 period.
Under a 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.
The ACCC will seek to implement a cost-based pricing approach once a robust cost model, capable of producing reliable estimates of costs in all geographic regions, is available.
Schedules 1 and 2 also set out the indicative prices for LCS and WLR for the 2008–2009 period.
[1] ACCC, Declaration of local telecommunications services, Inquiry Report, July 1999.
[2] ACCC, Pricing principles and indicative prices for local carriage service, wholesale line rental and PSTN originating and terminating access services, November 2006.