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On 5 September 2008, the Australian Competition and Consumer Commission (ACCC) released its draft decision exempting Telstra from its obligation to supply the Public Switched Telephone Network Originating Access (PSTN OA) in 15 CBD and 248 metropolitan exchange service areas (ESAs).
PSTN OA is a wholesale service used by access seekers to supply a range of voice-grade calls, including international, national long distance and fixed to mobile calls.
The proposed exemptions are consistent with the ACCC's recent decision to grant Telstra conditional exemptions in respect of the supply of the Local Carriage Service (LCS) and the Wholesale Line rental Service (WLR) in 248 ESAs (more information), and represent a further step forward in Telstra’s attempt to roll back regulation.
As with the LCS/WLR exemption decision, these exemptions would significantly limit the ACCC’s ability to set terms and conditions for the supply by Telstra of PSTN OA.
If confirmed in the final decision, this decision will leave infrastructure owners in no doubt that the ACCC is willing to remove regulation where it is necessary to improve outcomes for consumers by promoting competition and overall economic efficiency. Granting the exemptions would encourage competitors to invest in their own infrastructure rather than simply resupplying the incumbent's services. New network investment by Telstra’s competitors is likely to deliver more effective and vigorous competition than competition based solely on price.
The draft decision grants exemption to Telstra in 15 of the 17 CBD and 248 of the 387 metropolitan ESAs for which exemption was sought. The exempt ESAs were selected on the same basis as the LCS/WLR exemption decision. Namely they:
- have 14,000 or more addressable services in operation (i.e. customers who can be supplied by competitors of Telstra using ULLS (a basic network input that requires significant competitor investment)), or
- have three or more ULLS-based competitors to Telstra.
The ACCC proposes that the individual exemption orders will be subject to the same conditions imposed in the LCS/WLR exemption decision, which means that Telstra would not obtain exemption in respect of:
- An ESA where the Telstra exchange is “capped” - that is, subject to certain constraints on the ability of access seekers to locate Digital Subscriber Line Multiplexer (DSLAM) equipment needed to provide ULLS services.
- An access seeker, in a specific ESA, that joined a queue to enter into Telstra’s exchange buildings within the 12 months before the exemptions take effect for so long as they remain in the queue.
- Supply to an access seeker in respect of customers for whom that access seeker has been using LSS (Line Sharing Service), LCS and WLR to supply a bundled fixed voice and broadband service - unless Telstra develops and implements a LSS to ULLS migration process meeting certain guidelines.
The ACCC also proposes to grant class exemption orders which will apply to carriers other than Telstra, enabling them to also gain the benefit of exemption.
The exemptions would come into effect 12 months after the date of the ACCC’s final decision, and would continue until the earlier of the expiry of the exemption order on 31 December 2012 or the expiry or revocation of the requirement to provide PSTN OA services or ULLS services.
Reasons for the decision
Unsurprisingly, given the relative similarities of the services in a functional sense, much of the ACCC’s reasoning mirrors the views expressed in its LCS/WLR exemption decision. The principal difference involves the reasons for granting exemption in respect of CBD ESAs (the WLR/LCS Exemption Applications did not include CBDs, which were exempted in 2002).
The ACCC found that granting the exemptions in the relevant 263 ESAs would promote competition in the supply of voice services through a combination of increased take-up of ULLS and more efficient use of access seekers’ DSLAM infrastructure.
In respect of 17 CBD ESAs, the ACCC considered that other alternative infrastructure networks (i.e. competitor fibre loops, switching and fixed/mobile wireless capability) would provide an alternative to PSTN OA. Accordingly, in the CBD areas, the exemptions would encourage efficient use of alternative infrastructure such as rival fibre networks, instead of continuing reliance on resale services such as PSTN OA.
Next steps
The ACCC is seeking submissions in response to its draft decision by 26 September 2008.