Alert

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Authors
Thomas Jones  
Special Counsel

Danet Khuth  
Solicitor

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Thomas Jones  
Special Counsel
T +61 2 9296 2203

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Sydney
Kristin Leece  
Dave Poddar  

Melbourne
Amanda Bodger  
Neil Carabine  

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Mallesons Stephen Jaques has assisted Telstra in winning regulatory rollback from the Australian Competition Tribunal (Tribunal).

This week the Tribunal published orders exempting Telstra from its obligation to supply the local carriage service (LCS) and wholesale line rental service (WLR) in a number of exchange service areas (ESAs) in metropolitan Australia. The LCS and WLR services allow Telstra’s competitors to resupply line rental and local calls without investing in their own infrastructure.

The exemption orders commenced on 24 August 2009 and will continue until the earlier of five years after that date or the revocation of the requirement to provide WLR/LCS services or Unconditioned Local Loop Service (ULLS). However, the first batch of ESAs will not become exempt for approximately 15 months.

The Tribunal’s decision was made on remitter from a Full Court of the Federal Court (which quashed the Tribunal’s previous decision) and varies the decision of the Australian Competition and Consumer Commission (ACCC) made in August 2008. For further information about the ACCC’s decision, see our previous alert.

The decision is significant for Telstra, and for infrastructure owners more generally, because, aside from any commercial benefits, it displays a willingness by the Tribunal to roll back access regulation in certain circumstances. This may be relevant to applications for re-declaration under the general access regime as well as future exemption applications under the telecoms access regime. It also allows Telstra to price the LCS and WLR services on a commercial basis in exempt ESAs.

The exemption orders are subject to a number of conditions. An ESA will only become exempt if it has:

• three or more ULLS-based competitors to Telstra

• those competitors have an aggregate market share equal to or greater than 30 per cent, and

• those competitors have a specified level of spare capacity on their DSLAM equipment to allow migration of their LCS and WLR services to ULLS.

The Tribunal’s exemptions are also subject to an exchange capping condition, a queuing condition and a LSS to ULLS migration process condition, similar to those conditions imposed by the ACCC last year. The imposition of these conditions enable the Tribunal to be satisfied that exemption would promote competition and efficient investment in the long term.

The exact number of ESAs that will become exempt is not yet known and will depend on the information to be provided by Telstra and access seekers to the ACCC on a quarterly basis. This information will be used to ascertain, on a bi-annual basis, which ESAs will become exempt. Depending on that information, the Tribunal’s final decision could, over time, grant Telstra exemption in a significant number of the 387 ESAs for which exemption was originally sought.