Fixed Line Wholesale Pricing Under Review

The Australian Consumer and Competition Commission (ACCC) has released a draft report into the pricing model of fixed line telephony services, proposing radical price reductions, which is likely to see Telstra’s fixed line revenues fall even further.

The ACCC has suggested a move away from the traditional wholesale pricing model based Retail Price less Retail Cost, instead the ACCC has suggested an alternative model:

The ACCC has used a building block pricing model (also known as a regulated asset base, or “RAB” model), which calculates prices based on the assets and costs associated with providing the regulated services. It is consistent with the ACCC’s approach in other regulated industries. All submissions received in response to the ACCC’s December discussion paper supported such an approach.

The new model has suggested an across the board charge of $20 per month for line rental down from the two consumer and business rates that exist, while the ACCC has suggested a reduction of wholesale local call costs from 17c to 7c, a massive drop, which is likely to anger Telstra. Below we have extracted the draft pricing for the period 2011 to 2014:

Draft indicative prices

For ULLS services, the Bands relate to different geographical areas.

• Band 2 covers non-CBD metropolitan areas, where approximately 70 per cent of Australia’s population live.
• Band 4 price for more remote areas is notional, as there is very little demand, significant technological limitations on the copper and no reliable information on which to determine a price using the ACCC’s model. In June 2010, there were only about 144 active ULLS services in Band 4 compared to over 690,000 active ULLS services across Bands 1, 2 and 3.

Summary—Current indicative prices compared with proposed draft indicative prices to apply from 1 January 2011 to 31 December 2014
	Current indicative prices	Draft indicative prices
ULLS access prices with geographically de-averaged prices
Band 1	$6.60	$6.50
Band 2	$16.00	$16.00
Band 3	$31.30	$31.00
Band 4 (notional price)		$100
WLR (per line per month)	$25.57 (Homeline) $26.93 (Businessline)	$20.00 (nationally averaged)
LSS (per line per month)	$2.50	$2.50
PSTN OA and TA (per minute)	1c (headline rate)	1.1c (headline rate)
LCS (per call)	17c	7c