Australia: Competition Tribunal ruled Telstra had ongoing obligation to provide rival Optus with regulated access to its copper network

[accc] Telstra has an ongoing obligation to provide Optus with regulated access to its copper network in all areas of Australia, following a decision by the Australian Competition Tribunal.

The Tribunal has rejected Telstra's exemption application to restrict regulated access for Optus in areas where Optus has its Hybrid Fibre Coaxial cable network. The Tribunal was not satisfied that Telstra's application was likely to promote competition or economic efficiency. This affirms the November 2008 decision by the Australian Competition and Consumer Commission.

The Tribunal's decision noted in particular the 'chilling effect' on investment that would result from granting an exemption application which singles out a particular competitor to lose access to regulated services. The Tribunal considered that such a discriminatory access policy would "be likely to seriously hamper the achievement of long-term dynamic efficiency and sustainable full facilities-based competition."

The Tribunal further commented that "it is perhaps unsurprising that there are no examples of a discriminatory exemption or forbearance having been granted anywhere in the world."

The Tribunal also found that, since Optus already has incentives to use and invest in its network, forcing Optus into further investment by removing access to Telstra's copper network could lead to an inefficient and 'socially wasteful' outcome.

ACCC Chairman, Mr Graeme Samuel, today welcomed the Tribunal's decision and said that the Tribunal had confirmed the ACCC's view that a discriminatory access policy would be likely to discourage investment and not promote the long term interests of end-users.

"Telstra's exemption application focused too much on one competitor, rather than on benefiting consumers and competition generally," he said. "The Australian Competition Tribunal's decision affirms that open and equivalent access for all parties is required for effective communications regulation."

The Tribunal's decision was made on 22 May 2009. Its reasons for decision were made public today.

Optus HFC Exemption Application

On 18 December 2007, Telstra lodged an application with the ACCC under section 152AT of the Trade Practices Act 1974 seeking individual exemptions from the Standard Access Obligations (SAOs) for the supply of the unconditioned local loop service (ULLS), line sharing service (LSS), local carriage service (LCS), wholesale line rental service (WLR), and PSTN originating access service (PSTN OA) to Optus in a defined geographic area of any customer premises within 75 metres of Optus' currently deployed Hybrid Fibre Coaxial network in Sydney, Melbourne and Brisbane.

The HFC network was initially constructed to supply pay TV services, but can also be used for other services including voice and broadband.

The ACCC must not make an order or determination granting an exemption from the SAOs for a declared service unless satisfied that granting the exemption will promote the long-term interests of end users (LTIE) as defined in the Act.

The ACCC issued a final decision rejecting the Optus HFC exemption application on 11 November 2008.

In December 2008, Telstra applied to the Australian Competition Tribunal to consider whether the Optus HFC exemption application should be accepted or rejected. The Tribunal's decision to reject Telstra's application means that Optus can seek ACCC determination over the terms and conditions of access to the ULLS, LSS, LCS, WLR and PSTN OA in all areas where the services are declared.

Declared Services

Under Part XIC of the Trade Practices Act 1974, the ACCC may declare services where it determines that this would be in the long-term interests of end-users. Once a service is declared, carriage services providers (CSPs) are required to comply with standard access obligations in the supply of this service.

The ULLS is a service for access to unconditioned cable, usually a copper wire pair, between a telephone exchange and an end user's home or office. The ULLS essentially gives an access seeker the use of the copper pair without any dial tone or carriage service. This allows the access seeker to use its own equipment in an exchange to provide a range of services, including traditional voice services and high speed internet access, to the end-user.

The LSS allows similar functionality to a competitor to that of the ULLS, but where the voice service is still provided by another party.

The LCS and WLR are wholesale services that respectively allow access seekers to resell local calls and basic line rental services to end-users. The 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.

Competition Tribunal requires Telstra to provide network access to Optus