Court smacks Telstra over wholesale pricing

Australia's Australian Competition and Consumer Commission (ACCC) is crowing today after the nation's Federal Court agreed with its ruling on how much dominant telco Telstra can charge for wholesale services on its fixed line networks.

In 2015 the Commission decreed that Telstra must cut wholesale prices by 9.4 per cent. The regulator did so because it wanted to promote competition and also because it felt it unfair for downstream users to help Telstra ameliorate the drop in revenue and value of its fixed-line networks caused by the growing footprint of the rival National Broadband Network (NBN). The regulator also noted that Telstra is trousering a lazy AU$11bn or so for its fixed line network by nbn™, the organisation building Australia's NBN, so was already being compensated for the decline of its fixed-line business.

Telstra, which has the enormous advantage of having sprung from a previous monopoly, argued that the price cuts just weren't fair because it still has to operate the old fixed line network and needs certainty about revenue to be able to do so in ways that will benefit the retail telcos to which it is bound to offer access. The company also argued that the cut represented a step outside the ACCC's normal price-setting practices, and was therefore an unwelcome anomaly.

But the anomaly of the NBN replacing Telstra as wholesaler turned out to be the making of the ACCC's case. Federal Justice Lindsay Foster said he could not find any reason to overturn the regulator's ruling and said the methodologies it used to calculate the new price were watertight. He therefore denied Telstra the opportunity to have a judicial review of the ACCC decision.

Telstra's irked: it says it will study the judgement and consider its options. The ACCC is chuffed, saying it thinks retail telcos now have pleasing predictability of what they'll need to do in the next few years as their customers move to the NBN. Carrier groups are also happy, declaring Telstra' opposition to the pricing ruling little more than an attempt to abuse its dominant market position. ®