Price cuts for rivals will hurt FTTN: Telstra

Telstra has accused the competition regulator of "throwing a hand grenade" into the fibre-to-the-node (FTTN) debate after reports surfaced that the Commission had cut the prices the telco can charge rival providers to use its copper network.

News of the revised pricing system first appeared in The Australian, with the Australian Competition and Consumer Commission (ACCC) reportedly mandating a cut of between 20 and 35 percent, depending on the location of the infrastructure.

The rate under which the majority of the population live has been dropped from AU$17.70 to AU$13.80, the paper said. A spokesperson for the ACCC declined to comment on the report.

Telstra fired a broadside at the regulator today claiming that, should the ACCC's fee-cutting continue, consumers will be faced with a price war -- and falling prices will mean fewer new services and tougher conditions for smaller providers.

A spokesperson for the telco said the cuts could ultimately hurt the consumer: "The fact is consumers are ultimately the victims of negative price spirals like the one that is being stimulated by the ACCC. Consumers end up paying in the form of fewer choices because of less investment and hence less innovation."

A report published by the ACCC has, however, apparently disproved the link between falling prices and stymied investment. The latest annual study into Australia's telecoms costs, published by the ACCC earlier this month, found the prices consumers paid in the 2005 to 2006 period fell by 6.5 percent in real terms, while investment in telecoms infrastructure rose by 9.5 percent in 2005-06 to AU$6.9 billion. The heaviest investment was seen in broadband and 3G.

Telstra has also suggested that the revised pricing for the local loop could have an impact on the FTTN debate, by widening the price disparity between the cost of copper rental in the bush and urban areas respectively.

"The ACCC has deliberately thrown another hand grenade at a critical point in the FTTN debate -- this time just before the commencement of the FTTN panel process. This decision further expands the deficit between prices and costs and funding for services in the city and the bush. If the ACCC gets its way, FTTN will never happen and the rural network will falter," the telco said.