Wholesale ADSL regulation back on table

The Australian Competition and Consumer Commission (ACCC) will decide next week whether to hold an inquiry into the regulation of wholesale ADSL pricing, saying that the structural separation undertaking submitted by Telstra does not adequately address this issue.

Late last year, the ACCC caused an uproar by saying that it was thinking about holding a review into regulating wholesale ADSL prices after allegations that Telstra was selling its wholesale services for higher prices than retail customers were paying for the same services.

However, in April this year, the ACCC decided not to go down that path.

ACCC chair Rod Sims said that although he wasn't chair at that time (he was appointed in August 2011), he understood that the commission had decided that the issues the telcos were raising about Telstra's pricing would be addressed by the structural separation undertaking (SSU), which Telstra needs to complete in order for its deal with the National Broadband Network Company to go through. However, it had since become clear in consultation that this was not the case, according to Sims.

"It turns out that in regards to wholesale ADSL, the SSU hasn't give us the effectiveness in price equivalence," he said

The commission will decide next week whether to hold an inquiry into making wholesale ADSL a declared service. Sims doesn't have any doubt that there will be an inquiry, saying that a no inquiry decision was "not an outcome I would urge anyone to dwell much on".

If, as he thinks likely, the inquiry is held, it will take about two months and be completed in February — the same time that he says the ACCC will provide its decision on whether Telstra's revised separation undertaking is adequate. This is not coincidence as the two are linked, Sims said, which was underlined by his statement in the commission's press release.

"Provided that the outstanding concerns around wholesale ADSL can be quickly resolved, the ACCC is otherwise minded to accept the undertaking, subject to any new issues of real substance or drafting matters arising in the course of this final round of consultation," Sims said in a statement.

The ACCC is generally happy with Telstra's revised SSU, which underlines how Telstra will operate as a separated business, such that its retail arm doesn't get special consideration from its wholesale arm over other wholesale customers.

Sims said that the biggest change in the undertaking was an equivalence commitment, addressing concerns that Telstra would not treat other customers the same in terms of price, service time and quality as its retail division, including an effective enforcement regime whereby the ACCC can act if it sees that Telstra is not obeying the commitment.

"If we find a lack of equivalence, we can impose a solution," Sims said. In these cases Telstra has to present a "rectification proposal" to the ACCC and the commission can also seek court orders for fines and compensation for damages to the parties involved. Telstra had also changed its undertaking to allow that an issue doesn't have to involve major loss of profits for it to be counted as a breach of the equivalence measures, although the issue cannot be trivial. The operational metrics will also now be applied not only to copper, but also to fibre services.

As mentioned previously, Telstra has also enabled players to go to the ACCC if they feel that the Independent Telecommunications Adjudicator could not solve their problem. Sims said that carriers would likely go to the ITA for technical oversight issues, but to the ACCC when they thought that an issue was caused by a deliberate action which wasn't an oversight.

Telstra has also made changes so that management can't have line management responsibilities for retail and a wholesale business unit at the same time, enhancing separation. It has also strengthened IT provisions to keep wholesale customer information confidential.

The ACCC said it will invite comments and issue a discussion paper on the undertaking shortly. The consultation will close in mid January 2012.

The Competitive Carriers Coalition, which is a group of Telstra rivals including Internode, iiNet, iPrimus, Macquarie Telecom, Nextgen Networks, TransACT and Vodafone, said that the wholesale announcement was a step forward and took "vital sticking points in Telstra's structural separation plan" off the table.

However, the coalition said it was too early to say whether it was happy with the SSU as it stood and that there wasn't enough time to consider and comment on the new undertaking.

"It is in the detail of the undertaking that the question of whether or not competition and consumer interests are to be improved, and assessment of that detail needs time," it said.

Optus also welcomed the wholesale ADSL news. On the SSU, Optus said it was pleased it could still contribute on the matter and that there were issues that had not yet been adequately addressed in the undertaking, which were important to competition.

"We are pleased that the ACCC has not bowed to pressure to rush into a decision regarding the SSU, and will dedicate the time and attention required to ensure the right regulatory settings are put in place," Optus GM of Interconnect and Economic Regulation Andrew Sheridan said in a statement.