ACCC: NBN opens Telstra wounds

Since 1997, the ACCC has been notified of a total of 157 telecommunications access disputes.

"This is in stark contrast to the three access disputes that have been notified to the ACCC across all other sectors of the economy," said Samuel.

"Over the past 24 months, judicial review has also been sought in respect of almost all final arbitration determinations made by the ACCC.

"As of 6 May, there were 15 final determinations before the Federal Court - all relating to the unconditioned local loop service and the line sharing service."

He said the ability of access providers to propose access terms and conditions in undertaking has likewise failed to expedite or provide greater certainty under the regime.

"In total, 34 access undertakings have been submitted under Part XIC for 10 different telecommunications services," Samuel said.

"The ACCC found that only five of these were in the long term interest of end users, and therefore acceptable, after applying the criteria in the TPA."

Four of the ACCC's decisions to reject undertaking have been appealed unsuccessfully to the Australian Competition Tribunal.

Most recently, the ACCC rejected Telstra's undertaking to set a $30 monthly charge for the Unconditioned Local Loop Service in metropolitan areas.

The ACCC found that a $30 monthly charge would result in Telstra recovering more than is necessary to promote its legitimate business interest and that this proposed charge was significantly above estimates derived from benchmarking against comparator countries.

Telstra has now appealed the ACCC's decision to the Australian Competition Tribunal.

Samuel believed there were a number of options to change the industry structure and reform the regulatory regime, in order to improve competition in the transition period before the NBN is operational

"The options include proposals to alter Telstra's structure by requiring functional separation to improve its incentive to treat access seekers and its own downstream business units on equivalent terms,"  he said.

"Functional separation is a broad term used to define various models which segregate particular assets and other inputs into a separate division but without requiring separate legal ownership of that division.

"The key feature of functional separation models is that the network provider operates at arm's length from the downstream service providers.

He said this usually requires operations and management separation and carries the potential for decisions to be made independently by the separated division and the rest of the company.

"When successfully implemented, functional separation may go some way to addressing concerns regarding the promotion of equivalence in the treatment of access seekers.

"However, vertical integration of any form into downstream markets, even when subject to functional separation, will not necessarily ensure equivalence".