Government forces Telstra's hand on fixed line pricing

The Federal Government is trumpeting a win for rural Australia through a recent amendment to Telstra’s price controls.

The change, which was originally flagged last year, sees the telco forced to offer a basic retail line rental service at the same price across Australia.

This move would ensure parity for rural Australia Minister for Communications, Information Technology and the Arts, Helen Coonan, said in a statement.

The specific change; the Telstra Carrier Charges – Price Control Arrangements, Notification and Disallowance Determination No.1 of 2005 (Amendment No. 1 of 2006), was made today.

Senator Coonan said the price controls were a key telecommunications safeguard and would ensure that any efficiency gains Telstra made were passed on to customers in the form of lower prices.

Under the amended price controls Telstra will not be permitted to charge more than 22 cents for local calls.

The price for the basic line rental service to residential customers would also remain at $31.95 until 30 June 2007 when it would only increase at the rate of inflation, thereafter.

“The Determination reaffirms this Government’s commitment to retail pricing parity for the benefit of all Australians, especially those living in regional, rural and remote areas of the country,” Senator Coonan said.

According to telecommunications analyst, Paul Budde, Telstra had misused Government policy in the past to increase its line rental from around $15 to around $30.

In recent times the telco had also indicated that line rental prices were likely to go towards the $35 mark, he said. This had subsequently annoyed the Government, provoking it to enforce pricing controls on Telstra.

Despite mobile phone penetration sitting at around 90 percent, according to Budde, prices were still too high for the technology to be a suitable alternative to fixed lines.

A review of the price controls will be initiated in 2008 for completion in early 2009, Coonan said.