Telstra complies with ACCC on price control arrangements

According to the ACCC, Telstra has adequately complied with all price control arrangements. The ACCC's view is based on their review of an independently audited compliance report that Telstra provided.

The report relates to the initial reporting period under the current arrangements: an 18-month period from 1 January 2006 to 30 June 2007.

The central framework of Telstra’s retail price control arrangements consists of a series of price caps that apply to specified ‘baskets of services’.

The first basket of services consists of local calls, trunk (national long-distance and fixed-to-mobile) calls, international calls and line rentals.

This basket is subject to a price cap of Consumer Price Index – Consumer Price Index(CPI) per cent. This means that Telstra is entitled to change the individual prices of the services within the basket as it wishes, but the aggregate price of all services in the basket must not increase in nominal terms.

The second basket consists of Telstra’s most basic line rental product offered to residential customers. In the current reporting period, this basket was also subject to a price cap of CPI–CPI per cent.

The third basket consists of Telstra’s basic line rental product supplied to business customers and charity customers. This basket is subject to an annual price cap of CPI–0 percent. As the initial reporting period was for 18 months, the price cap in the initial period was set at 1.5 times the annual CPI.

For example, if the annual CPI increased by 3 percent, the nominal price of this basket must not increase by more than 4.5 percent.

The fourth basket consists of connection services, and is subject to an annual price cap of CPI–0 per cent. In the initial 18-month reporting period, the aggregate price for these services must not increase by more than 1.5 times the increase in CPI.

All PSTN services, except those supplied to large business customers on individual contracts, are subject to the price caps.

Each price cap is independent and is therefore not subject to any overall cap. Price movements for each basket will be reported separately and are not required to be averaged to an overall price movement for all services.