Letter to ACCC Chairman

The CEOs of seven telecommunications companies, six of which are CCC members, recently wrote to the ACCC chairman Graeme Samuel expressing their deep concern at a recent pricing decision from the ACCC that seems at odds with the signals from the Commission over the past several years. The letter is available here.

The letter reflects a growing worry in the industry that the Commission has not grasped just how fragile competition truly is. The ACCC itself, in its most recent annual report on the state of competition, pointed out that the industry is one of the most concentrated in the world, and had been getting more concentrated over the past three years. The graph below is from that report, which concluded:

• Three service categories measured were all well above the “competition concern” threshold under the index methodology employed
• Fixed line voice market concentration was “more than twice the threshold … and increasing,” and;
• “Concentration levels in broadband increased by more than one third.”

Yet the Commission has made a series of decisions that competitors had warned would make this situation worse. The most troubling of these was the determination of the Commission to press ahead with plans to exempt Telstra from having to provide competitors with basic wholesale voice services in locations where competitors had installed their own equipment in exchanges. The Commission has forced through these exemption even though competitors equipment cannot, in many cases, provide voice services.

The CCC said at the time the Commission first announced it plan to do this that it was tantamount to punishing competitors for the failure of the regulatory regime to control Telstra’s market power. It seems the Commission has a long way to go before it understands the commercial pressure competitors are under.

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