Telstra is considering its legal options after the competition regulator ordered the telecommunications giant to slash its wholesale network prices by 9.4 per cent in an effort to make phone and internet services cheaper.
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While many homes and businesses get their phone and internet services from companies like Singtel-Optus or TPG Telecom, the majority of these depend on copper lines rented from Telstra. But where Telstra had wanted to increase wholesale prices by 7.2 per cent, on Friday the Australian Competition and Consumer Commission confirmed it would order Telstra to slash the price of access by 9.4 per cent. This could lead to either cheaper broadband prices or larger data downloads.
The ACCC decision is bad news for Telstra, which generates almost $1 billion in wholesale access revenues a year from its copper network, says Goldman Sachs. This decision alone could cost Telstra more than $150 million in net present value.
Telstra had previously said the move's impact on financial 2016 earnings before interest, taxation, depreciation and amortisation (EBITDA) would be $90 million for the nine months to June 30.
Telstra had argued that it would have to keep maintaining its copper network even as millions of customers were shifted onto the national broadband network. It believed the one-off increase in charges would help pay for the discrepancy.
But the ACCC ultimately decided that the shrinking base of copper customers should not be punished for staying put and ruled it was against the long-term interest of end users. The final decision is 0.2 per cent less of a cut compared to its draft decision issued in late June.
"Users of Telstra's network should not pay the higher costs that result from fewer customers as NBN migration occurs," ACCC chairman Rod Sims said. "If there is no adjustment for these higher costs then customers who have not yet been migrated to the NBN will ultimately pay significantly higher prices for copper services."
Telstra had a strong ally in then-communications minister Malcolm Turnbull and Finance Minister Mathias Cormann, who both wrote to the ACCC calling for it to support the telco giant's proposal because doing otherwise could destabilise the NBN's rollout and the $11 billion deal to lease the copper network.
Telstra was strongly disappointed, saying: "We are particularly disappointed to see the ACCC depart from its draft decision in March, which recognised the importance of providing price stability to the industry at this time of transition to the NBN." Mr Sims said it was "literally impossible" to have a verdict that pleased all parties and the ACCC was ready for possible legal action.
