ACCC admits to failure of anti competitive Telstra measures

The ACCC admitted last week to a Senate standing committee that the operational separation legislation introduced in 2005 to control anti-competitive behaviour by Telstra has failed.

The Telecommunications Legislation Amendment (Competition and Consumer Issues) Act 2005 introduced an operational separation framework for Telstra that sought greater equivalence and transparency in Telstra's supply of certain "designated" wholesale services to competitors.

It was also intended to provide ongoing assurance that Telstra is not favouring its own retail business units by implicitly supplying services to itself at prices which are unjustifiably lower or of a higher quality than those offered to downstream competitors.

On June 5, before a Senate Standing Committee on Economics and Budget Estimates, ACCC chairman Graeme Samuel responded to a question posed by Senator Kate Lundy as to whether the ACCC viewed the current operational separation regime that applies to Telstra an effective mechanism for promoting equivalency between Telstra and its competitors.

"I can give a short answer to that or a slightly longer one. The short answer is probably no," Samuel replied.

"We continue to receive complaints of conduct that suggest that the objective of equivalence, which was the objective of the regime, is not being achieved. There have been some instances of conduct since the regime's inception which, while it is not clear they breach the operational separation plan, do not promote the objective of equivalence which was the fundamental objective of the plan in the first place," he continued.

Samuel also said that additional reporting of Telstra's business practices that the legislation requires has been of limited benefit.

"I guess, in summary, we would have to say that the regime is fundamentally unduly complex. There is a lot of discretion left to Telstra. There are limited self-regulatory mechanisms and unduly convoluted processes to implement any corrective action if a problem is identified," he said.

Complaints received regarding breaches of the operational separation plan by Telstra, of which the ACCC had investigated three, have not resulted in any public action against Telstra other than the ACCC's duty to report such matters to the Minister for Communications.