The Federal Government has released a discussion paper on its Telstra retail price control review.
The review was kicked off in January 2010 in the form of a public enquiry.
Price controls on certain Telstra fixed-line services have been in place since 1989 as a way to not only promote competition in the telco sector but also ensure fair access to services to low-income and regional residents.
Affected services include monthly line rentals, connection fees and untimed local call cost which is capped at 22 cents.
These restrictions only apply to Telstra since is a monopoly in the backhaul telco market.
The discussion paper aims to find out whether there is a need to keep the pricing controls or make them cover new fixed-line services as well.
Current retail price control arrangements need to be looked at due to some significant changes in the telco industry, namely due to the impending National Broadband Network (NBN).
With Telstra planning to gradually decommission its copper network and structurally separate as part of its deal with NBN Co, it will reduce the telco’s power in the market.
Since the NBN is set to level out competition in the telco sector, the question now is whether there is still a need for price controls on Telstra. Should it be determined that the controls should stay, should they be applied to other telco operators as well?
The discussion paper notes Telstra’s fixed-line service prices are already lower than the regulated cap prices thanks to pressure from its competitors.
“In practice, retail price controls may therefore act more as a safeguard preventing sudden for severe increases, rather than a tight cap on prices,” according to the paper.
Other players in the industry such as Optus and Macquarie Telecom have recommended the price controls to be scrapped.
The paper invites the public and industry stakeholders to provide feedback on the topic. Submissions close on November 18.