New Aust price model to cut call costs

Robert Clark
20 Sep 2010

The price of Australian local calls is set to fall under a new price-setting model proposed by the national competition regulator.

The Australian Competition and Consumer Commission (ACCC) says the cost of carrying a local call under its new scheme is just 7 cents Australian (6.6 cents), well under the 17 cents currently estimated by Telstra.

Following a ten-month industry consultation, the ACCC has decided to junk the existing price-setting methodology, which has been based on long-term incremental cost, and replace it with the building blocks model (BBM), which calculates prices based on the assets and costs associated with providing the regulated services.

All those made submissions to the consultation – including Telstra, Optus, VHA and Macquarie – supported the BBM approach, ACCC said.

The new pricing model for fixed-line networks will take effect for four years from January 1, 2011. It will apply only to Telstra’s copper access network and not the planned NBN.

While local call fees are likely to come down, the prices of leased DSL capacity and

Telstra DSL wholesale services could rise 10% over the next four years, primarily because of anticipated increase in labor costs, ACCC said in its report.

It said the new system reflected “increasing industry agreement” that the current framework, established 13 years ago, “is no longer the most appropriate method for setting future access prices.”

The commission said it used the BBM framework in other regulated industries, such as the power sector.

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