Between the lines: Let's hope consumers benefit from telecoms regulation

By PETER GRIFFIN

How low do you go? That's the question Douglas Webb and his bean-counters have been asking over the past few months as they walked the fine line of telecoms regulation for the first time.

A drop from 2.6c to 1.13c a minute (excluding GST) for network interconnection charges sounds impressive and equates to some savings for TelstraClear, but believe it or not, the Commerce Commission had the leeway to go even lower.

Initially Commissioner Webb had set a target for reducing the price to between 1.21c and 1.41c. But as the months passed and Webb kept an eye on the global picture, it became clear that even that range was steep.

Elsewhere, interconnect prices have been plummeting.

After extensive international benchmarking Webb had a range of around 0.4c to just over 3c to work with, giving 1.13c a conservative air.

Still, interconnect prices have never been meddled with before, so a buffer has been left to allow for any "regulatory failure".

In its submissions to the commission TelstraClear had campaigned to have interconnect set at the median price of a handful of benchmarked countries and some US states - a price of 0.66c a minute. Telecom produced research claiming 2.6c was a fair price.

So much for all that hard work, the commissioned reports from analysts, the teleconferences with experts in the US.

It all did Telecom little good, because what was presented by the telco flew in the face of what was happening in the rest of the world.

The level-headed Webb turned out to have little interest in Telecom's threats to chop its capital expenditure, in the range of $400 million in the current financial year, if the wholesaling and TSO decisions bring more gloom for the telco.

With Telecom's fixed-line network generating revenue of $2.8 billion in the year to June 30 and pretax earnings of $1.6 billion, "Telecom will need to continue to maintain and upgrade the fixed network in order to maintain those revenues," says the commission.

Still, Webb has covered himself if Telecom gets difficult.

Buried in the interconnect decision is a paragraph giving the commission scope to "correct towards a higher price" if it became obvious that Telecom was winding back network investment.

With wholesale pricing making up a far larger proportion of TelstraClear's payments to Telecom, this is a smallish victory for the Australian-owned challenger and a tiny dent in Telecom's armour.

Let's hope consumers, not just profit-hungry overseas parent companies, see the benefits of TelstraClear's savings.