In New Zealand, TelstraClear is the access seeker to the dominant firm, Telecom NZ’s, infrastructure. I don’t want to read too much into this (you know NZ is surely “COMPLETELY DIFFERENT” from Australia and all that) but it makes interesting reading. Here is the link to a key submission on PSTN access (May 2005) and over the fold an interesting extract:

40. the Commission’s draft TSLRIC price for designated interconnection service has been estimated using a bottom-up approach, which seeks, as much as possible, to make calculation of the TSLRIC price in a “scientific” manner. TelstraClear supports this. Inevitably though, there is a significant element of “art” in TSLRIC modelling in that many of the parameter values are based on judgements rather than real world numbers and because the calculation should be forward looking rather than historical. In its judgements on the correct parameter values to apply, the Commission should opt for values that result in a lower, rather than higher, TSLRIC price because this best satisfies s.18. There are several reasons why this is the case, including but not limited to:

a. a lower TSLRIC price will result in lower prices to end-users;

b. a lower TSLRIC price will promote competition by strengthening the ability of Access Seekers to compete;

c. by strengthening competition, a lower TSLRIC price will promote innovation in the telecommunications industry;

d. higher PSTN prices have not had a positive impact on the level of investment in telecommunications. This is demonstrated by work undertaken by Network Strategies, which is further discussed below; and

e. a lower TSLRIC price will reduce incentives for inefficient/duplicative investment in alternative networks. In this regard, there is an asymmetry of risk associated with setting the interconnection price too high versus too low. In particular, if it set too low, investment by Access Seekers may be discouraged because they prefer to rely on Telecom. But this can be reversed subsequently by a correction in price. If the interconnection price is set too high inefficient investment in duplicative network may be encouraged, which cannot be reversed even if the interconnection is subsequently corrected.

It gets even better after this with lower prices promotion innovation including “a higher interconnection price implies greater reliance on the incumbent for innovation.” And the investment bit is classic: “These findings indicate that the Commission should place more weight on the benefits from competition in its decisions on the interconnection price rather than on Telecom’s arguments about the risks to its incentives to invest.” Amen to that.

8 Responses to What happens when Telstra is an access seeker?

  1. [...] My piece in yesterday’s Fin (over the fold) was about the failure of Telstra (or, more fairly, telecommunications policy) to give us even late-20th century standards of broadband service. Meanwhile Joshua Gans looks at how Telstra talks to regulators when it’s the underdog. [...]

  2. [...] I have a short piece in Crikey today that is a lay version of my post last week on Telstra the access seeker. The text is over the fold: [...]

  3. [...] To begin, a little background. As readers of this blog know, I have been worrying about competition in broadband for some time. Specifically, I am concerned that if it were valuable to invest in better broadband — say, optic fibre to the home — then the problem we face is that this decision is largely in the hands of one firm — Telstra. To solve this, I have suggested, (i) breaking up Telstra, (ii) separating the cable network from the rest, (iii) privatising the copper pair; or (iv) regulating access to the copper pair more stringently. None of these seem likely and at the moment we have a strange debate between the regulator and Telstra with Telstra refusing to make more investments until it receives protection from competition. This seemed frustrating to me as we appeared to lag behind the world in broadband investment. Moreover, there was a bunch of hypocracy in the debate as Telstra when it sought access seemed to dramatically change its tune. [...]

  4. [...] Here is a link to that post which itself draws from Telstra’s submissions to the NZ Commerce Commission for access to Telecom NZ’s network. Seems they don’t mind low prices there and, indeed, produce consultant reports on how that promotes efficient investment. Those reports should make interesting reading at the High Court. [...]

  5. [...] We may not have much diversity in broadband infrastructure but we now have competition in broadband lobbying. The telcos other than Telstra have launched a site — Tell The Truth Telstra — to counter Now We’re Talking. It is a little sparse at the moment but may develop with events. I wonder, have they approached Telstra-Clear in NZ to join? They have done some good work in this area. [...]

  6. [...] Martin has been reading (perhaps this) about what Telstra says when the shoe is on the other foot: It might be interested in looking at [...]

  7. [...] not in their interests comes from them, we can accord much more weight to it. For instance, I have noted before that Telstra-Clear in NZ has put forward evidence that regulation improves broadband and telecommunications investment. Now [...]

  8. [...] not news by the way. TelstraClear have had these views for years. Just look at my previous postings here and here. When it comes down to it, no one has ever accused Telstra of consistency; indeed, by [...]

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