Telstra Ponders Multiple Court Actions, Gears Up For Cyber Trials

Telecom Policy Report, March 10, 2008

To Telstra's dismay, late last week, the justices of the High Court of Australia confirmed the constitutional validity of Part XIC of the Trade Practices Act 1974 and specifically its application to the Unconditioned Local Loop Service (ULLS) and Line Sharing Service (LSS).

The High Court has confirmed Telstra's ownership of the public telephone network "has always been subject to the rights of its competitors to gain access to and use its network for the ultimate benefit of customers. Accordingly, the access regime does not amount to an acquisition of Telstra's property."

"The telecommunications access regime is a key component of the regulatory framework supporting the development of a competitive telecommunications industry," commented Graeme Samuel, chairman of the Australian Competition and Consumer Commission (ACCC). "(The) High Court ruling comprehensively rejects Telstra's arguments, referring to them as 'synthetic and unreal.' It provides welcome clarity around the basic regulatory rules which all carriers must abide by. It also removes yet another layer of uncertainty created by the Telstra strategy of continual litigation. It provides welcome encouragement to industry participants using the access regime to continue investments which provide competitive services to end users."

"Australians lost an opportunity to enjoy more broadband investment," Telstra said in its own statement when the decision was released, adding the Australian government is rewarding "Telstra's competitors who ride on Telstra's network rather than invest in Australia" and that "compelling (Telstra) to offer network access at loss-making wholesale prices breaches the Constitution because they amount to the acquisition of shareholders' property without just compensation."

"A victory today would have meant more investment, more infrastructure and more competition for Australia, all of which would have been good for Australian consumers and businesses," commented Telstra Group General Counsel Will Irving. "We accept the decision, but we are disappointed because it means Australians lose an opportunity for more investment, more competition, more innovation and more choices in broadband."

He continued, "Our competitors now have little reason to invest in their own networks, knowing instead they can simply resell Telstra services. The can now 'buy' rather than 'build' - a perverse outcome, by any measure."

Eminent Domain?

Telstra challenged the ACCC because it believes the agency has allowed wholesale customers to pay as little as $14.30 per month for unbundled local loop and $2.50 per month for line-sharing, "amounting to compulsory acquisition of shareholders' property without fair compensation."

Despite the increasing cost of copper, service vehicles, fuel and labor, Telstra charges the ACCC with continuing to set wholesale prices at levels that are beneath other developed countries.

"We challenged the law because we had a legal and ethical duty on behalf of our shareholders not to stand idly by while the ACCC reduced wholesale prices to some of the lowest levels in the developed world - even though network costs in Australia are the highest in the world owing to long distance, low densities and difficult terrain," explains Dr. Phil Burgess, group managing director/Public Policy & Communications. (Last week's) decision shows how the law is being used by a rogue government agency, the ACCC, to arbitrarily redistribute the investments of more than one million Australians."

He continues, "In some cases, this redistribution of wealth means the savings of Australian investors have been handed over to highly-profitable foreign corporations that have no right to be subsidized, least of all by Australian investors."

While Telstra is deciding what to do next about this High Court decision, it's dealing with another road bump.

Questions About Aussie Regional Broadband Deal

In February, Australia's Labor Government reportedly agreed to provide Telstra with documents regarding the former Coalition government's decision to award a $958 billion broadband contract to the Opel consortium of Optus and Elders; to date, that network has not been built. However, the government now is asking for more time to pull its paperwork together.

Telstra had asked for the documents in August 2007, alleging the former government "secretly changed a bid process" that gave Opel the deal. According to the carrier, the program originally was a $600 million initiative to provide broadband to new rural communities for the first time, "yet the Government awarded nearly $1 billion to the Optus/Elders consortium to duplicate services that already existed."

Reports out of Australia say Telstra isn't going to agree to an extension, pointing out that "they've know all along about the deadline...We have responded that both parties had worked out a realistic timetable and we expect them to keep to that timetable and we are expecting to see the first lot of documents on Monday -- or we'll have to go back to court."