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Optus submits mobile termination undertaking to ACCC
23 Dec 2004

Optus announced today it had lodged an access undertaking to the ACCC, setting out the rates that it would charge other telcos to terminate calls to the Optus mobile network for the 2005-2007 period.

The undertaking sets rates of 19.25 cents for 2005; 18 cents for 2006; and 17 cents for 2007.

In the undertaking, Optus also offers a second option, under which telcos terminating to the Optus mobile network would be charged a flat fee each quarter, based on the number of their customers, together with lower per minute rates of 14.25 cents in 2005, 13 cents in 2006 and 12 cents in 2007.

"Our undertaking follows many months of detailed economic analysis and cost modeling. It offers two alternative pricing constructs that are designed to set efficient prices and stimulate growth for both Optus and other telcos in the industry," said Paul Fletcher, Director, Optus Corporate and Regulatory Affairs.

"In particular, Optus' second option will give fixed to mobile operators the chance to reduce their effective per minute cost by growing the number of minutes of traffic their customers generate onto the Optus network. This in turn will incent them to reduce their retail prices for fixed to mobile calls.

"This aspect of Optus' undertaking responds to concerns about competition in the fixed to mobile market which the ACCC expressed when it released its decision on mobile termination in June 2004."

Mr Fletcher said the ACCC's June decision was widely misunderstood. While that decision indicated the principles the ACCC would apply should it be called upon to arbitrate a dispute, it left open to operators such as Optus the option to take the alternative route of lodging an undertaking.

"Optus believes that given the complexity of the issues raised by mobile termination, the most efficient way forward is for the ACCC to consider the undertaking lodged by Optus, rather than the ACCC having to conduct a series of bilateral arbitrations.

"We were critical of the ACCC's decision in June as we did not believe it was based on thorough cost modeling - unlike decisions the ACCC has made in the past concerning the pricing of access to Telstra's fixed line network.

"To address this issue, in developing our undertaking we have done extensive cost modeling, and the prices we are offering are rigorously cost-based," he said.

"We were also concerned that the ACCC's approach risked damaging competition in the market for retail mobile services, as enforcing price reductions in mobile termination would likely lead to price increases in access and origination charges – in turn suppressing consumer take up.

"By contrast, we believe the undertaking Optus has lodged strikes a fair balance between stimulating growth and competition in the fixed to mobile market on the one hand, and the retail mobile services market on the other.

"We look forward to working with the ACCC as it assesses our undertaking.

"Our undertaking offers certainty to the Australian telecommunications industry, as all parties now know what prices they face to interconnect with Optus' mobile network. We are ready to move quickly to negotiate commercial terms reflecting our undertaking prices," Mr Fletcher said.

For more information:
Melissa Favero
Optus Corporate Affairs
Tel: (02) 9342 7850

Background

Under the Trade Practices Act provisions governing access to telecommunications networks, there are two alternative paths open to an access provider such as Optus in setting the rate that it charges other telcos for access to its network.

The first way is by commercial negotiation – with the ACCC to arbitrate if negotiation is unsuccessful. The second is for the access seeker to lodge an undertaking.

The undertaking route allows a price to be set in one process which will apply industry wide – whereas using commercial negotiation and arbitration requires a series of bilateral processes.