Telstra calls for an end to fixed line calls price cap

17 Feb 2010

Australian fixed line incumbent Telstra has claimed that, as a result of increased competition from mobile and internet voice services, existing restrictions on the price that can be charged for fixed line calls should be removed. However, according to The Age, the telco is facing stiff opposition to such a move from The Australia Institute, a think tank which claims that the removal of such limits would harm lower-income households.

Under the existing legislation Telstra is unable to charge more than AUD0.22 (USD0.19) for a local call, while the telco is also restricted in that it may not increase line rental costs by more than the rate of inflation. The Australian Competition and Consumer Commission (ACCC) is currently conducting a review of the restrictions, and in a submission to the review Telstra has argued that increased competition effectively negates the need for price regulation, noting: ‘Although price controls may have been necessary during the transition to full market liberalisation, they are no longer necessary.’ Telstra has, however, said that it would back requirements for both untimed local calls and for a single price for local calls nationwide. Meanwhile, the Australia Institute in its submission to the ACCC said: ‘Low-income households are already spending 6% of their income on telephones, compared with only 1.6% for the wealthiest 20% of households. Removing price caps would only exacerbate this inequity.’

The ACCC is expected to report its findings to the government by 12 March 2010, with any new pricing rules to come in to force from July this year for a two-year period.