ACCC to maintain DTCS regulation until March 2019

31 Mar 2014

An inquiry into the regulation of the Domestic Transmission Capacity Service (DTCS) has been concluded by the Australian Competition and Consumer Commission (ACCC), with it having resolved to maintain its supervision of the service until 31 March 2019. In announcing its decision on the matter, the ACCC argued that maintaining regulation of the DTCS would enable alternative operators to access the service in those areas where there is little competition.

Claiming that the DTCS will ‘continue to be an essential input for retail broadband services during and following the transition to the National Broadband Network’, the ACCC also cited the fact that high capital costs in constructing transmission networks meant that competition is less developed outside of inner metropolitan areas. As such, the regulator said that it considers that ’maintaining regulation where there is insufficient competition is important to ensure those who wish to access the declared DTCS can do so, and do so at regulated rates’. However, it did note that where competition has developed on certain transmission routes it will remove regulation.

To consider the state of competition the regulator adopted a more comprehensive methodology than previously applied, and as per its market assessment the ACCC said it had found that an additional 112 metropolitan Exchange Serving Areas (ESAs) and eight regional routes are sufficiently competitive, so as to be removed from regulation. In total, 200 metropolitan ESAs (around 40% of the total) and 27 routes from capital cities to the major regional areas are now not subject to regulation under the DTCS. Further, the ACCC has also decided to re-regulate routes from Brisbane to three regional areas in Queensland, which it said had failed to meet the new criteria of the competition assessment. Meanwhile, the ACCC has made a number of variations to the DTCS service description to reflect its competition assessment and improve its general clarity.

With some submissions to the inquiry having also raised issues regarding the pricing of the DTCS service and access to facilities, the ACCC has said such matters will be considered in an upcoming access determination inquiry, which it expects to start by mid-2014; this will also consider the terms and conditions on which access to the DTCS is provided in regulated exchange areas and routes.

Commenting on the development, ACCC commissioner Cristina Cifuentes said: ‘Competition for transmission services like the DTCS typically provides lower prices for this essential wholesale service. Retailers are then able to pass this on to consumers in the form of lower prices … Those areas where a competitive environment has not developed require regulation to protect the interests of access seekers and ultimately consumers. However, in those transmission markets where a healthy level of competition exists or competition is likely to develop, the ACCC believes that it is appropriate to remove regulation.’