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Government accepts AUSTEL charges for second carrier



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MINISTER FOR TRANSPORT AND COMMUNICATIONS

GOVERNMENT ACCEPTS AUSTEL CHARGES FOR SECOND CARRIER

AUSTEL's recommended charges for the second telecommunications carrier to gain access to the Telecom/OTC network have been accepted by the Government.

"The charges are 'initial1 charges which will apply until the second carrier gains sufficient market power to negotiate.effectively with Telecom/OTC on an equal basis," Mr Kim Beazley, Minister for Transport and Communications,

said today.

"I have considered and accepted AUSTEL1s recommendations as providing a sound basis for competitive arrangements in the period leading up to 1997 when unrestricted network competition begins," Mr Beazley said.

Details of the interconnection and access charge principles which are to apply are at Attachment A.

The average "initial" usage charges for the second carrier will be 3.14 cents per call end minute including 0.52 cents per minute for the customer access network, essentially the

telephone line between a customer and the nearest exchange.

The effect of this is that the second carrier will pay a charge to Telecom/OTC of 6.28 cents per minute where its customer makes a call which uses Telecom/OTC's network at both ends.

Mr Beazley said the Government had also accepted market share "trigger" mechanisms proposed by AUSTEL to indicate cessation of "initial" charges.

Where "initial" charges ceased to apply, they would be replaced by "subsequent" charges negotiated commercially by the carriers.

The market share "triggers" would be applied flexibly by AUSTEL to ensure that, as far as possible, "initial" charges ceased when Telecom/OTC's market dominance had genuinely been reduced.

Kim C Beazley, M P

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23 August 1991

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COMMONWEALTH PARLIAMENTARY LIBRARY MICAH

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"Achievement of these triggers will not mean an indiscriminate shift from 'initial' to 'subsequent' charges," Mr Beazley said.

"When a specified threshold is reached, the second carrier will have the opportunity to argue a case to AUSTEL that Telecom/OTC nevertheless retains dominant market power in a specific area, or on a route, and that 'initial' charges

should therefore continue to apply.

"Conversely, should the new entrant choose not to meet network rollout commitments and to focus exclusively on the high return, inter-capital city routes, AUSTEL could remove the new entrant's access to 'initial' charges."

Mr Beazley said AUSTEL had not recommended charges for some categories, including trunk calls, MobileNet or ancillary and supplementary services such as billing and operator assistance. These would be commercially negotiated between the carriers.

Telecom/OTC would not be expected to supply any interconnection facilities at charges less than the costs it necessarily incurred in providing them.

"Any arbitration by AUSTEL on these commercially negotiated charges will have to take into account the objects and provisions of the Telecommunications Act 1991 and the Government's overall telecommunications policy objectives," Mr Beazley said.

The charging arrangements would provide both carriers with a degree of certainty about their commercial future and in planning their network investments.

They were especially important for the second carrier as they would allow it to establish a sound market presence.

The Minister said the Government would monitor the arrangements through AUSTEL's routine activities.

The Government would initiate a review of the charging regime if it was shown to be causing Telecom/OTC to lose disproportionate market share or was preventing the second carrier from achieving a realistic and equitable share of the market.

Mr Beazley said the Government had also accepted AUSTEL's technical report which outlined the approach the regulator might take in considering the registration of agreements between the carriers or in any arbitration.

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"The technical issues are complex," Mr Beazley said.

"AUSTEL will need to ensure that the technical arrangements allow the carriers the greatest scope to compete and offer independent services while allowing transparent and seamless 'any-to-any' access by consumers."

Copies of AUSTEL1s reports are available from its Public Affairs Section, ph. 03 828 7364.

Media contacts:

Minister's Office: Gary O'Neill, ph. 06 277 7200

AUSTEL: Rob Davey, ph. 03 828 7301

ATTACHMENT A

INTERCONNECTION AND ACCESS

CHARGE PRINCIPLES AND APPLICATIONS

1. These principles will form the basis of a Determination under s .140 of the Telecommunications Act 1991 to provide the basis for setting the terms and conditions of access agreements between Telecom/OTC and the second carrier.

2. Eight categories of charges by Telecom/OTC for interconnection by the second carrier, including access, . usage and lease of interconnection and access services and facilities, are addressed:

. Customer access network (CAN)

. Intra-charge area carriage and switching

. Inter-charge area (trunk) carriage and switching

. International carriage and switching

. Mobile telecommunications services

. Ancillary and supplementary services

. Interconnection gateways

. Over- and under-forecast requirements.

3. These principles are to be applied in a manner consistent with the objects of the Telecommunications Act 1991 and the Government's overall telecommunications policy objectives. Each carrier may request a review by AUSTEL of the charging arrangements on a case by case or route by route basis to establish that outcomes are consistent with the objects and provisions of the Telecommunications Act 1991 and the Government's overall telecommunications policy objectives.

Basis for interconnection charging

4. In accordance with the Government's November 1990 policy statement, charges by Telecom/OTC for interconnection, including usage, access and lease of interconnection and access services and facilities by the second carrier, are to cover the costs necessarily incurred by Telecom/OTC, ie the resources and assets used to provide interconnection,

including access, usage and lease of interconnection and access facilities and services to the second carrier. They are to include all relevant direct costs and a commercial return to Telecom/OTC on its relevant direct assets.

5. Telecom/OTC is not expected to supply infrastructure or services at charges less than the costs it necessarily incurs in providing them.

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6. Carriers may agree commercially to express charges by reference to standard tariff levels (such as by way of discounts, for example) or in some other form, provided that AUSTEL is able, where necessary, to establish the effective overall equivalence between such forms of expression and these charge principles.

7. Where applicable, the "initial" charges that were recommended by AUSTEL are to be incorporated in the draft interconnection agreements currently being negotiated between Telecom/OTC and contenders for the second carrier licence. These parties may, however, agree to include them in the

agreements in some derivative form, such as by way of averaging or aggregation, provided that the calculation of the derivative form is made available to AUSTEL.

8. Where AUSTEL has not set initial charges, the charges are to be negotiated commercially between the carriers. Any arbitration by AUSTEL in relation to such charges is to have regard to the objects and provisions of the Telecommunications Act 1991, the Government's overall ~ telecommunications policy objectives, the effect of the relative market power of the carriers on industry outcomes and the need to avoid uneconomic duplication of facilities.

9. Carriers will provide interconnection and access services and facilities to each other on terms more favourable than to other service providers, consistent with the Telecommunications Act 1991.

10. Any arbitration by AUSTEL on any interconnection charge will have regard to:

. the relative technical and operational quality of the interconnection and access facilities available to each carrier, and

. the extent to which each of the carriers is able to independently offer the relevant services at comparable service quality levels.

Charge areas

11. The charge areas specified in AUSTEL1s 14 June and 9 August reports (Inter Carrier Charging Areas, ICCA) are to apply in setting initial and subsequent charges.

Trigger mechanisms for intra-ICCA and international traffic

12. In line with AUSTEL1s recommendations, trigger mechanisms are to apply to the charging regime for intra-ICCA and international traffic. The trigger mechanisms are designed to permit AUSTEL's initial charges to be superseded by commercially negotiated charges. Essentially, these

trigger mechanisms signal a shift in the onus of proof from

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Telecom/OTC to the second carrier as to whether Telecom/OTC continues to possess market dominance sufficient to require initial charges to continue.

13. This approach will permit Telecom/OTC to argue a case to AUSTEL that it has lost market dominance, even though the trigger thresholds may not have been reached. In such a case Telecom/OTC could argue that initial charges should therefore no longer apply.

14. Similarly, it will be open to the second carrier to argue a case to AUSTEL that Telecom/OTC continues to have dominant market power, even though the trigger threshold has been reached, and that initial charges should therefore continue to apply. In the absence of a successfully argued case to this effect, initial charges would cease to apply once the trigger point was passed.

15. Initial charges will cease to apply irrespective of other trigger mechanisms where the corresponding or related network rollout commitment date's nominated by the second carrier are reached (except where any delay is approved by AUSTEL).

16. The second carrier and Telecom/OTC may agree on the application of initial prices for fixed periods as an alternative to use of market share or network rollout trigger mechanisms.

17. These principles on "trigger mechanisms" are to be applied in a manner consistent with the objects of the Telecommunications Act 1991 and the Government's overall telecommunications policy objectives.

APPLICATION OF CHARGING PRINCIPLES

Customer Access Network (CAN)

18. AUSTEL's recommended initial charges are to apply. However, carriers will be free to negotiate a different balance or mix of these charges within the same overall weighted average of charges.

Charges for new CAN

19. For CAN constructed or substantively upgraded after 1 October 1992 the carriers are to negotiate on a commercial basis subject to AUSTEL's arbitration.

Preselection and direct connections

20. Where preselection is available or where traffic is carried to or from a directly connected customer initial charges will not apply. In these cases, commercially negotiated charges may be agreed. Any AUSTEL arbitration is

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to be based on the same principles as for new CAN, and may include a capital contribution element.

Intra-ICCA (non-CAN) charges

21. AUSTEL's recommended initial charges are to apply. However, carriers will be free to negotiate a different balance or mix of initial charges such as peak/off peak, metropolitan/non-metropolitan or flagfall/usage, provided that, overall, charges recover the same proportion of relevant costs.

22. Consistent with paragraphs 12, 13 and 14 above, initial charges will cease to apply to:

. a charge area where the competing carrier has achieved 20 per cent of the total originating trunk (STD and IDD) traffic generated within the charge area, or 20 per cent of the total trunk terminating traffic within that charge area

. a charge area where the competing carrier has achieved 25 per cent of the total originating traffic generated within that charge area or 25 per cent of the total terminating traffic within that charge area

. all domestic trunk traffic (STD and IDD) once the competing carrier has achieved 15 per cent of the total trunk minutes within Australia

. all domestic traffic once the competing carrier has achieved 20 per cent of the total minutes of domestic traffic within Australia.

23. Any subsequent charges are to be negotiated commercially between the carriers. Any arbitration by AUSTEL is to be on the basis set out in paragraphs 8, 9 and 10.

Inter-ICCA (gateway to gateway) charges

24. AUSTEL did not determine charges for interconnection of inter-charge area facilities.

25. All charges for interconnection including usage, access and lease of interconnection and access facilities or services between gateways will be negotiated commercially between carriers. Any arbitration by AUSTEL will be on the basis set out in paragraphs 8, 9 and 10.

International

26. AUSTEL's recommended initial charges for international interconnection including usage, access and lease of interconnection and access facilities will apply.

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27. Initial charges will cease to apply, either:

(a) where the second carrier's share of international traffic on the stream reaches a 5 per cent share of traffic generated in Australia on that stream; or

(b) from the date of the second carrier's commitment to acquire its own dedicated facilities to service that stream.

28. As a further trigger, the withdrawal of initial charges on all international traffic is to apply when the second carrier's share of all international traffic generated in Australia reaches 10 per cent.

29. The traffic share trigger of 5 per cent reflects a level of traffic at which carriers could be expected to initiate negotiations for commencing a service operating agreement with an international correspondent. However, the particular

nature of correspondent negotiations means that such negotiations may be prolonged. The second carrier may ~ therefore call on AUSTEL to arbitrate as to whether initial charges should continue during the period required to bring negotiations on the relevant service operating agreement to finality.

30. Any subsequent charges are to be negotiated commercially between the carriers. Any arbitration by AUSTEL is to be on the basis set out in paragraphs 8, 9 and 10.

MobileNet

31. In the period before GSM is available, the second carrier will not be able to provide an analogue mobile network in competition with MobileNet. Telecom/OTC will be required to provide the second carrier with airtime on MobileNet.

32. The AUSTEL report did not determine charges for interconnection, including usage, access and lease of interconnection and access facilities and services of MobileNet, which operates to the Advanced Mobile Phone System

(AMPS) standard.

33. All charges for interconnection and access facilities on the AMPS network are to be negotiated commercially between the carriers. Any AUSTEL arbitration will be on the basis set out in paragraphs 8, 9 and 10.

34. These charges will cease to apply from the GSM digital network rollout commitment dates in each relevant geographical region as nominated by the second carrier.

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Ancillary and Supplementary Services

35. Ancillary and supplementary service charges including the costs of providing agreed or required services such as operator assistance, billing services and access to information systems and the charges for other non-PSTN

services are to be negotiated commercially between the carriers. Any AUSTEL arbitration is to be on the basis outlined in paragraphs 8, 9 and 10. These charges will not include costs which Telecom/OTC would have borne in any case in modernising its network or upgrading its service. These charges do not apply to transmission capacity.

36. In any arbitration, AUSTEL is to have particular regard for the potential for access to such services on equitable terms to be integral to the early start up of the second carrier on an efficient basis.

Interconnection Gateways

37. Interconnection gateway charges are charges to recover the direct cost of providing gateways for the interconnection of carriers' respective networks. These include the costs of planning, provision, operation and maintenance of gateway

infrastructure, as well as signalling costs.

38. These charges will be negotiated commercially between the carriers on the cost basis outlined by AUSTEL in its 14 June report.

39. The charges are not to include any costs associated with Telecom/OTC1s own network upgrading or modernisation.

Over- and Under-Forecast Requirements

40. Carriers may agree to have interconnection agreements based on forecasts of usage and other requirements.

41. Where carriers negotiate commercially to include forecasts of usage and other requirements, and where actual requirements differ by a significant amount (as commercially negotiated between carriers) from forecast requirements and there is a demonstrated significant variance in costs due to this difference, carriers should agree on the appropriate cost adjustment to relevant charges. This may be done as part of an agreed adjustment mechanism.