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Six month extension to Telstra price caps

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M e d i a

R e l e a s e


Minister fo r Communications, Information Technology and the Arts

Deputy Leader o f the Government in the Senate


The Minister for Communications, Senator Richard Alston, today announced a six-month extension of the existing telecommunications price cap regime.

‘The extension will bring the price cap regime in line with the financial year, and will allow for a further consideration of the structure, scope and operation of the price cap regime in the deregulated telecommunications market,’ Senator Alston said.

‘The price cap regime is closely related to other important policy questions in telecommunications, such as the Telstra ‘access deficit’, the interconnect rates charged by Telstra to its competitors, and the encouragement of competition.

‘Accordingly, the Government will seek comments from interested parties on the form which the price cap regime should take in the future. The Government will issue a discussion paper on the price caps issue, together with a report prepared by Access Economics, before Christmas, and will call for comments at that time.

‘To facilitate this consultation process, the Government will extend the expiry date of the current regime from December 31, 1999 to June 30, 1999.

‘Following that consultation, the Government will make a decision on the structure and scope of the price cap scheme that will apply for the 1999-2000 year and beyond.’

The existing price cap regime is unposed on Telstra under the Telstra Corporation Act 1991. In summary, these price controls:

• require Telstra to reduce the price of a basket of its main services (connections; line rentals; local, trunk and international calls; leased lines and mobile services) by 7.5% in real terms for each calendar year in which the price cap regime operates; • require Telstra to reduce its standard prices for residential customers, for connections, line rentals,

trunk calls and international calls, by 1% in real terms each year during the operation of the price cap regime; • prohibit the price of untimed local calls rising above 25 cents per call for calls made from residential or business phones, and 40 cents per call for calls made from a public payphone; • require Telstra to obtain the prior consent o f the ACCC where Telstra proposes to increase a charge

that is subject to the price control arrangements by more than the change in the Consumer Price Index (CPI) during a year; and • make Telstra's charges for directory assistance subject to notification and disallowance by the Minister.

The price control arrangements are administered by the Australian Competition and Consumer Commission (ACCC).

Media Contact: Terry O’Connor, Minister’s office 02 6277 7480 Website 220/98 14 December 1998