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Telstra's interconnect price low by world standards

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M e d i a R e l e a s e Telstra

19 June 1998 278/98

Tclstro'j. Interconnect prices low by world standards

Telstra's interconnect prices are low by world standards, according to a report by OVUM Pty Ltd.

Telstra's Group Manager Competition, Dr Paul Paterson said the report shows that for interconnection distances up to 30 kms, covering the vast bulk o f interconnection traffic, the charges listed in Telstra's proposed Access Undertaking are extremely


These shorter haul interconnect charges are between 20 and 30 per cent lower than the average of the world class carriers included in the benchmark sample,

"We are most encouraged by these results. They demonstrate publicly and independently what we have known all along, that Telstra is offering world- competitive interconnect rates," said Dr Paterson.

The OVUM study has taken account o f the necessary contribution to the access deficit from all traffic using the public switched telephone network, including interconnect traffic, For Australia and a number of other countries, regulatory constraints have limited the rebalancing o f access line rentals and call charges to more closely reflect

costs, The resultant access deficit - the shortfall of line instalation and rental revenues against costs · must be met from cross-subsidies from retail call revenues and interconnect charges, Where this is the case, OVUM has appropriately netted out these contributions in making the comparisons -

"While some telecommunications service providers seeking interconnect arrangements claim Telstra should absorb the access deficit, OVUM has clearly got it right in recognising these as valid charges, but netting them out for purposes of comparison.

"Claims that the access deficit is covered by the Universal Service Obligation payment are clearly misinformed. Last year USO payments - most o f which were contributed by Telstra - were equivalent to only a small part o f the access deficit," said Dr Paterson

Telstra's charges are also extremely competitive for interconnection to and from mobile telephone services

"For peak time interconnect services for mobiles, Telstra's charges are close to hall*the average of the companies in the sample," Dr Paterson quoted from the report.

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Telstra Me d i a R e l e a s e

However, Dr Paterson said that the report should be treated as work in progress.

"We believe the sample o f countries against which Telstra is benchmarked should be expanded, ond there arc certain methodological issues that need further consideration. These include adjustments for the very different population distribution and density in Australia. We have a smaller number of customers over much larger areas and the

associated costs o f servicing these customers are very h ig h / he said.

The OVUM report has been commissioned by the ACCC and released today as a working draft for public comment, as part of the Commission's consideration of Telstra's Access Undertaking.

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For further information contact Kristen Hannah Senior Analyst

03 9634 5343 or 0419 $65 152