Telstra wholesale access appeal fails

High Court judges describe Telstra's argument to raise wholesale prices as 'synthetic and unreal'

Several telco industry representatives have expressed relief after the High Court of Australia squashed Telstra's bid to raise prices for carriers accessing the telco's network.

The telco giant claimed regulations set by the Australian Competition and Consumer Commission (ACCC) compelled it to provide network access at loss-making wholesale prices. These breached the Constitution because they amounted to the acquisition of shareholders' property without 'just' compensation, it claimed.

Telstra launched a challenge against the ACCC under section 51 (xxxi) of the constitution, which guarantees just compensation when property is compulsory acquired. Under the current arrangement, Telstra's wholesale customers pay $14.30 for an unbundled local loop and $2.50 for line-sharing. The High Court judges described Telstra's argument as 'synthetic and unreal'. iiNet chief regulatory officer, Steve Dalby, was unsurprised the courts dismissed the appeal.

"The current access regime has been in place since 1991. For Telstra to be trying this 17 years later puts their motivations into question," he said. "It's a way to inject uncertainty into the industry: Telstra has been very open about them needing at least five years to transform its business."

ACCC Chairman, Graeme Samuel said the result removed another layer of uncertainty created by Telstra's successive legal actions.

"The competitive carriers would have been pursuing the course of action we encourage, which is facilities-based competition by installing their own DSLAMs in Telstra exchanges," he said. "Any stifling effect the High Court challenge might have had we hope has been removed. What we need to remember is that there is layer upon layer of litigation brought by Telstra in relation to the regulatory environment - whether it is in relation to our decisions or the validity of the regime we administer."

Independent telco analyst, Paul Budde, claimed Telstra used the court to delay and frustrate competition.

"Unfortunately, unless the government changes the regulatory environment and stops Telstra from misusing the court system, it's difficult," he said.

In a statement, Telstra claimed victory would have triggered more third-party investment into communications infrastructure.

"We accept the decision, but we are disappointed because it means Australians lose an opportunity for more investment, more competition, more innovation and more choices in broadband," Telstra Group general counsel, Will Irving, said in its statement.

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