Watchdog gave telco mobile fee gift: Optus
Telstra will pocket hundreds of millions of dollars in coming years from its landline customers calling mobiles because it is not passing on regulated wholesale price cuts.
In January this year the competition watchdog cut the fees that are paid for each minute a caller spends on another mobile network from 9c per minute to 6c.
The latest full-year financial reports show that the 3c reduction gave Telstra an extra $18 million of earnings, while reducing Vodafone's earnings by about $20.5 million and Optus' by about $15 million.
Analysts expect further regulated cuts to see Telstra taking an extra $200 million over the next four years.
The impact of the cuts has been a ''regulatory gift to Telstra'', according to its competitor Optus. Telstra is a net payer of terminating rates because nearly all calls from fixed lines to mobiles start on its fixed network. Calls from mobiles to mobiles are relatively even between networks.
Terminating rates are an ongoing sore-point in the telco industry because the cuts have reduced the amount Telstra pays Vodafone and Optus, but Telstra has not made a similar reduction in retail prices.
In fact, Telstra recently increased the cost of calling mobiles from 35c per minute to 36c on its basic home phone plans. Both Optus and Vodafone accuse it of pocketing the 3c difference for a competitive advantage.
A spokesman for Telstra said it has passed on termination savings through general price reductions on all its mobile and fixed products.
''Passing through savings solely to fixed-to-mobile calls will not be allocatively efficient, as consumers value pass-through relatively more on the other calling products (i.e. local, [interstate] and international calls). Imposing a pass-through requirement on Telstra would harm its ability to meet its customer needs, which would not be in the long term interest of end users,'' Telstra said in a submission to the Australian Competition and Consumer Commission last year.
Over the past two decades terminating rates have fallen from 21c per minute to 6c per minute and will drop to 3.6c per minute by mid-2014.
Optus' interconnect and economic regulation general manager Andrew Sheridan said the reductions in termination rates have been a ''regulatory gift to Telstra''.
''The whole point of regulating [termination rates] was not about mobile to mobile, it was about fixed to mobile … There has been a significant value transfer from the competitive mobile operators to the fixed line incumbent,'' he said.
Vodafone spokesman Greg Spears said, ''Telstra has used [termination fee] regulation to increase its margins on fixed-to-mobile calls rather than passing on the savings to consumers.
''At the end of 2004, Telstra's average revenue per minute for fixed-to-mobile calls was 40c per minute. In seven years Telstra's average revenue per minute has fallen by 10c. In contrast, the ACCC has reduced the wholesale price for [termination fees] from 21c per minute to 6c per minute - a reduction of 15c,'' he said.
ACCC spokesman Michael Cosgrave said while retail prices are affected by many things, the commission does monitor the retail impact of rate cuts.