The inquiry is really all about the line rental charge. Right now Telstra is allowed to increase it every year by the rate of inflation, whether or not its costs have actually increased. There are bugger-all costs by the way. Telstra does this because it faces no competition in line rental and uses the extra revenue to cut prices where it does face competition.
The capped 22 cent local phone call and the 50 cent payphone fee are up for grabs.
Communications Minister Stephen Conroy has ordered a snap inquiry into all of the price caps that apply to Telstra, including the critical fixed line rental charge.
While it is understood that his interest is in tightening rather than loosening the controls, Telstra says it will argue that it should be freed from price caps in areas where it now faces effective competition.
The current controls in place since 2005 stipulate that Telstra can not charge more than 22 cents for a local call from a fixed phone unless it does so as part of a "discount plan"... Local calls from public phones are limited to 50 cents.
The basic line rental charge has to be uniform throughout Australia and can grow no faster than the consumer price index . In addition the price of a "basket" that includes line rental, long-distance charges and calls to mobiles has to stay fixed in absolute terms, meaning that as line rental charges rise other charges have to fall.
Mobile calls are exempted form the caps on the ground that the industry is competitive.
The price controls were due to expire in mid-2009 and were extended a year while the government developed plans for its national broadband network.
The Minister's statement says "given that the NBN is in an early stage of development" he will extend the controls for a further two years after first asking the Competition and Consumer Commission to conduct a "limited" inquiry into the form they should take.
The ACCC has just two months to report and wants submissions by February 12.
Telstra said in a statement it was "keen to ensure that any controls take into account the increased level of competition in the marketplace".
Published in today's Age
. The case against Conroy
. Telstra - the witch is dead
. Tuesday column: Calling Telstra's bluff, with malice