From Green Whiskers

Telecommunications access pricing: The Australian experience

Posted in: Reports / Papers

By Henry Ergas
January 24, 2008

Few issues have been as controversial in Australia as the setting of access prices in telecommunications. This paper provides a survey of the Australian experience in that regard. It shows that:

Access charges have been set in a way that does not respect "adding up" constraints, and notably the requirement for full cost recovery;
The resulting shortfalls have been increased by distortions in relative prices between substitutable services;
The failure to allow recovery of even "efficient" costs has bee aggravated by decisions by the ACCC that plainly involve "time inconsistency", i.e. that amount to expropriation of the sunk capital of investors in the access provider; and
The distortions associated with thus setting the level of access charges incorrectly have been accentuated by very steep rates of decline in access charges that far exceed any reasonable estimate of the rate of reduction in costs. .... more. (pdf, size 121kb)