FEDERAL COURT OF AUSTRALIA

 

Telstra Corporation Ltd v Australian Competition & Consumer Commission [2008] FCA 1436

ADMINISTRATIVE LAW – Telecommunications Access Regime under Pt XIC of Trade Practices Act 1974 (Cth) – access disputes between three access seekers and carrier (Telstra Corporation Ltd – Telstra) – Australian Competition and Consumer Commission (ACCC) arbitrating disputes under Div 8 of Pt XIC – ACCC makes final determination under s 152CP – Telstra challenges final determinations on judicial review grounds – statutory list of mandatory relevant considerations – whether one or more should be given priority – exhortatory provisions – whether final determinations invalid because period exceeded period of declaration of Line Sharing Service as a declared service

TRADE PRACTICES – Telecommunications Access Regime under Pt XIC of Trade Practices Act 1974 (Cth) – access disputes between three access seekers and carrier (Telstra Corporation Ltd – Telstra) – Australian Competition and Consumer Commission (ACCC) arbitrating disputes under Div 8 of Pt XIC – ACCC makes final determination under s 152CP – Telstra challenges final determinations on judicial review grounds – statutory list of mandatory relevant considerations – whether one or more should be given priority – exhortatory provisions – whether final determinations invalid because period exceeded period of declaration of Line Sharing Service as a declared service

Trade Practices Act 1974 (Cth) Pt XIC, Div 8, ss 152AB, 152AQA, 152CR, 152AL, 152ALA, 152CM, 152DNA, 152DNC

Applicant VEAL of 2002 v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 225 CLR 88 distinguished

Australasian Meat Industry Employees’ Union (WA Branch); ex parte Ferguson (1986) 67 ALR 491 cited

Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 referred to

Broussard v Minister for Immigration and Ethnic Affairs (1989) 21 FCR 472 cited

Commissioner for Australian Capital Territory Revenue v Alphaone Pty Ltd (1994) 49 FCR 576 cited

Craig v South Australia (1995) 184 CLR 163 cited

Daniel v State of Western Australia (2004) 138 FCR 254 cited

Dumitrov v SC Johnson and Son Superannuation Pty Ltd (No 2) [2007] NSWSC 42 cited

East Australian Pipeline Pty Ltd v Australian Competition and Consumer Commission (2007) 239 ALR 50 discussed

Ex parte Hebburn Ltd; Re KearsleyShire Council (1947) 47 SR (NSW) 416 cited

Girretti v Deputy Commissioner of Taxation (1996) 70 FCR 151 cited

Idonz Pty Ltd v National Capital Development Commission (1986) 13 FCR 70 discussed

Inspector-General in Bankruptcy v Bradshaw [2006] FCA 22 cited

Jones v Dunkel (1959) 101 CLR 298 distinguished

Kioa v West (1985) 159 CLR 550 distinguished

Martincevic v Commonwealth (2007) 164 FCR 45 referred to

Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 referred to

Minister for Aboriginal and Torres Strait Islander Affairs v State of Western Australia (1996) 67 FCR 40 distinguished

Minister for Immigration v Eshetu (1999) 197 CLR 611 cited

Nevistic v Minister for Immigration & Ethnic Affairs (1981) 34 ALR 639 cited

Prasad v Minister for Immigration & Ethnic Affairs (1985) 6 FCR 155 cited

Queensland Medical Laboratory v Blewett (1988) 84 ALR 615 cited

R v Hunt; ex parte Sean Investments Pty Ltd (1979) 180 CLR 322 distinguished

R v The Australian Broadcasting Tribunal; ex parte Hardiman (1980) 144 CLR 13 referred to

R v Toohey; ex parte Meneling Station Pty Ltd (1983) 158 CLR 327 cited

Re Michael; Ex parte Epic Energy (WA) Nominees Pty Ltd (2002) 25 WAR 511 cited

Re Minister for Immigration and Multicultural Affairs; Ex parte Miah (2001) 206 CLR 57 cited

Re Refugee Tribunal; ex parte Aala (2000) 204 CLR 82 cited

Segal v Waverley Council (2005) 64 NSWLR 177 cited

Sinnathamby v Minister for Immigration and Ethnic Affairs (1986) 66 ALR 502 cited

Somaghi v Minister for Immigration, Local Government and Ethnic Affairs (1991) 31 FCR 100 cited

Stead v State Government Insurance Commission (1986) 161 CLR 141 referred to

Sun Zhan Qui v Minister for Immigration and Ethnic Affairs (unreported, Federal Court of Australia, 6 May 1997, Lindgren J) cited

SZBEL v Minister for Immigration and Multicultural and Indigenous Affairs (2006) 228 CLR 152 cited

Tickner v Chapman (1995) 57 FCR 451 discussed

Tobacco Institute of Australia v National Health and Medical Research Council (1996) 71 FCR 265 cited

Urban Transit Authority of NSW v Nweiser (1992) 28 NSWLR 471 cited

  

 

TELSTRA CORPORATION LIMITED v AUSTRALIAN COMPETITION AND CONSUMER COMMISSION and REQUEST BROADBAND PTY LTD

NSD 1744 of 2007

TELSTRA CORPORATION LIMITED v AUSTRALIAN COMPETITION AND CONSUMER COMMISSION and PRIMUS TELECOMMUNICATIONS PTY LTD

NSD 1743 of 2007

 

TELSTRA CORPORATION LIMITED v AUSTRALIAN COMPETITION AND CONSUMER COMMISSION and CHIME COMMUNICATIONS PTY LTD

NSD 1560 of 2007

 

 

 

LINDGREN J

19 SEPTEMBER 2008

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1744 of 2007

 

BETWEEN:	TELSTRA CORPORATION LIMITED Applicant
AND:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION First Respondent   REQUEST BROADBAND PTY LTD Second Respondent

 

JUDGE:	LINDGREN J
DATE OF ORDER:	19 september 2008
WHERE MADE:	SYDNEY

 

THE COURT ORDERS THAT:

 

1.                  The proceeding be listed at 9.30am on 22 October 2008 for the making of orders, including orders as to costs.

2.                  The parties attempt to agree on the orders to be made, including orders as to costs.

3.                  If, by 8 October 2008 agreement has not been reached, the parties provide to the Associate to Lindgren J by 17 October 2008 the forms of orders for which they will respectively contend and written submissions in support.

 

 

 

 

 

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1743 of 2007

 

BETWEEN:	TELSTRA CORPORATION LIMITED Applicant
AND:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION First Respondent   PRIMUS TELECOMMUNICATIONS PTY LTD Second Respondent

 

JUDGE:	LINDGREN J
DATE OF ORDER:	19 SEPTEMBER 2008
WHERE MADE:	SYDNEY

 

THE COURT ORDERS THAT:

 

1.                  The proceeding be listed at 9.30am on 22 October 2008 for the making of orders, including orders as to costs.

2.                  The parties attempt to agree on the orders to be made, including orders as to costs.

3.                  If, by 8 October 2008 agreement has not been reached, the parties provide to the Associate to Lindgren J by 17 October 2008 the forms of orders for which they will respectively contend and written submissions in support.

 

 

 

 

 

 

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1560 of 2007

 

BETWEEN:	TELSTRA CORPORATION LIMITED Applicant
AND:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION First Respondent   CHIME COMMUNICATIONS PTY LTD Second Respondent

 

JUDGE:	LINDGREN J
DATE OF ORDER:	19 SEPTEMBER 2008
WHERE MADE:	SYDNEY

 

THE COURT ORDERS THAT:

 

1.                  The proceeding be listed at 9.30am on 22 October 2008 for the making of orders, including orders as to costs.

2.                  The parties attempt to agree on the orders to be made, including orders as to costs.

3.                  If, by 8 October 2008 agreement has not been reached, the parties provide to the Associate to Lindgren J by 17 October 2008 the forms of orders for which they will respectively contend and written submissions in support.

 

 

 

 

 

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1744 of 2007

BETWEEN:	TELSTRA CORPORATION LIMITED Applicant
AND:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION First Respondent   REQUEST BROADBAND PTY LTD Second Respondent

 

 

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1743 of 2007

BETWEEN:	TELSTRA CORPORATION LIMITED Applicant
AND:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION First Respondent   PRIMUS TELECOMMUNICATIONS PTY LTD Second Respondent

 

 

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1560 of 2007

BETWEEN:	TELSTRA CORPORATION LIMITED Applicant
AND:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION First Respondent   CHIME COMMUNICATIONS PTY LTD Second Respondent

 

 

JUDGE:	LINDGREN J
DATE:	19 september 2008
PLACE:	SYDNEY

TABLE OF CONTENTS

Section		Para
	Introduction	[1]
A	Telstra’s Cost Model	[123]
B	Invalidity of Final Determination	[239]
C	Pooling and Allocation Method	[268]
D	Line Costs Recovery	[346]
E	Disconnection Charges, Churn Process and “Option 2”	[418]
F	Disconnection Charges, Backdating and the “No Charge Period”	[508]

 

 

REASONS FOR JUDGMENT

INTRODUCTION

1                     These three proceedings concern Pt XIC of the Trade Practices Act 1974 (Cth) (the Act) headed “Telecommunications Access Regime”.  Part XIC was introduced into the Act by the Trade Practices Amendment (Telecommunications) Act 1997 (No 58 of 1997) (see item 6 of Sch 1) with effect from 30 April 1997.  It provides for a regulated access regime specific to telecommunications services.  By way of contrast, Part IIIA of the Act provides for a general access regime not limited to a specific industry.  Section 152CK of the Act provides for the interaction between the two regimes, but it is not of present relevance.

2                     The proceedings relate to access to the High Frequency Unconditioned Local Loop Service, also known as the Line Sharing Service (LSS).  The applicant (Telstra) owns the lines over which the LSS is provided.

3                     There were access disputes between Telstra and the second respondents in the three proceedings in relation to access to the LSS.  I will refer to the access seekers by the following abbreviations:

Chime Communications Pty Ltd                        Chime

Primus Telecommunications Pty Ltd                  Primus

Request Broadband Pty Ltd                              Request

In certain circumstances, Pt XIC permits an access dispute to be arbitrated by the first respondent, the Australian Competition and Consumer Commission (ACCC – referred to as the Commission in the Act and in various parts of the evidence and in the parties’ submissions).  Arbitration takes place under Div 8 of Pt XIC.

4                     Pursuant to the mechanism in Div 8, ACCC made a final determination in respect of each access dispute.  Telstra seeks review of each of the final determinations.

5                     The three proceedings were heard together, the evidence in each being evidence in the others, subject to all just exceptions on grounds of relevance.

6                     In the table below, I identify, in summary form, the grounds of review referable to various paragraphs in s 5(1) of the Administrative Decisions (Judicial Review) Act 1977 (Cth) (ADJR Act) on which Telstra relies, leaving until later the explanation of the grounds.  Each “Ground No” is a reference to the number of the ground in the relevant amended application.  The capitalised letters of the alphabet in bold in the left hand column indicate the grouping of those grounds that I use at [123]ff below.

	Ground of review relied on by Telstra	Request proceeding Ground No	Chime proceeding Ground No	Primus proceeding Ground No
A	Failure to take into account a relevant consideration, namely, Telstra’s cost model	1	1	NA
A	Denial of procedural fairness by failing to afford Telstra a reasonable opportunity to present its case with respect to Telstra’s cost model	2(a)	2(a)	N/A
D	Denial of procedural fairness by denying Telstra a reasonable opportunity to present its case as to whether Telstra was recovering its line costs	2(b)	2(b)	N/A
A	Procedural ultra vires in relation to Telstra’s cost model – failure to comply with s 152DB(1)(b) of the Act	3	3	N/A
B	Decision made in excess of jurisdiction, not authorised by the Act and otherwise contrary to law because decision expressed to have effect until 31 December 2007, yet the declaration of the LSS pursuant to s 152AL(3) of the Act expired on 31 October 2007	4	4	1
C	Procedural ultra vires and failure to take into account a relevant consideration, namely, the direct costs of providing access to the LSS (s 152CR(1)(d)) in adopting the Pooling and Allocation Method	5(a)	5(a)	N/A
C	Procedural ultra vires and failure to take into account a relevant consideration, namely, the long-term interests of end-users and in particular the legitimate commercial interests of Telstra including its ability to exploit economies of scale and scope (ss 152CR(1)(a), and 152AB(2)(e) and (6)(b) of the Act) in adopting the Pooling and Allocation Method	5(b)	5(b)	N/A
C	Procedural ultra vires and failure to take into account a relevant consideration, namely, the LSS Pricing Principles (s 152AQA(6) of the Act) in adopting the Pooling and Allocation Method	5(c)	5(c)	N/A
C	Error of law in misconstruing s 152CR(1)(d) of the Act in concluding that the Pooling and Allocation Method allowed Telstra to recover its costs, including its direct costs	6	6	N/A
D	Error of law by making a finding of fact that Telstra was recovering its line costs when there was no evidence to justify the finding	7	7	N/A
E	Procedural ultra vires when determining disconnection charges by not enquiring of Telstra concerning, or investigating solutions to address, the practical difficulties of adopting a more precise test than Option 2 – failure to comply with s 152DB(1)(b) of the Act	8	N/A	2
E	Denial of procedural fairness by failing to afford Telstra a reasonable opportunity to present its case in relation to disconnection charges by failing to disclose the issue of Option 2	9(a)	N/A	3(a)
E	Denial of procedural fairness by failing to afford Telstra a reasonable opportunity to present its case in relation to disconnection charges by failing to disclose the material constituting the practical difficulties of a more precise test than Option 2	9(b)	N/A	3(b)
F	Failure to take into account a relevant consideration, namely, Telstra’s costs when determining disconnection charges during the No Charge Period	10(a)	N/A	4(a)
F	Procedural ultra vires by failing to take into account matters referred to in s 152CR(1) and to have regard to the LSS Pricing Principles when determining disconnection charges during the No Charge Period	10(b)	N/A	4(b)
F	Jurisdictional error by asking itself the wrong question in relation to disconnection charges during the No Charge Period	10(c)	N/A	4(c)

7                     As can be seen, all of the grounds are raised in the Request proceeding, but not all of them are raised in the Chime proceeding or Primus proceeding.  (An eleventh ground was raised in all three proceedings but, as noted at [26] below, it is no longer relevant.) Accordingly, evidence was led in the Request proceeding on the basis that it would also be all the evidence relevant to the issues in the Chime proceeding and Primus proceeding.  Conformably with that course, I will refer to the Request proceeding alone, but in doing so I will necessarily also be addressing the issues in the Chime proceeding and the Primus proceeding.

8                     In due course I will deal with Telstra’s grounds of review in the following sections:

Section	Section title	Telstra’s grounds
A	Telstra’s Cost Model	1, 2(a), 3
B	Invalidity of Final Determination	4
C	Pooling and Allocation Method	5(a), 5(b), 5(c), 6
D	Line Costs Recovery	2(b), 7
E	Disconnection Charges, Churn Process and “Option 2”	8, 9(a), 9(b)
F	Disconnection Charges, Backdating and the “No Charge Period”	10(a), 10(b), 10(c)

9                     Telstra contends in respect of each of its grounds of review that the result is that the decision is invalid or is liable to be set aside (although Telstra concedes in respect of Section B (Invalidity of Final Determination) that the decision would be invalid only in respect of the period after 31 October 2007).

10                  I agreed to the parties’ request that I publish my reasons for judgment without making orders, and allow the parties the opportunity to make submissions on the orders to be made.

SOME TECHNICAL MATTERS

11                  The proceedings have been characterised by numerous acronyms and terms, some of which relate to technical matters.  Annexure A to these reasons is an alphabetical list of acronyms and technical terms and their meanings.

12                  Telstra owns a variety of networks which it uses to provide telecommunication services.  One such network is the Public Switched Telephone Network (PSTN).  Through the PSTN, Telstra provides to end-users various telephony and data services such as local, long distance, national and international calls and dial-up internet connections.  Another Telstra network is its “Broadband” network.  The PSTN and the Broadband network use what is called the Customer Access Network (CAN).  Generally speaking, the CAN can be understood to be the network of connections between end-users, whether business or private, and some aggregation point within the network, which is usually a local exchange building.

13                  Connection between the end-user and that point within the network is normally achieved by way of “line” (or “metallic pair” or “twisted pair”) of copper or aluminium wire, or where there is no fixed line, by radio.  The copper or aluminium wire is often referred to as “unconditioned communications wire”.  It forms a continuous copper or aluminium path between the premises of end-users and exchanges and is commonly referred to as the Unconditioned Local Loop (ULL), “local loop” or, simply, “line”.  The word “unconditioned” signifies that the wire is bare or unqualified, that is, the equipment required to make it serviceable is not yet attached to it.

14                  Both the LSS and another service referred to below, the Unconditioned Local Loop Service (ULLS), are provided over the CAN, and to a retail customer, or end‑user, over a ULL.  The CAN is the generic expression which applies to all of the ULLs:  the ULLs, taken together, constitute the CAN.

THE LEGISLATION

15                  Division 1 (ss 152AA-152AK) within Pt XIC is headed “Introduction”.

16                  Section 152AA, the first section in Div 1, gives the following simplified outline of Pt XIC:

●       This Part sets out a telecommunications access regime.

 

●       The Commission may declare carriage services and related services to be declared services.

 

●       Carriers and carriage service providers who provide declared services are required to comply with standard access obligations in relation to those services.

 

●       The standard access obligations facilitate the provision of access to declared services by service providers in order that service providers can provide carriage services and/or content services.

 

●       The terms and conditions on which carriers and carriage service providers are required to comply with the standard access obligations are subject to agreement.

 

●       If agreement cannot be reached, but the carrier or carriage service provider has given an access undertaking, the terms and conditions are as set out in the access undertaking.

 

●       If agreement cannot be reached, but no access undertaking is in operation, the terms and conditions are to be determined by the Commission acting as an arbitrator.

 

●       An access undertaking (other than a special access undertaking) may adopt the terms and conditions set out in a telecommunications access code.

 

●       The Commission may conduct an arbitration of a dispute about access to declared services. The Commission’s determination on the arbitration must not be inconsistent with the standard access obligations or an access undertaking.

 

●       The Commission may register agreements about access to declared services.

 

●       A carrier, carriage service provider or related body must not prevent or hinder the fulfilment of a standard access obligation. 

There is no access undertaking in operation relevant to these proceedings.

17                  Section 152AB(1) sets out the single object of Pt XIC.  Subsections (1) to (3) of s 152AB are as follows:

Object

 

(1)        The object of this Part is to promote the long-term interests of end-users of carriage services or of services provided by means of carriage services.

 

Promotion of the long- term interests of end- users

 

(2)        For the purposes of this Part, in determining whether a particular thing promotes the long-term interests of end-users of either of the following services (the listed services):

(a)        carriage services;

(b)        services supplied by means of carriage services;

regard must be had to the extent to which the thing is likely to result in the achievement of the following objectives:

(c)        the objective of promoting competition in markets for listed services;

(d)        the objective of achieving any-to-any connectivity in relation to carriage services that involve communication between end-users;

(e)        the objective of encouraging the economically efficient use of, and the economically efficient investment in:

(i)         the infrastructure by which listed services are supplied; and

(ii)        any other infrastructure by which listed services are, or are likely to become, capable of being supplied.

 

Subsection (2) limits matters to which regard may be had

 

(3)        Subsection (2) is intended to limit the matters to which regard may be had.

 

The “long-term interests of end-users” is commonly referred to by the acronym LTIE, which I will use.  Although the term “end-user” is not defined, it is convenient to think of it as referring to a retail customer or “consumer”.  There may be other persons who have a right to use a service, such as a member of the retail customer’s household:  see s 152CR(1)(c) (set out at [40] below).

18                  The expressions “carrier” and “carriage service provider” are defined in s 152AC to have the same meaning as they have in the Telecommunications Act 1997 (Cth).  I need not discuss those meanings.  It suffices to say that Telstra is a carrier in relation to the LSS.

19                  On the hearing there was a suggestion that there may be a difference between a legislative requirement to “take into account” something and a legislative requirement to “have regard” to something, one being more demanding than the other.  I do not agree (see Re Michael; Ex parte Epic Energy (WA) Nominees Pty Ltd (2002) 25 WAR 511; (2002) 24 ATPR 41-886 (Epic Energy) at [55]).  I am not persuaded by the fact that within Pt XIC itself the legislature has sometimes used one expression and sometimes the other (compare, for example, s 152AB(2) at [17] above and s 152CR at [40] below).  I will use the expressions interchangeably.

20                  It will be noted that subs (3) of s 152AB makes the list in subs (2) an exhaustive list of the matters to which regard may be had for the purpose of determining whether a particular thing promotes the LTIE.

21                  Subsections (4) and (6) of s 152AB identify certain matters to which regard must be had in connection with  the subs (2)(c) and (e)  considerations respectively, but subss (5) and (7) respectively make it clear that subss (4) and (6) do not limit the matters to which regard may be had.

22                  Section 152AC defines the terms “access”, “access seeker”, “declared service” and “standard access obligation”.  Those expressions are defined to have the meanings given by ss 152AF, 152AG, 152AL and 152AR respectively, discussed below.

23                  Sections 152AF and 152AG are as follows:

152AF Access

 

(1)     A reference to this Part to access, in relation to a declared service, is a reference to access by a service provider in order that the service provider can provide carriage services and/or content services.

 

(2)     For the purposes of this Part, anything done by a carrier or carriage service provider in fulfilment of a standard access obligation is taken to be an aspect of access to a declared service.

 

152AG Access seeker

 

(1)     This section sets out the circumstances in which a person is taken to be an access seeker in relation to a declared service for the purposes of this Part.

 

(2)     A service provider is an access seeker in relation to a declared service if the provider makes, or proposes to make, a request in relation to that service under section 152AR (which deals with the standard access obligations), whether or not:

(a)        the request is refused; or

(b)        the request is being complied with.

 

(3)     A service provider is an access seeker in relation to a declared service if:

(a)        the provider wants access to the service; or

(b)        the provider wants to change some aspect of the provider’s existing access to the service; or

(c)        the supplier of the service wants to change some aspect of the provider’s existing access to the service.

Request is an access seeker in relation to the LSS.

24                  Section 152AH, headed “Reasonableness – terms and conditions”, is not of immediate relevance to the present three proceedings but the similarity of s 152AH(1) to s 152CR(1) (set out at [40] below) is instructive (s 152AH(1) omits only para (e) of s 152CR(1)), as is the prominence that it, like s 152CR(1), gives to the LTIE:

(1)        For the purposes of this Part, in determining whether particular terms and conditions are reasonable, regard must be had to the following matters:

(a)        whether the terms and conditions promote the long-term interests of end-users of carriage services or of services supplied by means of carriage services;

(b)        the legitimate business interests of the carrier or carriage service provider concerned, and the carrier’s or provider’s investment in facilities used to supply the declared service concerned;

(c)        the interests of persons who have rights to use the declared service concerned;

(d)        the direct costs of providing access to the declared service concerned;

(e)        the operational and technical requirements necessary for the safe and reliable operation of a carriage service, a telecommunications network or a facility;

(f)        the economically efficient operation of a carriage service, a telecommunications network or a facility.

(2)        Subsection (1) does not, by implication, limit the matters to which regard may be had.

 

ACCC can be called upon to determine whether particular terms and conditions are reasonable under s 152BK(3)(c) in relation to the making by ACCC of a telecommunications access code (telecommunications access codes are dealt with in Div 4 and are not of present concern), and under s 152BV(2)(d) in relation to the  acceptance by ACCC of an access undertaking proffered by a carrier or carriage service provider (see [34] below).

25                  Division 2 (ss 152AL-152AQB) within Pt XIC deals with “Declared services”.  Section 152AL(3) provides that ACCC may, by written instrument, declare that a specified “eligible service” is a “declared service” if certain conditions identified in that subsection are satisfied.  I need not discuss the meaning of “eligible service”.  The LSS is a declared service (see [28], [52] below). 

26                  At one time Telstra submitted that the declaration of the LSS was a legislative rather than an administrative act, and was invalid for failure to comply with certain provisions of the Legislative Instruments Act 2003 (Cth) (LI Act).  However, following the enactment of the Trade Practices Amendment (Access Declarations) Act 2008 (Cth), this attack (expressed in an eleventh ground of review that was relied on by Telstra) has not been pressed.

27                  Section 152ALA is important for Telstra’s Ground 4 (which I address in Section B (Invalidity of Final Determination) at [239]ff below).  Subsections (1) to (5) of s 152ALA are as follows:

Expiry date

 

(1)        A declaration under section 152AL must specify an expiry date for the declaration.

(2)        An expiry date must occur in the 5-year period beginning when the declaration was made.

(3)        Subsection (2) has effect subject to subsection (4).

 

Extension of expiry date

 

(4)        The Commission may, by notice published in the Gazette, extend or further extend the expiry date of a specified declaration under section 152AL, so long as the extension or further extension is for a period of not more than 5 years.

 

Duration of declaration

 

(5)        Unless sooner revoked, a declaration under section 152AL ceases to be in force on the expiry date of the declaration.

 

28                  On 7 October 2002, pursuant to s 152AL(3), ACCC declared the LSS to be a declared service with effect on 16 October 2002, the date on which the declaration was notified in the Commonwealth of Australia Gazette (GN41, 16 October 2002) (LSS Declaration).  By a subsequent instrument dated 19 November 2003, which took effect on 3 December 2003, the day on which it was published in the Commonwealth of Australia Gazette (GN48, 3 December 2003), ACCC determined that s 152ALA of the Act had effect in relation to the LSS Declaration as if 31 October 2007 had been specified in the LSS Declaration as its expiry date.  By an instrument dated 26 October 2007, which took effect on 29 October 2007, the day on which it was published in the Commonwealth of Australia Gazette (GN 5214), ACCC extended the period of the LSS Declaration to 31 July 2009 pursuant to s 152ALA(4) of the Act. 

29                  Section 152AQA assumes some importance in the present proceedings.  It obliges ACCC to determine pricing principles relating to the price of access to a declared service.  Subsections (1)-(6) and (8) of s 152AQA provide:

Determination

 

(1)        The Commission must, by writing, determine principles relating to the price of access to a declared service.

 

(2)        The determination may also contain price-related terms and conditions relating to access to the declared service.

 

Timing

 

(3)        The Commission must make such a determination at the same time as, or as soon as practicable after:

(a)        the Commission declares a service to be a declared service; and

(b)        if the Commission varies a declared service - that variation.

 

Consultation

 

(4)        Before making such a determination, the Commission must:

(a)        publish a draft of the determination and invite people to make submissions to the Commission on the draft determination; and

(b)        consider any submissions that are received within the time limit specified by the Commission when it published the draft determination.

 

Publication

 

(5)        The Commission must publish the determination in such manner as it considers appropriate (including in electronic form).

 

Arbitration

 

(6)        The Commission must have regard to the determination if it is required to arbitrate an access dispute under Division 8 in relation to the declared service.

…

 

Definition

 

(8)        In this section:

price-related terms and conditions means terms and conditions relating to price or a method of ascertaining price.

 

ACCC determined pricing principles relating to the LSS at the same time as it issued its final decision on whether to declare a LSS (see [62]ff below).

30                  Section 152AQB provides that certain declared services are “core services”.  The LSS is not a core service. 

31                  Division 3 (ss 152AR-152BBD) within Pt XIC deals with “Standard access obligations” (SAOs).  The key provisions are subss (2) and (3) of s 152AR, which provide:

Access provider and active declared services

(2)        For the purposes of this section, if a carrier or a carriage service provider supplies declared services, whether to itself or to other persons:

(a)        the carrier or provider is an access provider; and

(b)        the declared services are active declared services.

 

Supply of active declared service to service provider

(3)        An access provider must, if requested to do so by a service provider:

(a)        supply an active declared service to the service provider in order that the service provider can provide carriage services and/or content services; and

(b)        take all reasonable steps to ensure that the technical and operational quality of the active declared service supplied to the service provider is equivalent to that which the access provider provides to itself; and

(c)        take all reasonable steps to ensure that the service provider receives, in relation to the active declared service supplied to the service provider, fault detection, handling and rectification of a technical and operational quality and timing that is equivalent to that which the access provider provides to itself.

 

Telstra accepts that it provides the LSS to other persons.  Therefore, Telstra is an access provider, the LSS is an active declared service, and the obligations specified in s 152AR(3) are enlivened.  (Telstra does not concede that it provides the LSS to itself, but this does not matter for present purposes.)  Section 152AR contains fifteen subsections in all.  Subsections (4) to (12) elaborate on the subs (3) obligations and provide for exemptions from them.  For present purposes the detail does not matter.  Section 152AC defines SAOs as having the meaning given by s 152AR.

32                  The terms and conditions on which SAOs are complied with are determined in one of three ways.  First, they can be agreed between the carrier or carriage service provider and the access seeker: s 152AY(2)(a).  Second, failing agreement, if there is an “access undertaking” given by the carrier or carriage service provider that deals with the matter (see Div 5 discussed below), the relevant terms and conditions of that access undertaking apply: s 152AY(2)(b)(i).  Third, in all other cases the terms and conditions are as determined by ACCC under Div 8 of Pt XIC (Div 8 provides for the arbitration of access disputes – see [35]ff below): s 152AY(2)(b)(ii) and (iii).

33                  Section 152AZ provides, relevantly, that a carrier licence held by a carrier is subject to a condition that the carrier must comply with any SAOs applicable to the provider.  Section 152BB empowers this Court to make orders directed to the enforcement of the SAOs.

34                  Division 5 (ss 152BS-152CGB) is headed “Access undertakings”.  It refers to written undertakings given by a carrier or carriage service provider to ACCC by which that carrier or carriage service provider undertakes to comply with the terms and conditions specified in the undertaking in relation to applicable SAOs.  Section 152BU(2) requires ACCC to accept or reject a proffered undertaking.  As will be noted below, ACCC rejected an undertaking relating to the LSS that was proffered by Telstra.  Section 152BV provides that if a proffered access undertaking does not adopt a set of model terms and conditions set out in the telecommunications access code provided for in Div 4 of Pt XIC, ACCC must not accept the undertaking unless certain conditions are satisfied.  One of these, s 152BV(2)(d), is that ACCC is satisfied that the terms and conditions specified in the undertaking are reasonable (see s 152AH(1) set out at [24] above).

35                  Division 8 (ss 152CL-152EB) within Pt XIC is of central importance to the present proceedings.  It is headed “Resolution of disputes about access”.  The Division’s first section, s 152CL, contains definitions.  A “determination” means a determination made by ACCC under Div 8, and includes both a “final determination” and an “interim determination” (ID).  The present three proceedings relate to final determinations, although these were in fact preceded by IDs.

36                  Section 152CLA provides in subs (1) that in exercising its powers under Div 8, ACCC must have regard to the desirability of access disputes being resolved in a timely manner.  A note to the subsection draws attention to the fact that ACCC must also have regard to, relevantly, the matters set out in s 152CR (see [40] below) and the pricing principles under s 152AQA (see [29] above).

37                  Section 152CM provides for notification by either an access seeker or the carrier or carriage service provider of an access dispute to ACCC in certain circumstances.  Access disputes were notified to ACCC in relation to each of the present three proceedings.

38                  Section 152CP(1) provides that unless ACCC terminates the arbitration, it must make a written determination on access by the access seeker to the declared service.  Section 152CP(2) provides that the determination may deal with any matter relating to access including matters that were not the basis for notification of the dispute.  ACCC must give to the parties a draft of its proposed determination (s 152CP(4)) and, when it makes the determination, its reasons for making it (s 152CP(5)).    The final determination to which the Request proceeding relates was made by ACCC on 1 August 2007 (Final Determination).  The Final Determination was accompanied by a statement of ACCC’s reasons for making it (FD Statement of Reasons).

39                  Section 152CPA deals with IDs.  Section 152CPA(3) provides that ACCC is not required to observe any requirements of procedural fairness in relation to the making of an ID in the circumstances set out in that subsection.  Similarly, ACCC is not required to observe any such requirements in relation to a variation of an ID in the circumstances set out in subs (12) of s 152CPA.  However, the attacks made in the present proceedings are on final determinations to which, it is not disputed, the requirements of procedural fairness apply.

40                  Section 152CR, which is of recurrent importance in these proceedings, provides:

(1)        The Commission must take the following matters into account in making a final determination:

(a)        whether the determination will promote the long-term interests of end-users of carriage services or of services supplied by means of carriage services;

(b)        the legitimate business interests of the carrier or provider, and the carrier's or provider's investment in facilities used to supply the declared service;

(c)        the interests of all persons who have rights to use the declared service;

(d)        the direct costs of providing access to the declared service;

(e)        the value to a party of extensions, or enhancement of capability, whose cost is borne by someone else;

(f)        the operational and technical requirements necessary for the safe and reliable operation of a carriage service, a telecommunications network or a facility;

(g)        the economically efficient operation of a carriage service, a telecommunications network or a facility.

 

(2)        The Commission may take into account any other matters that it thinks are relevant.

 

(3)        The Commission may take the following matters into account in making an interim determination:

(a)        a matter referred to in a paragraph of subsection (1);

(b)        any other matters that it thinks are relevant.

 

(4)        In making an interim determination, the Commission does not have a duty to consider whether to take into account a matter referred to in a paragraph of subsection (1).

[my emphasis]

 

As will be seen below, Telstra places particular emphasis on the mandatory relevant considerations described in paras (a), (b) and (d) of s 152CR(1).  As noted at [24] above, with the exception of para (e), the matters listed in s 152CR(1) are those also listed in s 152AH(1).  The LTIE is the first mandatory consideration listed (a reflection of its importance as the object of Pt XIC (see s 152AB(1) set out at [17] above).  Subsection (2) of s 152CR empowers, but does not oblige, ACCC to take into account any other matters that it thinks are relevant.

41                  Section 152CRA deals with the publication of a determination and of ACCC’s reasons for making it.  The section empowers ACCC to publish, in whole or in part, a determination and its supporting statement of reasons in such manner as it considers appropriate.  It must, however, first give the parties notice of its intention to do so and an invitation to make written submissions against publication.  This provision assumes importance in relation to claims that a part or parts of a determination are and should remain confidential.

42                  Section 152DB(1) provides:

(1)        In an arbitration hearing about an access dispute, the Commission:

(a)     is not bound by technicalities, legal forms or rules of evidence; and

(b)     must act as speedily as a proper consideration of the dispute allows, having regard to the need to carefully and quickly inquire into and investigate the dispute and all matters affecting the merits, and fair settlement, of the dispute; and

(c)     may inform itself of any matter relevant to the dispute in any way it thinks appropriate.

 

As will be seen, various aspects of para (b) of s 152DB(1) are relied on by the respective parties.  The Explanatory Memorandum relating to the Trade Practices Amendment (Telecommunications) Bill 1996 stated of this provision (at p 70):

Proposed s. 152DB, which is based on s. 44ZF of the [Act], provides that the ACCC is not bound by the rules of evidence when hearing an access dispute and may require that evidence or argument be presented in writing and may decide those matters on which it will require oral evidence or argument.  Hearings should be conducted in a speedy manner, having regard to the matters affecting resolution of the dispute and may be conducted by telephone, closed circuit television or any other means of communication.

 

The ACCC may also determine the length of time reasonably necessary for the parties to fairly and adequately present their cases and may require that the cases be present within that length of time.

 

43                  Section 152DK provides for a party to an arbitration to inform ACCC that in that party’s opinion, a specified part of a document contains confidential commercial information and to request ACCC not to give a copy of that part to another party.  The section provides for the way in which ACCC is to deal with such a request, and empowers it to accede to the request.

44                  Section 152DN provides that a final determination has effect 21 days after the determination is made.  As noted above, the Final Determination was made on 1 August 2007 and so had effect on and from 22 August 2007.

45                  Section 152DNA provides in subss (1) and (2):

(1)        Any or all of the provisions of a final determination may be expressed to have taken effect on a specified date that is earlier than the date on which the determination took effect.

 

(2)        The specified date must not be earlier than the date on which the parties to the determination commenced negotiations with a view to agreeing on the terms and conditions as mentioned in paragraph 152AY(2)(a).

 

This provision is relevant to cl 5A(i) of the Final Determination which provides that a disconnection charge is not payable by Request to Telstra where the disconnection occurred between 15 November 2006 and the date when the Final Determination came into effect (22 August 2007) and to Telstra’s Grounds 10(a), 10(b) and 10(c) (Section F   (Disconnection Charges, Backdating and the “No Charge Period”)).  Section 152DNA(4) provides that a provision of a final determination may be expressed to cease to have effect on a specified date.

46                  Section 152DNC is relevant to Telstra’s ground of challenge based on the Final Determination’s purporting to have an operation for a period that extended beyond the then expiration date of the LSS Declaration (Telstra’s Ground 4 – Section B (Invalidity of Final Determination)).  Section 152DNC provides:

(1)        This section applies if:

(a)        a declaration under section 152AL expires; and

(b)        immediately before the expiry of the declaration, a final determination was in force in relation to the declared service concerned; and

(c)        the determination does not have an indefinite duration.

 

(2)        Despite the expiry of the declaration, the declaration continues in force for the purposes of:

(a)        ascertaining whether the determination remains in force; and

(b)        ascertaining whether a party to the determination has any obligations under section 152AR to any other party to the determination while the determination remains in force; and

(c)        exercising the Commission's power to vary the determination under section 152DT.

 

(3)        A party to the determination is not entitled to notify an access dispute in relation to the declared service.

BACKGROUND FACTS

Agreed chronology

47                  The parties agreed on a chronology of events, a copy of which is Annexure B to these reasons for judgment.  The word “common” in that annexure indicates that the event referred to is relevant to all three proceedings.  In Annexure B, the words Request, Chime and Primus indicate relevance to the Request, Chime and Primus proceedings respectively. 

48                  In the following paragraphs, I recount in various degrees of detail some of the more important events and associated documents.  I will descend into greater detail as necessary when I come to consider Telstra’s grounds of review.

Access Pricing Principles – Telecommunications: a guide

49                  Shortly after Pt XIC was introduced into the Act (with effect from 30 April 2007 – see [1] above) ACCC published, in July 1997, Access Pricing Principles – Telecommunications: a guide (Access Pricing Principles guide).  This was a guide to the approach that ACCC would adopt, in the usual case, when considering access pricing issues under Pt XIC.  The publication of the paper followed the release of a draft of it in February 1997 and a public forum in relation to it held in April 1997. 

50                  Two points may be noted concerning the Access Pricing Principles guide.  First, the document states that the expression “direct costs” was intended to exclude profits lost by an access provider (or any other party) in a dependent market as a result of the provision of access.  The document stated that it was implied that “at a minimum, an access provider should cover the direct incremental costs incurred in providing access”.  This statement by ACCC is relevant to Telstra’s Grounds 5(a), 5(b), 5(c) and 6 dealt with in Section C (Pooling and Allocation Method).  Second, the document states that the access price chargeable by Telstra should, in general, be based on the total service long-run incremental cost (TSLRIC) of providing the service.  TSLRIC was defined in the Access Pricing Principles guide as:

... the incremental or additional costs the firm incurs in the long-term in providing the service, assuming all of its other production activities remain unchanged.  It is the cost the firm would avoid in the long-term if it ceased to provide the service.  As such, TSLRIC represents the costs the firm necessarily incurs in providing the service and captures the value of society’s resources used in its production.

 

ACCC was later to elaborate on the meaning of TSLRIC and its elements in the LSS Pricing Principles (see [63] below).

The LSS

51                  I gave a brief description of some relevant technical concepts, including the PSTN, LSS, ULL, ULLS and CAN at [11]ff above.

52                  On 21 September 2001 ACCC announced that it would conduct an inquiry into whether or not an LSS should be declared under Pt XIC of the Act.  ACCC undertook that inquiry and published its report in August 2002:  Line Sharing Service: Final Decision on whether or not a Line Sharing Service should be declared under Pt XIC of the Trade Practices Act 1974 (LSS Declaration Final Report).  ACCC declared the LSS a “declared service” by an instrument dated 7 October 2002.  The LSS Declaration took effect on 16 October 2002 as noted at [28] above.  The LSS Declaration described the LSS as follows:

The High Frequency Unconditioned Local Loop Service is the use of the non-voiceband frequency spectrum of unconditioned communications wire (over which wire an underlying voiceband PSTN service is operating) between the boundary of a telecommunications network at an end-user’s premises and a point on a telecommunications network that is a potential point of interconnection located at, or associated with, a customer access module and located on the end-user side of the customer access module.

 

It will be noted that the definition requires that an underlying voiceband PSTN service be already operating over the ULL.

53                  The upper part of the available transmission spectrum of a ULL is the “non-voiceband frequency spectrum” (also referred to as broadband or high frequency spectrum), and the lower part of the spectrum is the voiceband or telephony frequency spectrum (also referred to as narrowband or low frequency spectrum).  Access to the LSS is access to the upper part only of the available transmission spectrum of a ULL.  Telstra retains the lower part of the spectrum of the ULL, over which voice services such as local calls and long distance calls can be provided.  Access to the LSS allows a service provider or access seeker such as Request to provide any xDSL service (the “family” of Digital Subscriber Line (DSL) services including Assymetric DSL (ADSL)) over the high frequency spectrum of the ULL, once its own equipment is connected to the line.  The documents and submissions referred to in these reasons use a combination of the terms DSL, xDSL and ADSL, and I will do likewise, but the terms can all be understood to refer to services provided over the high frequency spectrum of the ULL.

54                  The charges payable by Request to Telstra in relation to the LSS that arise for consideration in the present proceedings include:

·                    charges for the connection and disconnection of ULLs; and

·                    periodic charges for the ongoing use of the high frequency spectrum of the ULL to provide the LSS, usually expressed as an annual or equivalent monthly charge (LSS periodic charges – also referred to as LSS monthly charges and LSS annual charges).

The ULLS

55                  Related to the LSS is another declared service known as the ULLS.  ACCC declared the ULLS a declared service by an instrument dated 4 August 1999 which took effect on 11 August 1999, the date of publication of the declaration in the Commonwealth of Australia Gazette (GN 32, 11 August 1999).

56                  Both the ULLS and the LSS involve the use of a ULL.  However, while the LSS gives the access seeker the use of only part of a ULL (the high frequency spectrum), the ULLS gives the access seeker the use of the entirety of a ULL.  In substance, the ULLS enables access seekers to supply both voice (telephony) and broadband services to end-users.  Again, in order to do so, the access seeker’s own equipment must be connected to the line.

The terms of the LSS Declaration Final Report of August 2002

57                  In the LSS Declaration Final Report, ACCC noted that on 19 April 2002 it had issued a draft decision to declare a LSS.  It observed that at that stage Telstra had indicated that it was likely to begin providing a LSS from 1 July 2002 but ACCC expressed concern about the competitive structure of the market, in particular, a concern that Telstra was unlikely to be constrained in its pricing and output decisions by the presence of effective substitutes.

58                  ACCC also noted that even though Telstra had reached commercial agreements with some carriers in relation to the charges to be made for the LSS, ACCC considered that the amounts were likely to exceed those expected in a competitive market for a LSS.

59                  ACCC stated that it believed there were two types of costs that could be included in the price of a LSS:  first, incremental LSS-specific costs, and second, some allocation of the costs of a line over which a LSS was provided.

60                  ACCC accepted that it was reasonable for an access provider (Telstra) to recover incremental LSS-specific costs through the access charge for a LSS, but stated that where it was already recovering its line costs from other revenue sources, it would be inappropriate to include any element of line costs in the price of a LSS.  ACCC added:

At present, the Commission believes that Telstra already fully recovers its line-related costs through a range of other revenue sources …  In this instance, therefore, the Commission believes the appropriate price for a LSS should be set with reference only to the LSS-specific costs of providing a LSS.

 

However, were Telstra to alter its pricing structure such that it no longer recovered all of its line related costs through its various other revenue sources, the Commission believes it may be appropriate to include an allocation of line related costs in the price of a LSS. In this instance, whilst estimation of the efficient contribution that the price of a LSS should make to recover these costs would be difficult, the Commission believes a practical cost allocation rule could simply be the difference between the geographically de-averaged cost of the line over which a LSS is provided and the line rental revenue recovered from services provided over the remaining low-frequency portion of the line.

 

61                  ACCC stated that it believed it was in a position to indicate what pricing principles were appropriate for a declared LSS (see s 152AQA of the Act set out at [29] above), although it was not in a position to know what price the application of those principles would yield.  However, ACCC said it believed it did not need to know this in order to decide to declare a LSS, and that the exact amount would fall to be considered if Telstra proffered an undertaking in relation to the provision of a LSS (see Div 5 of Pt XIC discussed at [34] above) or if ACCC was required to arbitrate the terms and conditions on which a LSS was provided (see Div 8 of Pt XIC discussed at [35]ff above).

The LSS Pricing Principles

62                  ACCC set out its “Final Pricing Principles for a LSS” (LSS Pricing Principles) in Ch 7 of the LSS Declaration Final Report.

63                  In the LSS Pricing Principles, ACCC stated that in the usual case it would apply the TSLRIC methodology for determining access prices.  ACCC stated, inter alia, that TSLRIC was an “attributable cost concept” in that it referred only to those costs that could be attributed to the production of the particular service, in this case the LSS.  Costs common to more than one service did not satisfy that description and therefore did not form part of TSLRIC.  However, ACCC noted that in practice TSLRIC is sometimes defined to include a contribution to indirect and overhead costs (TSLRIC+), and sometimes an additional contribution is also included in recognition of an access deficit (TSLRIC++).

64                  ACCC stated that while TSLRIC (and its variants) determine an access price using a “bottom-up” costing methodology, ACCC had also in the past considered “top-down” pricing methodologies, such as a retail-minus avoidable cost (RMAC) approach.

65                  ACCC observed that technically the ULLS was the service closest to a LSS, and that it was useful to consider ACCC’s approach to the pricing of the ULLS and to assess its applicability to a LSS.

66                  ACCC expressed the belief that a TSLRIC pricing methodology was most appropriate for the pricing of a LSS and noted that submissions it had received broadly agreed.  Telstra had not offered any alternatives and had rejected the RMAC approach.

67                  ACCC noted that while it had not undertaken a full cost study regarding the size of LSS-specific costs, an independent consultant had estimated the ULLS-specific costs to be relatively small.

68                  ACCC addressed the “key question”, as ACCC described it, of whether or not any allocation of the cost of the line should be recovered through the price of a LSS.  This issue is relevant to Section D (Line Costs Recovery) and I set out ACCC’s discussion of the issue in more detail in that section.

69                  The overall view expressed by ACCC was that if Telstra were to show that it was not fully recovering its line costs through its various other sources of revenue, it might be appropriate that the price of the LSS include some allocation of the cost of the line over which a LSS was provided.

The undertaking that was proffered by Telstra

70                  Following the making of the LSS Declaration, Telstra submitted an access undertaking in relation to the LSS on 1 September 2003.  Telstra proposed an LSS access price of $15 per service in operation (SIO) per month.

71                  In August 2004 ACCC published A final report on the assessment of Telstra’s undertaking for the Line Sharing Service (LSS Undertaking Final Report), which asserted that ACCC’s analysis still showed that Telstra was already fully recovering its line-related costs through revenue from other services.

72                  Importantly, in section 7.1.3 ACCC addressed “LSS-specific costs – an analysis of Telstra’s LSS cost model”.  This cost model was not the version that Telstra was to supply to ACCC in May 2007 with which Section A (Telstra’s Cost Model) is concerned. 

73                  In support of its proffered undertaking, Telstra had asserted that its model indicated that the efficient service-specific costs of the LSS exceeded $57 per LSS per month.  However, ACCC observed that Telstra had proposed an access price of $15 per LSS per SIO for the period of the undertaking supposedly in order to prevent “rate shock”.

74                  ACCC expressed the view that Telstra’s LSS cost model appeared to be technically sound, but ACCC had concerns with the specific input parameters and assumptions used in it and its treatment of depreciation and timing of cost recognition.  ACCC referred to Telstra’s LSS cost model as using a “tilted annuity approach for depreciation of capital”.

75                  ACCC’s conclusion was that Telstra’s LSS cost model would have to be modified to allow for the calculation of a more reasonable and appropriate access price.  In this regard, ACCC stated that it had developed a modified LSS cost model which included a small modification to the model that ACCC had provided to interested parties following the release of ACCC’s draft report (a reference to ACCC’s A draft report on the assessment of Telstra’s Undertaking for the Line Sharing Service of June 2004) to reflect a minor adjustment to the approach to depreciation.

76                  On 13 December 2004 Telstra submitted further proposed monthly charge undertakings for the ULLS and the LSS, in which the proposed monthly charge for the LSS was reduced to $9 per LSS per month.

77                  In March 2005 ACCC published two discussion papers: Telstra’s Undertakings for the Line Sharing Service – Discussion Paper (LSS Undertakings Discussion Paper) and Telstra’s Undertaking for the Unconditioned Local Loop Service – Discussion Paper (ULLS Undertakings Discussion Paper).

78                  In August 2005 ACCC published its Assessment of Telstra’s ULLS and LSS Monthly Charge Undertakings – Draft Decision (ULLS and LLS Undertakings Draft Decision).

79                  In December 2005 ACCC published its final decision in respect of the proffered ULLS and LSS monthly charge undertakings: Assessment of Telstra’s ULLS and LSS monthly charge undertakings (ULLS and LLS Undertakings Final Report). 

80                  ACCC concluded that Telstra’s monthly charge of $9 for the LSS was not consistent with the relevant criteria and rejected the proffered undertaking.

81                  Telstra applied under s 152CE(1) of the Act to the Australian Competition Tribunal (Tribunal) for review of ACCC’s decision of 21 December 2005 to reject its proffered LSS access undertaking.  On 2 June 2006 the Tribunal published its decision (Telstra Corporation Limited [2006] ACompT 4 (Tribunal’s 2006 Decision)), in which it addressed, inter alia, a pooling and allocation of LSS-specific costs (which is relevant to Section C (Pooling and Allocation Method)).  The Tribunal affirmed ACCC’s decision of 21 December 2005 rejecting Telstra’s proffered LSS access undertaking of 13 December 2004.

The access dispute between Telstra and Request

82                  On 18 April 2006 ACCC received a copy of Request’s notification (dated 13 April 2006) to ACCC under s 152CM(1) of an access dispute between Request and Telstra.  The dispute concerned both the LSS periodic charges and the LSS connection and disconnection charges.

83                  On or about 15 September 2006 ACCC provided to the parties a draft ID (First Draft ID), an accompanying issues paper (First Draft ID Issues Paper) and associated papers which related to the LSS connection and disconnection charges, but not to the LSS periodic charges.

84                  On or about 6 October 2006 ACCC provided to the parties a second draft ID (Second Draft ID), an accompanying issues paper (Second Draft ID Issues Paper) and associated papers in relation to Telstra’s LSS periodic charges.

85                  On or about 2 November 2006 ACCC made an ID (First ID), and gave reasons in support (First ID Statement of Reasons), with respect to LSS connection and disconnection charges and associated matters (but not the LSS periodic charges). Subsequently, on 21 December 2006, ACCC made a further ID (Second ID) and gave reasons in support (Second ID Statement of Reasons).  The Second ID revoked the First ID, reproduced its provisions relating to the LSS connection and disconnection charges, and fixed LSS periodic charges.

86                  By letter dated 2 February 2007, ACCC requested the parties to confirm, inter alia, the issues that remained in dispute for the purposes of the making of a final determination.  The parties subsequently confirmed that they remained in dispute over both the LSS periodic charges and charges for LSS connections and disconnections.

87                  By letter dated 6 March 2007, ACCC advised the parties that in coming to a final determination, it proposed to have regard to certain things which it listed, including the LSS Pricing Principles.

88                  By letter dated 21 March 2007, ACCC wrote to Telstra in relation to access to confidential documents.

89                  By letter dated 28 March 2007, ACCC advised the parties that a compact disc (CD) containing certain confidential documents would be couriered to the parties. 

90                  On or about 30 March 2007 ACCC provided the parties with its draft final determination (DFD) and consultation paper (DFD Consultation Paper) which set out issues on which ACCC sought submissions.  Both Telstra and Request provided ACCC with primary and responsive submissions.

91                  In a letter dated 26 April 2007 to ACCC, Telstra referred to the documents that it understood ACCC was intending to take into account in making a final determination.  Telstra stated that it presumed that ACCC would “also consider the models which were attached to its [ACCC’s] 21 March 2007 letter”.

92                  On 30 April 2007 ACCC responded, noting that Telstra’s letter of 26 April 2007 did not contain a full list of relevant matters, and referring Telstra to letters from ACCC of 6 March 2007, 21 March 2007 and 30 March 2007.

93                  In circumstances to be discussed below in Section A (Telstra’s Cost Model), Telstra filed and served submissions in response to the DFD Consultation Paper in early May 2007.

94                  As previously noted, on or about 1 August 2007 ACCC made the Final Determination which specified the ongoing LSS periodic charges and the LSS connection and disconnection charges to be paid by Request to Telstra.  ACCC provided the parties with a copy of the Final Determination and FD Statement of Reasons by letter and email respectively on that day.

95                  The Final Determination took effect on 22 August 2007, 21 days from the date on which it was made, and expired on 31 December 2007 – a period of only a little over four months.  It will be recalled that as at the date of the making of the Final Determination and the date that it took effect, the LSS Declaration was due to expire on 31 October 2007 (that is, prior to the date on which the Final Determination was due to expire).  This is relevant to Telstra’s Ground 4 which I address in Section B (Invalidity of Final Determination).

96                  Telstra commenced the Request proceeding on 29 August 2007.

Events subsequent to the commencement of the Request proceeding

97                  In October 2007 ACCC published its Review of the Line Sharing Service Declaration – Final Decision (Review of LSS Final Decision).  ACCC concluded, following an inquiry (commenced in April 2007) in accordance with s 152ALA(7) of the Act, that the expiry date for the LSS Declaration should be extended until 31 July 2009.  Chapter 3 of the Review of LSS Final Decision contained new pricing principles for the LSS (2007 LSS Pricing Principles).

98                  As noted at [28] above, on 29 October 2007 ACCC extended the expiry date of the LSS Declaration to 31 July 2009.

99                  On 13 February 2008, after the hearing had ended, Request filed a notice of motion seeking leave to reopen the proceeding in order to tender additional evidence.  The proposed additional evidence comprised a final determination of ACCC made on 20 December 2007 (Adam Final Determination) in respect of ACCC’s arbitration of an LSS access dispute between Telstra and Adam Internet Pty Ltd (Adam) and ACCC’s accompanying statement of reasons for that final determination (Adam FD Statement of Reasons).  The further evidence was sought to be tendered as relevant to Section A (Telstra’s Cost Model) and Section E (Disconnection Charges, Churn Process and “Option 2”).  I heard the motion on 4 March 2008 and reserved my decision on the basis that it and the reasons for it would be delivered as part of the final reasons for decision in the proceedings.

INTRODUCTION TO THE ISSUES

100               I have found the following introduction to the issues in Request’s written closing submissions useful.  It will be recalled that I have grouped Telstra’s grounds into sections using letters.  I have added to Request’s closing submissions the letter to which each issue belongs.

(a)        in relation to Telstra’s “cost model” [Section A (Telstra’s Cost Model)], Telstra submits that:

(i)         the “cost model” was a relevant consideration that the Commission was bound to take into account but did not (Telstra’s Ground 1);

(ii)        in alleged breach of the rules of procedural fairness, the Commission failed to notify Telstra that it believed that it had not received the “cost model” (Telstra’s Ground 2(a));

(iii)       the above two grounds constitute alleged contraventions of section 152DB(1) of the Trade Practices Act 1974 (“TPA”) (Telstra’s Ground 3);

(b)        Telstra submits that the Commission exceeded its jurisdiction [Section B (Invalidity of Final Determination)] by making a final determination that had effect until 31 December 2007 when, at the time the final determination was made, the LSS declaration was due to expire on 31 October 2007 (even though the LSS declaration was subsequently extended) (Telstra’s Ground 4);

(c)        in relation to Telstra’s line costs [Section D (Line Costs Recovery)], Telstra submits that:

(i)         the Commission found, without any evidence, that Telstra was already recovering its line costs (Telstra’s Ground 7);

(ii)        in breach of the rules of procedural fairness, the Commission advised the parties that it did not seek submissions on the calculation of line costs but did make a determination on this issue, depriving Telstra of a reasonable opportunity to present its case (Telstra’s Ground 2(b));

(d)        in relation to the “pooling and allocation method” [Section C (Pooling and Allocation Method)], Telstra submits that :

(i)         The Commission did not take Telstra’s direct costs of providing the service into account as required by TPA s 152CR(1)(d) (Telstra’s Ground 5(a)).  Similarly, in finding that the pooling and allocation method allowed Telstra to recover its direct costs, the Commission misconstrued TPA s 152CR(1)(d) and thereby made an error of law (Telstra’s Ground 6);

(ii)        the Commission failed to take the long term interests of end users into account because it did not take into account, and “give fundamental weight to” Telstra’s legitimate commercial interests, namely its ability to exploit economies of scale and scope (Telstra’s Ground 5(b)); and

(iii)       by adopting the “pooling and allocation method”, the Commission failed to have regard to its pricing principles, as required by TPA s 152AQA(6) (Telstra’s Ground 5(c));

(e)     in relation to the LSS “churn” process [Section E (Disconnection Charges, Churn Process and “Option 2”)], Telstra submits:

(i)         the Commission did not make enquiries of Telstra as to the practical difficulties which precluded the adoption of a more precise test than “Option 2”, in alleged contravention of s 152DB(1) of the TPA (Telstra’s Ground 8); and

(ii)        in alleged breach of the requirements of procedural fairness, the Commission failed to disclose to Telstra:

(A)       its consideration of “Option 2” (Telstra’s Ground 9(a)); and

(B)       the material constituting the “practical difficulties” referred to (Telstra’s Ground 9(b));

(f)        in relation to disconnections between 15 November 2006 and the date of the final determination [Section F (Disconnection Charges, Backdating and the “No Charge Period”)], Telstra submits that the Commission:

(i)         failed to take into account Telstra’s costs of doing those disconnections, being a relevant consideration it was bound to take into account (Telstra’s Ground 10(a));

(ii)        failed to comply with s 152CR(1) of the TPA and failed to have regard to the pricing principles (Telstra’s Ground 10(b)); and

(iii)       fell into jurisdictional error by asking itself the wrong question (Telstra’s Ground 10(c));

(g)     [para (g) addressed Telstra’s Ground 11, which has not been pressed.]

101               With reference to paras (a) to (f) of its summary of Telstra’s submissions, Request summarises its responses as follows (footnotes omitted):

(a)     There is no evidence that the Commission did not take Telstra’s “summary” (as distinct from an actual cost model) into account.  In any event, the summary was based upon a number of assumptions that were addressed and expressly rejected by the Commission.  Accordingly the Commission was not obliged to take the cost model further into consideration because there is nothing to show that it might have made a difference.

 

(b)     There is no legal rule that requires the Commission to limit the period of a determination so that it does not extend beyond the expiry date of the relevant declaration.  Indeed, the legislative scheme of Part XIC of the TPA points in the opposite direction.

 

(c)     Prior to the Final Determination, the question of Telstra’s line costs has been considered on at least seven earlier occasions by the Australian Competition Tribunal and the Commission (including on at least four occasions during the arbitration that led to the Final Determination (“the LSS Arbitration”)).  Telstra was given the opportunity to make submissions on each occasion and often did so.  Those submissions have not ever been accepted by the Tribunal or the Commission.  Telstra is in substance seeking merits review by judicial determination of this issue, which it is not entitled to.  Moreover, Telstra misunderstands what the Commission said it would do and in fact did.

 

(d)     Telstra’s “pooling and allocation method” has been considered on at least eight occasions prior to the Final Determination.  The position is similar to the line costs issue save that, whereas it might be argued that the question of recovering line costs was not directly addressed by Telstra in its submissions as part of the LSS Arbitration, Telstra did specifically address the “pooling and allocation method”.  Those submissions were considered and rejected by the Commission. Telstra is in substance seeking impermissible merits review by judicial determination of this issue also.

 

(e)     The nature of the issues relating to the LSS churn process, the history of the arbitration and the fact that the terms ultimately adopted by the Commission were, in many respects, more favourable to Telstra than the previously considered alternatives, mean that there was no obligation on the Commission to raise this issue with Telstra in any more detail than it was raised in the course of the arbitration.  In any event, raising the issue with Telstra would not have made any difference to the Commission’s determination and so it is not amenable to judicial review.

 

(f)     In relation to disconnection charges between the date of the interim determination and the final determination, Telstra misconceives the factors to which the Commission is required to have regarded when determining whether or not a charge should be backdated.  Further, backdating could not have been done in the manner suggested by Telstra without rewarding Telstra for its tardiness in establishing an LSS churn process.  The principal purpose of the backdating power is to compensate an access seeker for costs associated with delay, not to reward tardiness by the service provider.

 

(g)     ...

 

102               ACCC made submissions only in relation to issues of law of general importance relating to its power and procedures under the Act, and other exceptional matters.  ACCC referred to the principles established in R v The Australian Broadcasting Tribunal; ex parte Hardiman (1980) 144 CLR 13 (Hardiman) at 35-36 as the reason for its limited participation.   ACCC’s submissions related to aspects of Section A (Telstra’s Cost Model), Section B (Invalidity of Final Determination) and Section F (Disconnection Charges, Backdating and the “No Charge Period”).  (ACCC also addressed submissions to Telstra’s Ground 11, but, as noted previously, that ground is no longer relevant).

103               Request concedes that the Final Determination is amenable to review under the ADJR Act.  No party addressed submissions independently to s 39B(1) of the Judiciary Act 1903 (Cth) (Judiciary Act).  In its written closing submissions, Request for the first time submitted that it was “unlikely” that the Court had jurisdiction under s 39B(1) of the Judiciary Act on the ground that ACCC, as distinct from its Commissioners, was not an “officer of the Commonwealth”.  Nothing turns on the point.  In addition to its jurisdiction under the ADJR Act, the Court has relevant jurisdiction under s 39B(1A)(c) of the Judiciary Act and s 163A of the Act.

The Nature of an Arbitration of an Access Dispute under Div 8 of Pt XIC of the Act

104               Within Div 8, the “Arbitration of access disputes” is the subject matter of Subdiv C (ss 152CO-152CU) and the “Procedure in arbitrations” is the subject matter of Subdiv D (ss 152CV-152DMA).

105               The arbitration of access disputes between a carrier or provider of carriage services (in the present proceedings Telstra) and an access seeker (in the present proceedings, relevantly, Request) for which Div 8 provides, is of a special kind.  It is necessary to understand the special kind of arbitration for which Div 8 provides and the breadth of the considerations that Div 8 requires or permits ACCC to take into account in order to assess the parties’ submissions.

106               ACCC’s role is not simply that of an arbitrator called upon to consider rival cases involving merely the competing commercial antagonists.  ACCC is required to take into account the interests of persons who are not parties to the arbitration – in particular, but not exclusively, end-users.

107               The object of Pt XIC is stated in s 152AB(1) as being simply to promote the LTIE of carriage services and of services provided by means of carriage services: s 152AB(1).  Since Div 8 is within Pt XIC, that is its sole object too.  Consistently with that object, of the considerations that s 152CR(1) requires ACCC to take into account when making a final determination, the first one mentioned is the LTIE. 

108               Similarly, s 152AH lists the LTIE as the first matter to be considered when it is to be determined whether particular terms and conditions are reasonable for the purposes of the making of a telecommunications access code under Div 4, and for the purpose of accepting an access undertaking proffered under Div 5 (see [24] above). 

109               In determining whether a particular thing promotes the LTIE, for any of the purposes of Pt XIC, the first matter listed to which regard must be had is the extent to which the thing is likely to achieve the promotion of competition in markets for listed services: s 152AB(2)(c).

110               It is true that ACCC must also take into account when making a final determination the business interests of the carrier or provider, but only its legitimate business interests and its investment in supply facilities (s 152CR(1)(b)).  ACCC must also, however, take into account the interests of all persons who have rights to use the declared service (s 152CR(1)(c)).

111               The scheme that is revealed is one of investing in ACCC as arbitrator very broad policy orientated powers.  It would be wrong to approach an arbitration by ACCC under Div 8 with preconceptions derived from ordinary commercial arbitration processes.

Telstra’s fundamental weight submission

112               Various grounds on which Telstra relies depend on statutory provisions that require ACCC to “have regard to” or “take into account” (nothing turns on the difference – see [19] above) certain matters.  The most notable of those provisions is s 152CR(1) (set out at [40] above)  which lists matters that ACCC must take into account in making a final determination.   Telstra submits that the provisions on which it relies required ACCC to take particular matters into account as “fundamental” elements in its decision making process or required ACCC to give those matters “fundamental weight” to considerations.   This submission is relevant to many of Telstra’s Grounds and I address it at once.

113               In support of this “fundamental weight” submission, Telstra relies on R v Hunt; ex parte Sean Investments Pty Ltd (1979) 180 CLR 322 (Sean Investments) which concerned s 40AA(7) of the National Health Act 1953 (Cth).  That Act provided for the approval of premises as nursing homes, and made approval subject to a condition that the fees charged in respect of nursing home care of a “qualified nursing home patient” would not exceed fees payable in accordance with a scale determined by the Permanent Head of the relevant Department.  Section 40AA(7) directed the Permanent Head to “have regard to costs necessarily incurred in providing nursing home care in the nursing home”.  

114               Mason J held that those words required the Permanent Head to take those costs into account and “to give weight to them as a fundamental element in making his determination” (at 329).  His Honour gave two reasons for this conclusion.  First,  they were the only matter explicitly mentioned as a matter required to be taken into account, and second, the scheme of the provisions was that once premises were approved as a nursing home, the proprietor was bound by the conditions of approval not to exceed the scale of fees fixed.  His Honour observed that in many cases it was to be expected that the scale of fees would be fixed by reference to the costs necessarily incurred plus a profit factor, and that in the nature of things the costs necessarily incurred were a fundamental matter for consideration.

115               Sean Investments is distinguishable.  It is readily understandable that the fees to be fixed must cover the costs necessarily incurred in providing nursing home care in the particular nursing home.  Approval of the particular nursing home would be frustrated if the level of fees permitted to be charged did not cover those costs.  In the present case, there are a range of factors that ACCC is required to take into account.

116               Telstra refers to East Australian Pipeline Pty Ltd v Australian Competition and Consumer Commission (2007) 239 ALR 50.  The factual context was not alien to that of the present case – “a national access regime for gas pipeline systems within the framework of a national competition policy” (headnote, p 50).  The facts and legislation are complex.  Central to the issue for decision was s 8.10 of the National Third Party Access Code for Natural Gas Pipeline Systems contained in Schedule 2 to the Gas Pipelines Access (South Australia) Act 1997 (SA).  Section 8.10 listed in paras (a) to (k) eleven factors that were required to be considered when the initial capital base of certain pipelines was being established by a “Relevant Regulator”.

117               The High Court held that the Australian Competition Tribunal had not erred in taking as its starting point, and giving priority to, known valuation methodologies identified in the early paragraphs of paras (a) to (k).

118               The case is not authority for the proposition that para (d), for example, of s 152CR(1) must be accorded priority over the matters identified in the other paragraphs of that subsection.  The most that can be said is that the case shows that the correct approach to a list of mandatory relevant considerations can lead to priority properly being given to particular matters in the list.

119               Telstra also referred to other authorities such as R v Toohey; ex parte Meneling Station Pty Ltd (1983) 158 CLR 327; Queensland Medical Laboratory v Blewett (1988) 84 ALR 615 and Epic Energy. 

120               While I accept that the authorities establish that a decision-maker must give weight and genuine consideration to matters to which the decision-maker is required to “have regard” or which the decision-maker is required to “take into account”, none of the cases suggest that one or some of those matters must necessarily be given “fundamental weight” as against the others.  Everything depends on the natural meaning of the words, and the subject matter, scope and purpose of the particular legislation. 

121               In Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 (Peko-Wallsend), Mason J emphasised (at 41) that it is generally a matter for the decision-maker and not for a court to determine the appropriate weight to be given to the respective matters that are required to be taken into account in the exercise of a statutory power.  His Honour noted that in some circumstances a court may set aside an administrative decision which has failed to give adequate weight to a relevant factor of great importance, or has given excessive weight to a relevant factor of no great importance, but that in such a case the relevant ground of review is not the failure to take into account a relevant consideration or the taking into account of an irrelevant one, but that the decision is “manifestly unreasonable”.  Telstra does not rely upon a ground of manifest unreasonableness.

122               Section 152CR(1) provides that in making a final determination ACCC must take into account the seven matters listed in paras (a)-(g) of that subsection and s 152CR(2) provides that ACCC may take into account any other matters that it thinks are relevant.  Also, s 152AQA(6) provides that ACCC must have regard to the LSS Pricing Principles if it is required to arbitrate an access dispute.  The factor that should be given “fundamental weight” as against the others is the LTIE mentioned in para (a) of s 152CR(1) because s 152AB(1) provides that the object of Part XIC is “to promote the [LTIE]…”.

 

A.        TELSTRA’S COST MODEL

Telstra’s Ground 1:            Failure to take into account a relevant consideration, namely, Telstra’s cost model

Telstra’s Ground 2(a):        Denial of procedural fairness by failing to afford Telstra a reasonable opportunity to present its case with respect to Telstra’s cost model

Telstra’s Ground 3:            Procedural ultra vires in relation to Telstra’s cost model – failure to comply with s 152DB(1)(b) of the Act

General

123               “Telstra’s cost model” to which Grounds 1, 2(a) and 3 refer, is described in an affidavit of Iain Robert Little, Group Manager Economic Analysis for Telstra, as comprising two Microsoft Excel Spreadsheets on a CD which estimate Telstra’s top-down LSS-specific costs and calculate a per-unit cost for the LSS.  Telstra provided the CD to ACCC. The words and figures on each of the two Spreadsheets constituted only a short vertical column or table.  In the hard copy version in evidence, each occupied about half a page.

124               As will become apparent, while the Spreadsheets contained data and formulae, the ideas on which they were based were explained in the text of Telstra’s submissions to ACCC.  This raises a difficulty of nomenclature: the expression “Telstra’s cost model” can be used to include or not to include the explanations as well as the two Spreadsheets (including the data and formulae in them).

125               According to Ground 1, Telstra’s cost model was a relevant consideration that ACCC was bound, but failed, to take into account.  Telstra submits that there are two reasons why ACCC was bound to take Telstra’s cost model into account.  First, it formed an important part of Telstra’s submissions to ACCC.  Second, consideration of the cost model was made mandatory by s 152CR(1)(d) of the Act. 

126               Whether or not the expression “Telstra’s cost model” be understood to include related discussion and argument in the text of Telstra’s written submissions, Telstra’s contention is that by reason of ACCC’s failure to engage intellectually with the Spreadsheets on the CD, it denied itself the opportunity to take its cost model into account.

127               Telstra does not submit that ACCC did not address its mind to Telstra’s submissions in relation to specific costs (which Telstra’s cost model estimated – see [123] above).  There was, for example, much discussion of specific costs in the FD Statement of Reasons.  Telstra does, however, submit that without intellectual engagement with the Spreadsheets, and, in particular, without manipulation and “sensitivity testing” of the formulae in them, ACCC could not properly address Telstra’s submissions on specific costs.

128               According to Ground 2(a), ACCC failed to accord Telstra procedural fairness in respect of Telstra’s cost model.  Telstra’s case in this respect is also put in various ways.  It is said that by omitting to take Telstra’s cost model into account, ACCC did not give Telstra the hearing to which it was entitled.  Also, by failing to advise Telstra that it believed it had not received Telstra’s cost model and was proceeding on that basis, ACCC misled Telstra as to what it needed to do to ensure that ACCC did take Telstra’s cost model into account.

129               Finally, according to Ground 3, by failing to take Telstra’s cost model into account ACCC failed to discharge the duty imposed on it by s 152DB(1)(b) of the Act to give the dispute “proper consideration” and to inquire into and investigate the dispute carefully.

130               The facts relevant Telstra’s Grounds 1, 2(a) and 3 embrace facts leading up to ACCC’s receipt of the CD containing the two Spreadsheets on or around Monday 7 May 2007.

Factual background to provision of Telstra’s cost model to ACCC

131               On 30 March 2007 ACCC forwarded to the parties the cost model it (ACCC) had developed (ACCC SC model).  It also sent them the DFD, the DFD Consultation Paper, and directions concerning the format and timing of the parties’ submissions.  The DFD Consultation Paper explained, under the heading “Proposed cost model”, aspects of the ACCC SC model that was attached, asserting that it implemented the approach described in the DFD Consultation Paper as ACCC’s “preliminary view”.

132               The DFD specified (in Schedule 1) an LSS annual charge for the period from 18 April 2006 to 31 December 2007 of $30.00 per annum ($2.50 per month).  Schedule 2 specified LSS “single” connection charges and LSS “single” disconnection charges.  Schedule 3, which dealt with managed network migrations (MNMs), is not relevant to this proceeding.

133               The accompanying directions required, relevantly, Request and Telstra to provide submissions to ACCC (with a copy to the other party) via email by 5.00 pm on Friday 20 April 2007 on the matters to be addressed as part of the joint arbitration hearing.  Direction 4 stipulated that the submissions must:

(a)        conform to ACCC’s submission template (attached to the direction);

(b)        be provided in a soft copy format (MS Word or PDF) that would allow “copy and paste”; and

(c)        include as attachments copies of any extraneous material (such as consultants’ reports or quotes from court or tribunal decisions) that was relied on, with the relevant referenced sections clearly marked.

As will be seen below, the two Spreadsheets on the CD were provided separately from the text of Telstra’s submissions ((a) above) and as extraneous material ((c) above).

134               In response to ACCC’s invitation, Mr Little, with the assistance of others, produced Telstra’s cost model.

The timing and circumstances of the provision of Telstra’s cost model to ACCC

135               There was considerable evidence concerning precisely what Telstra submitted to ACCC and when it submitted it.

136               Telstra wrote a letter over the signature of Tony Warren, Telstra’s Executive Director Regulatory Affairs, dated Friday 4 May 2007 to Robert Wright of ACCC.  The opening paragraph of Mr Warren’s letter stated:

Please find attached an electronic version of Telstra’s submissions which relate to the issues said to be in dispute between Request and Telstra, together with a list of documents upon which Telstra relies (“supporting material”).  A CD of the supporting materials has also been couriered to the Commission and to Nicholls Legal. [my emphasis]

 

Nicholls Legal represented Request (they do not represent Request in the present proceeding).  At the time of the writing of the letter, the CD had not in fact been couriered to ACCC or to Nicholls Legal.  No doubt Mr Warren’s expectation when he signed the letter was that despatch of the CD by courier would precede delivery of the letter.

137               Mr Warren’s letter, Telstra’s submissions, and the list of supporting materials referred to in the letter were emailed to ACCC in the form of a series of emails from Mallesons Stephen Jaques (Mallesons), the solicitors for Telstra, dated Saturday 5 May 2007 at 3.59 – 4.00 am.  That is to say, although Telstra’s submissions were dated Friday 4 May 2007, they were emailed to ACCC in the early hours of the following day.

138               Because of the volume of the submissions, there were actually six emails.  In those emails, Mallesons advised ACCC that they were enclosing Telstra’s submissions and a list of supporting materials upon which Telstra relied.  The emails stated that a CD of the supporting materials would be couriered to ACCC and Nicholls Legal “as soon as possible”.  The emails did not contain the tables that were in the Spreadsheets on the CD yet to be couriered.

139               ACCC admits that on or around Monday 7 May 2007 it received a CD that contained two readable Microsoft Excel Spreadsheet files.  A copy of the CD and hard copies of the two Spreadsheet files were in evidence.

140               There is in evidence a further letter from Telstra to ACCC dated 4 May 2007 purporting to attach “a CD of the supporting materials referred to in Telstra’s submissions”.  If that letter in fact accompanied the CD, it must have done so on or around Monday 7 May 2007 when the CD was delivered to ACCC.  It may be, however, that it too was emailed to ACCC in the early hours of Saturday 5 May 2007 – two days before the CD was delivered.

141               Included in or with Telstra’s submissions of 4 May 2007 was an “Index of Documents Relied On in the Request Dispute”. This appears to be the “list of documents upon which Telstra relies” to which Telstra had referred in its covering letter of Friday 4 May 2007.  Items 93 and 94 in that list or index were:

93        Summary of Telstra’s Top Down TSLRIC model for LSS

94        Summary of Telstra’s Top Down TSLRIC model for LSS (High WACC)

 

The presence of the words “Summary of” will be noted.  The emails did not contain either the cost model or a summary of it.  Plainly, the “list of documents on which Telstra relies” or “Index of Documents Relied on in the Request Dispute” was pointing to the supporting materials on the promised CD.  Accordingly, read with the covering letter from Telstra dated 4 May 2007, entries 93 and 94 were informing ACCC that it could expect to find “summaries” on the foreshadowed CD.

142               The CD that was received by ACCC on or around Monday 7 May 2007 also contained an index.  It was headed “LSS INDEX – ALL DOCS” (LSS Index).  The LSS Index also included references to items 93 and 94, but those references were as follows:

093 ENTIRELY CONFIDENTIAL Telstra’s Top Down Model for LSS

 

094 ENTIRELY CONFIDENTIAL Telstra’s Top Down Model for LSS High WACC

As can be seen, the words “Summary of” were absent from the LSS Index.  On the other hand, the actual Spreadsheets on the CD which, according to Telstra’s submissions to this Court, constituted Telstra’s cost model, bore headings that repeated the words “Summary of”.

143               In sum, the words “Summary of” were present in the emailed list or index of documents relied on by Telstra and on the Spreadsheets that were on the CD said by Telstra to constitute its cost model, but they were absent from the LSS Index that was on the CD.

144               The Spreadsheets on the CD enabled manipulation or sensitivity testing.  By this I mean that upon a change being made in one integer in the Spreadsheet, the computer program would automatically make consequential adjustments to the other items.  It was open to ACCC to manipulate Telstra’s cost model to that end, that is to say, to determine the effect of changes in individual integers on the “average cost” per LSS per month.  Of course, this said nothing as to the correctness or reliability of the integers.

145               Telstra’s submissions to ACCC addressed “SPECIFIC COSTS” in Section D of Part 2.  They asserted (paras 53ff) :

●       that Telstra had developed a model in order to model adequately LSS-specific costs for the purpose of calculating monthly charges payable for LSS;

●       that Telstra’s newly developed model estimated Telstra’s costs of providing the LSS; 

●       that the model was a top-down model and was consistent with the statutory criteria set out in s 152CR of the Act; and

●       that application of the model gave estimated LSS-specific costs per SIO (service in operation) as between $4.56 and $4.75 per month.

 

146               In para 54 on p 10 of Part 2, Telstra stated that it had “estimated the top down LSS specific costs using ‘the Telstra model’”, and to this expression (in bold) there was a footnote reading “[LSS Index: 93]; and [LSS Index: 94] (using high WACC)”.  Clearly, this reference was to the LSS Index (on the CD), not to the emailed “Index of Documents Relied on in the Request Dispute”.  If an ACCC officer had read the footnote and gone to the LSS Index on the CD he or she would have seen references to the two top-down models without the words “Summary of”, but if the officer had gone to those two models on the Spreadsheets, he or she would have seen the “Summary of”.

147               Telstra’s submission to ACCC was that its newly developed top-down model was to be preferred to the ACCC SC model for reasons that Telstra set out in its submissions.  A reason given was that the ACCC SC model was a bottom-up model that suffered from an absence of comprehensive accurate bottom-up cost information.  Telstra submitted (para 56) that its model was based on Telstra’s Current Cost Accounts (CCA) maintained under the Record Keeping Rules (RKR) required under Div 6 of Pt XIB of the Act.

148               Telstra’s submissions in Section D concluded (para 103) by referring to the “large discrepancy between the results of the [ACCC SC model and Telstra’s cost model]” and arguing that ACCC should rely on Telstra’s cost model in setting the LSS periodic charges.

149               On or about 8 May 2007 Telstra sent to ACCC a supplementary submission which referred to the impact on LSS monthly costs of using a single weighted average cost of capital (WACC) for all services provided over Telstra’s CAN.  In order to calculate that impact, Mr Little created and manipulated a duplicate of Telstra’s cost model.  The results of Mr Little’s manipulation and calculations were included in the supplementary submission.

150               In the supplementary submission, Telstra referred to the fact that Telstra’s cost model considered specific costs separately and distinctly from network costs, but urged that if ACCC proposed to adhere to its previously expressed preference for using a single WACC for all services provided over the CAN, it should take into account the CAN services WACC estimate made by “its” expert, Professor Bowman.

The Final Determination

151               In the Final Determination, ACCC determined on a price of $2.50 per LSS per month based on the ACCC SC model, as had been foreshadowed in the DFD (see [132] above). 

152               In the FD Statement of Reasons, section 4.1.8 addressed “Specific costs” over some 14 to 15 pages.  ACCC stated that Telstra had not supplied it with its “newly developed cost model”, stating:

Telstra advocated a newly-developed cost model populated with its preferred approach and inputs, in preparing its submissions (Telstra, 4/5, Part 2, p 10, Annexures 6, 7).  Telstra did not supply this model to the Commission or to the parties.

 

The reference to “Telstra, 4/5, Part 2, p10, Annexures 6, 7” was a reference to p 10 and Annexures 6 and 7 of Part 2 of Telstra’s submissions to ACCC dated 4 May 2007.  ACCC rejected Telstra’s submission that if ACCC was to continue to use the ACCC SC model, adjustments should be made to it to restate capital values each year. 

153               ACCC’s finding of present relevance is contained in the following passages from the FD Statement of Reasons, section 4.1.8 under the heading “Proposed cost model” and the sub-heading “Commission’s views”:

Telstra submits that adopting all of its preferences (and using its proposed model) will result in a measure of LSS incremental cost of between [c-i-c redaction] $“X” and $“Y” per LSS per month.  [end c-i-c redaction]  Different cost estimates within this range result from adopting alternative positions advanced in respect of the WACC.

 

The contribution of each of Telstra’s claims to the higher claimed cost is not able to be calculated without access to Telstra’s newly-developed cost model (assuming that it permits such sensitivity testing to be undertaken).  However, the Commission expects each of the following factors [to] influence (to varying degrees) the higher cost estimate: the inclusion of indirect capital costs, a higher WACC, the more granular approach to cost allocation, no levelisation, and revised LSS and ULLS demand.

 

In the second paragraph ACCC was stating that it was not able calculate the contribution of each individual claim by Telstra as to its costs to the overall higher cost that Telstra claimed to incur.  However, ACCC expected that the five integers mentioned contributed, to varying degrees, to that higher claimed cost.  I will return to this matter below.

154               ACCC went on to note that the cost estimate that it had proposed to the parties of $2.43 was rounded to give a monthly charge of $2.50 per LSS per month (although I note that ACCC mistakenly referred to that amount as the “annual charge”).

155               Telstra submits that while ACCC understood that Telstra claimed that its costs were $4.56, the figure set out in Telstra’s written submission, in the passage set out above ACCC made it clear that because it did not have Telstra’s cost model, it:

●       could only “expect” or surmise that the difference between ACCC’s figure of $2.50 and Telstra’s $4.56 was attributable to the five integers mentioned;

●       remained uninformed as to the varying degrees to which each of the five influenced the ultimate per-unit cost for LSS claimed by Telstra; and

●       remained ignorant as to how Telstra’s cost model worked and as to whether it permitted sensitivity testing to be undertaken.

156               Mr Little’s affidavit shows that sensitivity testing was a reference to calculating the contribution of each of the integers to the per-unit cost of the LSS, and necessarily involved manipulating Telstra’s cost model by the input of different numbers to calculate the contribution of the five integers.  According to Telstra’s submission, Telstra’s cost model was designed to allow this very kind of sensitivity testing.  Mr Little’s affidavit set out three sample manipulations of Telstra’s cost model by reference to three of the five factors referred to by ACCC, namely, capital costs, LSS demand, and post-tax WACC.  For example, when all capital costs are eliminated from Telstra’s cost model, the per-unit cost for the year 2006 is reduced from $4.63 to $3.49.    In relation to LSS demand, an increase in LSS demand from 152,440 to 164,080 SOIs reduced the per-unit cost from $4.63 to $4.30.  A lowering of the post-tax WACC from 17.14% to 15% reduced the per-unit cost from $4.63 to $4.51.

Consideration

General

157               Request points out that Telstra can succeed on the “relevant consideration” ground only if ACCC was bound to take Telstra’s cost model  into account and that doing so “could” or “might” have had a material impact on the outcome:  see Peko-Wallsend at 30-31 (Gibbs CJ); 39-40 (Mason J).

158               Section 152CR(2) allowed ACCC to take into account any matters it thought relevant.  In Peko-Wallsend at 39-40, Mason J stated that where factors to be considered enumerated in a statute are not exhaustive, the Court should turn to the subject matter, scope and purpose of the statute in determining what matters a decision-maker is bound to take into account.  Telstra submits that in the present case this approach leads to a conclusion that ACCC was bound to take into account Telstra’s cost model because it was central to the issues that ACCC was required to determine and to matters that it was expressly obliged to take into account, for example Telstra’s “direct cost” of providing access to the LSS (see s 152CR(1)(d)).

159               In its submissions, Telstra did not draw a clear distinction between the course of reasoning by which it contends that s 152CR(2) coupled with general law principles produced the result that ACCC was bound to take into account Telstra’s cost model, and the course of reasoning by which it contends that s 152CR(1)(d) produced that result.

160               I turn now to the duty imposed by s 152DB(1)(b).  Telstra submits that s 152DB(1)(b) (set out at [42] above) supports its case while Request submits that, if anything, it assists the respondents.  Provisions such as s 152DB(1)(b) are troublesome.  It is questionable whether ultimately they have any effect at all in shaping the duty incumbent on a decision-maker.  The starting point in s 152DB(1)(b) is a legislative demand for speed, but apparently someone appreciated that speed can come at too great a cost, and so the demand for speed is reduced to a demand that ACCC “must act [only] as speedily as a proper consideration of the dispute allows”.  In order to make it plain that excessive speed is to be shunned, it is acknowledged that ACCC must inquire into and investigate the dispute “carefully”.  Apparently it is then thought that too much care may detract from the desideratum of speed, so the words “and quickly” are added after “carefully”.  Adding to the confusion is the legislature’s comprehensive demand that ACCC “inquire into and investigate the dispute and all matters affecting the merits, and fair settlement, of the dispute” (my emphasis).  The demand is that ACCC inquire into and investigate all matters affecting the merits of the dispute and all matters affecting the fair settlement of the dispute.

161               How ACCC can reasonably be expected to make sense of all this, I do not know.  The provision is a jumble of broadly expressed goals, no doubt attractive in themselves, that are in tension with one another.  If ACCC has not acted as “speedily” and “quickly” as it suits someone to suggest, it can be argued that it has not obeyed the legislative mandate.  If, on the other hand, someone chooses to suggest that there has not been a “proper consideration of the dispute” or that ACCC has not “carefully” conducted its inquiry or investigated “all matters affecting the merits, and fair settlement, of the dispute”, it can again be argued that it has not obeyed the legislative mandate.

162               To the first charge, ACCC can reply that it has been acting in accordance with the second mandate.  To the second charge ACCC can respond that it has been acting in accordance with the first.

163               Predictably, in the present proceeding Telstra and Request have both pointed to aspects of s 152DB(1)(b) that they suggest support their respective positions.

164               I regard s 152DB(1) as a general exhortatory provision: it exhorts ACCC to strive to achieve broad objectives.  Some of those broad objectives, at least if regarded in isolation, are antithetical to one another.  The notions of “speed”, “proper consideration of the dispute”, “careful inquiry and investigation”, “quick inquiry and investigation”, “inquiry into and investigation of … all matters affecting the merits” (my emphasis) and “fairness” pull in different directions: cf the discussion of ss 420 and 476 of the Migration Act 1958 (Cth) in Sun Zhan Qui v Minister for Immigration and Ethnic Affairs (unreported, Federal Court of Australia, 6 May 1997, Lindgren J) at 39-41, and see Minister for Immigration v Eshetu (1999) 197 CLR 611 at [49] per Gleeson CJ and McHugh J.

165               It may be noted in passing that achievement of the objectives depends not only on the diligence, awareness and qualifications of ACCC officers:  it also depends on the levels of funding and workload of ACCC as they respectively exist at any particular time and from time to time.  I do not imply, however, that these extraneous considerations have the potential to give rise to a fluctuating construction of s 152DB(1)(b).

166               I find it difficult to conceive of circumstances in which a court would find that a failure to achieve the goal of speed or that of carefulness would, without more, provide a ground for the granting of relief in respect of an administrative decision.  Surely the person aggrieved would have to show that the failure had had consequences in terms of one of the recognised grounds of judicial review.  For example, absence of care (perhaps arising indirectly from excessive speed) could give rise to an overlooking of a relevant consideration or a failure to accord procedural fairness.  It is not obvious what ground of judicial review, if any, might arise directly from a failure to act “speedily” or to inquire “quickly”.  It is another question whether the decision-maker could invoke the requirement of speed “in defence” against the consequences, in terms of grounds of judicial review, of a lack of care, but it is to be doubted.

167               In so far as Telstra relies on an alleged failure by ACCC to seek further material from Telstra, Request submits that ACCC’s decision would be vulnerable to attack under the ADJR Act for a failure in this respect only if the failure was so unreasonable that no reasonable decision-maker would have failed to make the inquiry (Request cites Prasad v Minister for Immigration & Ethnic Affairs (1985) 6 FCR 155 at 169-170).

Telstra’s Ground 1

To what extent, if at all, did ACCC in fact engage with the Telstra cost model?

168               Request puts its submission that ACCC engaged with Telstra’s cost model in two ways.  First, it submits that it should be inferred that ACCC did in fact read the Spreadsheets on the CD, but did not appreciate that they were the complete or final version of Telstra’s cost model that was referred to in Telstra’s submissions.  Second, it submits that the FD Statement of Reasons shows that ACCC took into account the essential features of Telstra’s cost model that were reflected in the Spreadsheets, even if it did not read the Spreadsheets themselves.

169               Request submits that the passages from the FD Statement of Reasons on which Telstra relies (section 4.1.8, the relevant extracts from which were set out at [152] and [153] above) show only that ACCC considered that it had not received from Telstra the complete or full version of Telstra’s cost model that it was expecting to receive.  Request argues that Telstra ignores the heading’s use of the word “Summary” and the simplistic nature of the two Spreadsheets which Telstra now characterises as constituting the cost model. 

170               Request contends that ACCC was entitled to understand that the two Spreadsheets were only a summary and were not Telstra’s “newly-developed cost model, populated with its preferred approach and inputs”.  In support of this submission, Request refers to the contrast between the Spreadsheets and previous cost models that had been before ACCC and Telstra.  For example, there was the ACCC SC cost model that formed part of the DFD Consultation Paper.  It comprises six landscape pages of figures.  Second, there were cost models (in evidence) that Telstra had provided to ACCC in 2002 and 2006 in connection with other applications.  Telstra’s cost model of 4 July 2002 consisted of five pages.  Telstra’s “ULLS Specific Costs FINAL (ACCC) xls” model submitted to ACCC on 14 March 2006 consisted of five landscape pages.

171               Telstra’s cost model to which Telstra’s Grounds 1, 2(a) and 3 refer is limited to the two Spreadsheets that were on the CD.  In the hard copy form in evidence, they consisted of two half pages of vertical columns of words and figures, as mentioned at [123] above.

172               To my mind, by reference to the three cost models to which I have referred, Telstra’s cost model has the appearance of a summary, and the title to it confirms that it was indeed so.  It is very brief and does not approach the degree of density and complexity of any of the other three cost models mentioned.  I agree that ACCC was entitled to treat the two Spreadsheets as a summary of something larger and more detailed that existed, in whatever form, elsewhere.

173               I referred at [152] above to the reference in section 4.1.8 of the FD Statement of Reasons to Telstra’s submission of 4 May 2007, Part 2, p 10 Annexures 6, 7.  As I noted (at [146] above) para 54 on p 10 of Part 2 of Telstra’s submissions referred to Telstra’s cost model, and a footnote to that para referred to the two Spreadsheets on the CD.  Accordingly, it may well be that when ACCC referred to p 10 of Part 2 of Telstra’s submissions, it was indicating that it had read the two Spreadsheets.  If so, it must have considered that when Telstra had referred to its newly developed cost model it had been referring to something more substantial.

174               Similarly, the first paragraph in Annexure 6 to Telstra’s submissions of 4 May 2007 stated that Telstra had prepared a top-down model of LSS non-network costs, which it termed “the Telstra Model”.  Again there was a footnote reference to LSS Index: 93 and LSS Index: 94.  Accordingly, it may well be that when ACCC referred to Annexure 6, it was incorporating a reference to the two Spreadsheets on the CD that were referred to in items 93 and 94 of the LSS Index.

175               In addition to references in the FD Statement of Reasons, there is other evidence suggesting that ACCC did have regard to the underlying features of Telstra’s cost model.  This is relevant to the second way in which Request puts its case.

176               There is in evidence an ACCC internal memorandum dated 25 May 2007 from Sean Riordan to Graeme Samuel and Ed Willett.  According to that memorandum ACCC had proposed a cost model that updated models Telstra had supplied in prior regulatory consideration of LSS and ULLS annual charges, but Telstra was proposing “an entirely new cost model”.  In the alternative, according to the memorandum, Telstra was asking for “indirect capital costs” to be included in ACCC’s own model; for the costs of Telstra’s “ADSL systems” to be recognised; for the WACC to be increased;  and for LSS demand to be revised down to reflect most recent actual and forecast data.  The memorandum stated (p 2):

Telstra’s proposed model takes accounting data (drawn from CCA reports), annualises the capital costs and adds operating expenses to determine an annual cost.  This is then unitised over LSS-only demand to give an annual charge.  Telstra provides no analysis of the efficiency of its cost claims, other than to point to TFP studies for the entirety of Telstra’s business and certain US telecoms.

 

Telstra’s proposed model is contrary to the ACT’s [Australian Competition Tribunal’s] LSS ruling: it allocates and unitises incremental costs on a LSS only basis [that is, it does not adopt the a pooling and allocation approach]: it does not adopt a levelisation approach; and the TFP study provides little if any comfort that the claimed costs were efficiently incurred or forward-looking.  For instance, a $[CONFIDENTIAL] million current asset comprising unpaid LSS charges (>[CONFIDENTIAL]% claimed asset base) has not been adjusted down to reflect the pending reduction in LSS charges.

 

While there could be a basis to include an allowance for indirect capital costs, Telstra hasn’t provided information that allows us to calculate the cost that should be allowed.  We propose to not make any allowance, rather than give another opportunity to substantiate a proper claim.

 

177               It is clear that the writer of the memorandum considered that he knew the features of Telstra’s proposed “entirely new cost model”.  It will be appreciated that by the date of this memorandum, ACCC had been in possession of the CD containing the two Spreadsheets for some two and a half weeks.  The memorandum shows that the writer saw shortcomings in the features of Telstra’s cost model.  Telstra does not suggest that the features that Mr Riordan criticised were not in fact features of its cost model that underlay the two Spreadsheets.

178               A second internal ACCC memorandum on which Request relies is one dated 19 July 2007, only 13 days before the date of the Final Determination, again from Mr Riordan to Messrs Samuel and Willett.  In this memorandumMr Riordan observed:

Telstra argued for a higher cost estimate of around $4.50 per month, mainly on the basis of (i) unadjusted current cost accounting for one financial year (no levelisation) that is specific to the LSS (no-pooling); and (ii) to a lesser extent, a higher WACC.  Telstra did not provide any details of its internal equivalent capital costs that would have allowed a more precise estimate to be made.

 

We consider that Telstra’s claimed CCA cost base is not representative of a forward-looking, efficient access provider; and the method of calculating a LSS annual charge from this cost base is inconsistent with the Tribunal ruling on cost allocation and levelisation. And so, we do not propose to adopt it.

 

This paragraph quoted does not establish that ACCC had actually read the two Spreadsheets.  It does, however, again show that ACCC was aware of an aspect of their contents, whatever the source of that knowledge may have been, and therefore engaged with Telstra’s cost model in the broader sense.

179               Telstra points to the fact that no officer of ACCC was called to give evidence that regard was had to the two Spreadsheets.  Telstra refers to the “rule of evidence” associated with Jones v Dunkel (1959) 101 CLR 298 at 305, 308, 320-321.  That rule has been recognised as having scope for operation in applications for judicial review of administrative decisions: see the authorities cited in Minister for Aboriginal and Torres Strait Islander Affairs v State of Western Australia (1996) 67 FCR 40 at 61.  In that case the Full Court stated (at 62):

The application of the rule requires … that there be inferences available from the evidence which favour the other party. The failure of the Minister to call evidence does not provide positive evidence that he did not consider the representation but, unexplained, it leaves the Court in a position where opposing inferences can be more confidently drawn because they stand uncontradicted by the person who could say something about the true state of the facts: Jones v Dunkel at 308. The question then is what inferences were open on the evidence.

 

180               Request responds by referring to the limited role permitted to a decision-maker such as ACCC in defending its decisions:  see Hardiman at 35-36.  The role of ACCC is one of arbitrating an access dispute between a carrier or carriage service provider and an access seeker.

181               In my opinion, the counsel given to administrative tribunals by the High Court in Hardiman applied to ACCC in that role.  As noted at [102] above, ACCC has led no evidence, and has made submissions only on particular issues that it has perceived to be of general importance in relation to its powers and procedures.  ACCC informed Request and Telstra prior to the hearing that it would act in accordance with Hardiman.  It was open to Telstra or Request to subpoena ACCC officers to attend to give evidence or to produce documents.  The absence of more direct evidence of the course of ACCC’s deliberations is not to count against either of them more than it is against the other.

182               I therefore do not think the principle recognised in Jones v Dunkel is appropriately invoked in the present circumstances.  Minister for Aboriginal and Torres Strait Islander Affairs v Western Australia is distinguishable.  Unlike ACCC, the Minister was not arbitrating a dispute pursuant to an arbitration regime laid down by statute.

183               My conclusions on the factual question posed are as follows:

1.                  I am satisfied that ACCC did not “manipulate” or “sensitivity test” Telstra’s cost model in the CD Spreadsheets;

2.                  I am satisfied that ACCC took into account the essential features, if not all of the figures, of Telstra’s cost model in the Spreadsheets; and

3.                  I am not satisfied as to whether ACCC did or did not read the Spreadsheets.

Was ACCC’s engagement with Telstra’s cost model sufficient to amount to “taking it into account”?

184               Telstra submits that in order for ACCC to take Telstra’s cost model into account, it had to engage in an “active intellectual process” in relation to it.  In support, Telstra refers to Tickner v Chapman (1995) 57 FCR 451 at 462, 464 per Black CJ and Tobacco Institute of Australia v National Health and Medical Research Council (1996) 71 FCR 265 at 277-279 per Finn J.

185               As Black CJ observed in Tickner v Chapman (at 462-463), “[t]he degree of effort that the consideration of a particular representation may involve will of course vary according to its length, its content and its degree of relevance”.

186               The question arises whether, in the light of my factual conclusions above, ACCC’s consideration of Telstra’s cost model was sufficient to amount to an “active intellectual process”.  More specifically, did an “active intellectual process” require ACCC to manipulate or sensitivity test Telstra’s cost model?

187               Telstra points to statements made by ACCC in the context of ACCC’s consideration of similar cost models in regulatory matters, which Telstra says demonstrate the importance that ACCC places on sensitivity testing in order to gauge the value of cost models.  In my view, evidence of this kind shows only that in the circumstances of those matters and those models ACCC considered that sensitivity testing assumed some importance.

188               As the extract from ACCC’s internal memoranda set out at [176] and [178] above show, ACCC knew, and engaged with, the features of Telstra’s cost model.  In reliance on those features, as understood by ACCC, ACCC rejected that model.   In other words ACCC rejected the underlying basis of Telstra’s cost model by rejecting the assumptions and, at least to some extent, the data, on which Telstra’s cost model, and thus the Spreadsheets, were based.   The following explains some of the features referred to by ACCC in the extracts:

(a)        Telstra’s cost model was based on asserted LSS-specific costs only, rather than the “pooled” costs of the LSS, ULLS and ADSL lines.  In section 4.1.8 of the FD Statement of Reasons, ACCC adhered to the view that it had expressed in its DFD Consultation Paper in favour of a pooling of LSS- and ULLS-specific costs, and Telstra’s own internal equivalent costs, followed by an allocation of those pooled costs to a demand base that included all downstream ADSL services (I address this pooling and allocation of costs in Section C (Pooling and Allocation Method)).  Telstra’s cost model lacked this feature.      

(b)        Telstra’s cost model was based on figures for six months only (the second half of the financial year ended 30 June 2006).  (Although the model refers to 2007, it does so only by reference to assumed inflation and a productivity deflator applied to the 2006 figures.)  ACCC referred to levelisation in the DFD Consultation Paper and adopted an eight-year levelisation approach in the FD Statement of Reasons.  Telstra’s cost model did not provide for levelisation.

(c)        ACCC and the Tribunal had previously referred to the need for access providers to prove that their costs were forward looking and efficient (a requirement of the TSLRIC methodology which was adopted in the LSS Pricing Principles), and stated that this could not be assumed to be so simply because the access providers were operating in a competitive market.  In the present case, Telstra was a monopoly supplier: there was no competitive market for the supply of the LSS.  Telstra provided no evidence of the efficiency of its claimed costs, other than by pointing to so-called “Total Factor Productivity” (TFP) studies from Telstra’s business and from certain businesses of the United States of America.  ACCC was not convinced that Telstra’s claimed costs were efficiently incurred.

189               The five “factors” that were identified in the passage from the FD Statement of Reasons set out at [153] above had all been addressed in detail in the immediately preceding pages of the FD Statement of Reasons.  It will be recalled that those five factors were:

1.         Inclusion of indirect capital cost;

2.         A higher WACC;

3.         A more granular approach to cost allocation [as opposed to ACCC’s Pooling and Allocation Method];

4.         No levelisation;

5.         Revised LSS and ULLS demand.

Telstra does not suggest that those five factors, taken as a whole, do not substantially explain the difference between its monthly per-unit figure of $4.56 and ACCC’s $2.50.  Its complaint is that ACCC denied itself the opportunity of measuring the extent of the contribution of the individual factors, and the possible contribution of other factors, to that difference.  But I am not convinced that this matters.

190               By dealing with the features of Telstra’s cost model in the way in which it did, ACCC “had genuine regard” and gave “positive consideration” to essential features of Telstra’s cost model, although it rejected them.  I do not accept that ACCC was required to undertake manipulation or sensitivity testing and thereby to quantify the contributions of the individual factors in order to take Telstra’s cost model into account.

Might the Final Determination have been different if ACCC had manipulated or sensitivity tested the Telstra cost model?

191               If, contrary to my conclusion above, ACCC was required to undertake manipulation or sensitivity testing in relation to Telstra’s cost model, I do not consider that the result of the arbitration could or might have been different.

192               The relevant test was described by Mason J in Peko-Wallsend at 40:

Not every consideration that a decision-maker is bound to take into account but fails to take into account will justify the court setting aside the impugned decision and ordering that the discretion be re-exercised according to law.  A factor might be so insignificant that the failure to take it into account could not have materially affected the decision.

 

More recently, a Full Court of this Court in Martincevic v Commonwealth (2007) 164 FCR 45 observed (at [68]) that:

It is not for the court to guess what view [the decision-maker] would have taken of the report and its significance.  It is enough that it cannot be said that the failure to have regard to the report was so insignificant that it could not have materially affected the decision.

193               Telstra submitsthat none of the features of its cost model referred to above tell against the assistance that ACCC would have obtained by interrogating Telstra’s cost model and conducting sensitivity testing of it.  It submits that these processes would have enabled ACCC to understand better the differences between Telstra’s cost model and the ACCC SC model.  Thus, ACCC could have used Telstra’s cost model as an important check on the ACCC SC model and on the factors leading to the different cost estimates.  Telstra contends that Telstra’s cost model may have suggested that the ACCC SC model was not capturing all relevant costs.  Telstra correctly points out that ACCC itself, in the passage from the FD Statement of Reasons set out at [153] above, implies that it would or might have been assisted by sensitivity testing of Telstra’s cost model.

194               At the first blush there appears to be force in Telstra’s submission:  why would ACCC have referred to the absence of a capacity for sensitivity testing if its availability could not have made any difference?

195               This question requires that close attention be given to the passage set out at [153] above.  The first sentence in the second paragraph is introductory to the second.  The word “However” which introduces the second sentence means:  “ACCC’s incapacity to calculate the contribution of Telstra’s various claims does not prevent ACCC from proceeding because the contributions, to varying degrees, can be expected, in the nature of things, to be made by the five factors listed”.  I do not think ACCC can be understood as implying that manipulation and sensitivity testing would or could have made a difference.  Rather, ACCC is implying that it could not have done so.

196               Nor do I think there is any other reason to think that manipulation and sensitivity testing could have made a difference in view of the rejection by ACCC of Telstra’s cost model based on its underlying features.

Telstra’s Ground 2(b) and Ground 3

197               It remains to refer to Telstra’s complaint that ACCC unreasonably failed to enquire or follow up by requesting that Telstra supply a “fuller” model.  (I discuss the principles in relation to procedural fairness in relation to Telstra’s Grounds 9(a) and 9(b) at [482]ff below.)  It is uncontested that ACCC did not ask Telstra whether its cost model had been provided, or whether the two Spreadsheets on the CD were only a “summary” of something more substantial that was yet to come.

198               Telstra submits that ACCC could have cleared up any confusion as to whether the model supplied was only a “summary” of something larger by a simple phone call to Telstra.  This is true.  But the statement assumes that there was or should have been confusion on the part of ACCC.  There is no evidence that a more ample model existed, and Telstra’s case is that the two Spreadsheets on the CD were Telstra’s cost model.  It follows that on the evidence it cannot be said that ACCC would have been furnished with any additional information had inquiries been made.  Telstra apparently asks me to accept that it would have told ACCC that the two Spreadsheets on the CD were Telstra’s cost model, and perhaps that they could be manipulated and sensitivity tested.  But because ACCC rejected the underlying features of Telstra’s cost model, the furnishing of this information would have made no difference in the result.

199               Telstra further submits that if ACCC failed to consider Telstra’s cost model, Telstra was denied procedural fairness.  However, ACCC gave due attention to Telstra’s submissions in so far is they related to the features of Telstra’s cost model.  I do not think that natural justice required it to do more. 

Conclusion in relation to Telstra’s cost model

200               In the result, Telstra’s Grounds 1, 2(a) and 3 are not sustained.

Request’s motion for leave to reopen

201               As mentioned at [99] above, on 13 February 2008 (subsequent to the hearing), Request filed a notice of motion seeking leave to reopen to tender into evidence the Adam Final Determination and the Adam FD Statement of Reasons dated 20 December 2007 in the LSS arbitration between Adam and Telstra.

202               Request submits that the additional evidence shows that ACCC’s consideration, manipulation and sensitivity testing of Telstra’s cost model by ACCC and disclosure of “Option 2” to Telstra could not have made any difference in the result (“Option 2” is relevant to Section E (Disconnection Charges, Churn Process and “Option 2”).

203               I will refer to the “Request/Telstra” access dispute and arbitration and the “Adam/Telstra” access dispute and arbitration in order to distinguish between them.

204               Request’s submission is that after full argument in the Adam/Telstra arbitration, ACCC rejected Telstra’s cost model and adopted “Option 2”.  I will defer dealing with the motion to reopen in so far as it relates to “Option 2” until Section E (Disconnection Charges, Churn Process and “Option 2”) below, and will say nothing further of it here.

205               Request submits that ACCC’s rejection of Telstra’s cost model in the Adam/Telstra arbitration is relevant as to whether the Court in its discretion should grant or decline relief in the present proceeding.

Legal principles in relation to the grant of leave to reopen

206               The parties agree on the principles that govern the motion for leave to reopen.

207               Telstra could not have adduced the evidence in question during the hearing:  it did not come into existence until 20 December 2007 – some 13 days after the last day of the hearing.

208               The ultimate question for the Court is whether it is in the interests of justice that the further evidence be admitted (see, for example, Inspector-General in Bankruptcy v Bradshaw [2006] FCA 22 at [24]; Daniel v State of Western Australia (2004) 138 FCR 254 (Daniel) at 269; Urban Transit Authority of NSW v Nweiser (1992) 28 NSWLR 471 at 478-479 (per Clarke JA, Mahoney & Meagher JJA agreeing); Dumitrov v SC Johnson and Son Superannuation Pty Ltd (No 2) [2007] NSWSC 42 at [7]).

209               The particular criterion relevant to the present circumstances is whether it is probable to the required degree that the additional evidence will affect the result.  There is not a single formulation in the cases as to the degree of probability required.  In Australasian Meat Industry Employees’ Union (WA Branch); ex parte Ferguson (1986) 67 ALR 491, Toohey J said (at 493-494):

In situations where a hearing has concluded but judgment has been reserved and not delivered, it has been said that fresh evidence should be admitted only when it is so material that the interests of justice require it;  the evidence is believed would most probably affect the result; ... [my emphasis]

In Daniel, RD Nicholson J stated (at 269) that it must be shown that the new evidence, if accepted, would “most certainly affect the result” (my emphasis).

210               In Idonz Pty Ltd v National Capital Development Commission (1986) 13 FCR 70 (Idonz), the Court refused an application by the respondents to an appeal to reopen the hearing of the appeal to allow them to call fresh evidence.  One reason given by Fox J, with whom Everett J agreed, was that the evidence had been available when the appeal was heard.  Other reasons given by Woodward J (in relation to the application by the second and third respondents) were that the evidence would be complex, contested and not appropriate for consideration by an appellate court, and that the evidence would have added little probative value to material already before the Court and would have related only to the possible exercise of discretion against the appellant if it were otherwise successful in its appeal.

211               Idonz is both different from and similar to the present case.  In the present case, the evidence is sought to be tendered at trial, was not available at the time of hearing, and consists simply of two documents.  On the other hand,  the evidence relates to the possible exercise of discretion against Telstra if it were otherwise successful on Telstra’s Cost Model G\rounds.  Moreover, as appears below, complex questions as to the probative value of those documents are raised.  

The legal test in relation to when discretionary relief may be refused

212               Telstra submits that Request erroneously states the test as to the circumstances in which relief may be refused on discretionary grounds where a judicial review ground vitiating a decision (relevantly, a failure to take into account a relevant consideration and a denial of procedural fairness) is established.  Telstra submits that to ask whether it “would have made any difference” if that ground had not existed involves legal error.

213               Telstra submits that where there is a failure to take into account a relevant consideration, relief will be refused only if that consideration was so insignificant that the failure to take it into account could not have materially affected the decision.  I referred to the relevant authorities in relation to a failure to take into account a relevant consideration at [192] above.

214               In the context of a failure to accord procedural fairness, Telstra refers to Stead v State Government Insurance Commission (1986) 161 CLR 141, where the Court stated (at 147):

… if the Full Court is properly to be understood as saying no more than that a new trial would probably make no difference to the result, their Honours failed to apply the correct criterion.  All that the appellant needed to show was that the denial of natural justice deprived him of the possibility of a successful outcome.  In order to negate that possibility, it was, as we have said, necessary for the Full Court to find that a properly conducted trial could not possibly have produced a different result.  [my emphasis]

 

The “possibility of a different result” was also referred to in the context of alleged failure to accord procedural fairness by Gaudron and Gummow JJ in Re Refugee Tribunal; ex parte Aala (2000) 204 CLR 82 (ex parte Aala) at 116-117, and by myself (Jenkinson J agreeing) in Girretti v Deputy Commissioner of Taxation (1996) 70 FCR 151 at 166.

215               In oral submissions, counsel for Request conceded that at times Request had described the relevant test loosely.  Request concedes that the correct test is the “possibility of a different result” test. 

The additional evidence – the cost model proposed by Telstra in the Adam/Telstra arbitration, the Adam Final Determination and the Adam FD Statement of Reasons

216               In the Adam/Telstra arbitration, ACCC again had to consider the issue of the appropriate periodic charge and connection and disconnection charges in respect of the LSS. 

217               As in the Request/Telstra arbitration, a cost model was used to determine the amount of the periodic charge.  The Adam FD Statement of Reasons reveal that Telstra had proposed an alternative cost model to that proposed by ACCC.  The cost model proposed by Telstra in the Adam/Telstra arbitration was, for all intents and purposes, the same as Telstra’s cost model in the Request/Telstra arbitration which, in the present proceeding, Telstra complains that ACCC failed to take into account.

218               There were differences in figures, for example in respect of the WACC, the debt ratio and the interest rate, in respect of the two models.  Those differences, however, are of no relevance.  There is evidence that after the figures for the WACC, the debt ratio and the interest rate in the cost model proposed by Telstra in the Adam/Telstra arbitration are brought into line with those in Telstra’s cost model in the Request/Telstra arbitration, the two outcomes generated are identical.

219               ACCC addressed the cost model proposed by Telstra at paras 642-645 of the Adam FD Statement of Reasons:

642       A cost model is a tool to convert assumptions and input values to a cost measure.  The cost model structure proposed by the Commission in respect of LSS annual charges works, is relatively well understood, and is transparent and flexible.  It adopts the structure and formulas and same level of detail that Telstra developed in submitting TSLRIC+ models to the Commission for consideration in prior regulatory proceedings, and which have subsequently been scrutinised by industry during regulatory proceedings before the Commission and the Tribunal.

 

643       In contrast, in its newly-developed cost model, Telstra has chosen to adopt a model structure with less detail and transparency over input data and intermediate calculations.  The result is that Telstra’s newly-developed model cannot be readily modified to adopt other modelling approaches, including the approach that the Commission advised the parties that it was likely to adopt in these proceedings.  The Commission has reached the view that it should proceed to calculate the TSLRIC+ of the LSS ‘specific-costs’ in accordance with the approach outlined to the parties.  As explained above, the Commission has reached this view after considering the parties’ submissions and the section 152CR criteria and 2007 LSS pricing principles.

 

644       While as Telstra suggests particular input values in its model can be varied so as to test other scenarios, the Telstra model cannot be configured by the simple alteration in input values so as to model the approach that was outlined to the parties in the August 2007 consultation paper.  Specifically, the Telstra model cannot be adjusted in this way to reflect the approach that was outlined (and which has been adopted) in respect of cost allocation and levelisation.

 

645       Nor can the Telstra cost model be readily adapted to reflect that approach.  This would require the introduction of many additional data, the replication of existing formulas and introduction of new formulas, and would essentially result in a new model.  The model’s outputs would also need to be directed towards financial years rather than calendar years.  The development of this third model is unnecessary in these proceedings, as the model that the Commission distributed to the parties is already configured in a way that allows the implementation of the approach that the Commission has chosen to adopt.

 

ACCC went on to note that no party had suggested that ACCC’s cost model could not derive a proper measure of the TSLRIC+ of the LSS-specific costs, but that Telstra had suggested amendments to “input values” used in ACCC’s model.  ACCC also noted Telstra’s submission that capital values should be restated for each year and that the amounts of allowances, such as for capital costs, should be increased. 

220               ACCC gave reasons for not adopting Telstra’s submissions.  In particular, ACCC noted that ACCC’s approach to levelisation meant that it was not appropriate to restate capital values each year within the single regulatory period being considered.

221               At para 653, ACCC identified the following factors as influencing (to varying degrees) the higher cost estimate that Telstra supported:  (1) the inclusion of all claimed capital costs and expenses on a CCA (FDC) basis;  (2) a higher WACC;  (3) the approach to cost allocation;  (4) the approach to levelisation;  and (5) revised figures for LSS and ULLS demand.  ACCC observed that these “issues of principle” had been discussed in detail elsewhere in its Adam FD Statement of Reasons.  These were the same five factors that had been identified by ACCC in the FD Statement of Reasons in relation to Telstra’s cost model in the Request/Telstra LSS arbitration – see [153] above.

222               ACCC noted (at para 654) that the contribution of each of Telstra’s claims to the higher claimed cost could not be calculated because Telstra’s cost model did not support “the calculation of TSLRIC+ measures for the relevant counter factual scenarios”.  ACCC stated that while changes could be made to correct for certain input values, the output from the cost model proposed by Telstra would remain informed by the remainder of its modelling assumptions that could not readily be varied, specifically as to the approach to levelisation and cost allocation.

223               ACCC went on to note (at para 655) that while it was not possible to reconcile precisely the output of each model, ACCC had manipulated (that is, sensitivity tested) the cost model proposed by Telstra in various ways.  Having done so, ACCC concluded (at para 656) that it was satisfied that there were “no factors that materially contribute[d] to the difference in the competing cost measures in addition to those identified and discussed at length in [the Adam FD Statement of Reasons]”.

224               Telstra does not submit that the cost model it proposed in the Adam/Telstra arbitration was different from that which it had proposed in the Request/Telstra arbitration.  Nor does Telstra submit that it did not have an opportunity to be heard in relation to the model in the Adam/Telstra arbitration.  In its application for judicial review of the Adam Final Determination, Telstra does not raise a ground based on the rejection of its cost model.  Telstra contends, however, that the evidence of ACCC’s dealing with the matter in that arbitration should not be admitted because it lacks the required degree of probative value.  In support, Telstra submits that:

1.                  What is decided in one access dispute is not probative of what “would have” been or will be decided in a completely separate access dispute (or, more correctly, on the question whether there is no possibility that a different result could have been arrived at in the separate dispute if the reviewable error had not been committed);

2.                  In the Adam FD Statement of Reasons, ACCC had regard to different considerations to those to which it had regard in the Request/Telstra arbitration;

3.                  The Adam Final Determination is itself the subject of a judicial review proceeding in this Court (NSD 70 of 2008) in which Telstra seeks to call into question aspects of the Adam FD Statement of Reasons.

225               I will briefly discuss these submissions in turn.  I say “briefly” because I have reached the conclusion that leave to reopen to put the two documents into evidence should be granted but that the documents should be accorded no weight.

226               The reason is that I reached the conclusion expressed at [200] above strictly on the evidence and submissions as they existed at the conclusion of the hearing on 7 December 2007, and prior to considering, and without any reference whatever to, the Adam Final Determination and the Adam FD Statement of Reasons.  I came to consider Request’s motion and those documents in that state of affairs.  In these circumstances, the only purpose that could be served by admitting the additional evidence would be to provide a further and alternative discretionary basis to support my decision.  I am not obliged to address that further and alternative discretionary basis to support my decision (and would not have been obliged to do so even if the documents had been tendered by Request during the course of the hearing).

227               The issues that are raised by the motion are complex as the brief summary of the parties’ submissions in the following paragraphs shows.  In circumstances in which it is not necessary that I deal with the discretionary ground, I have decided not to do so, but to admit the evidence and accord it no weight.

1. What is decided in one access dispute is not probative of what “would have” been or will be decided in a completely separate access dispute (or, more correctly, on the question whether there is no possibility that a different result could have been arrived at in the separate dispute if the reviewable error had not been committed)

228               Telstra submits that it cannot be assumed that ACCC “would have” decided in relation to Telstra’s cost model in the same way in the Request/Telstra and Adam/Telstra arbitrations.  Each arbitration must be decided on its own merits and there is no principle of stare decisis in administrative decision making.  Telstra cites statements by Tobias JA in Segal v Waverley Council (2005) 64 NSWLR 177 at [96] and by Deane J in Nevistic v Minister for Immigration & Ethnic Affairs (1981) 34 ALR 639 at 646-647, generally to the effect that an administrative decision-maker must decide each case on its facts and merits, and must not blindly follow a fixed policy.  It seems to be inherent in the submission that it should be accepted that ACCC may properly determine different charges for the supply of the (identical) LSS by Telstra to different access seekers, such as Request and Adam.

229               Telstra submits that if it succeeds in either this proceeding or the Adam/Telstra proceeding, it is not “inconceivable” that ACCC might take a different view of Telstra’s cost model from that which it adopted in the FD Statement of Reasons based on what has transpired in this proceeding and the Court’s reasons for judgment.  As well, according to Telstra, any subsequent consideration of Telstra’s cost model may be affected by the outcome of other grounds of review, in particular, those relating to the Pooling and Allocation Method (see Section C (Pooling and Allocation Method)) which might be relevant to a consideration of Telstra’s cost model.

230               On the other hand, the reasons that ACCC gave for not adopting cost model proposed by Telstra in the Adam/Telstra arbitration appear to relate exclusively to questions of economic principle having industry-wide relevance, which, prima facie, would be equally applicable to the circumstances of the Request/Telstra arbitration.  It is in the interests of justice and sound decision-making that a decision-maker decide consistently.

231               ACCC made the Final Determination on 1 August 2007 and the Adam Final Determination on 20 December 2007.  The period of the Final Determination expired on 31 December 2007, whereas the period of the Adam Final Determination began on 10 January 2008.  I infer that Telstra advanced its best case for the adoption of the Telstra cost model in the Adam/Telstra arbitration.

2. In the Adam FD Statement of Reasons, ACCC had regard to different considerations to those to which it had regard in the Request/Telstra arbitration

232               Telstra relies on the fact that in the Adam/Telstra arbitration, ACCC was required to apply different pricing principles from those which it had been bound to apply in the Request/Telstra arbitration.  It will be recalled that the LSS Pricing Principles were contained in Ch 7 of ACCC’s LSS Declaration Final Report of August 2002.  As mentioned at [97] above, in October 2007, ACCC made (or purported to make – Telstra’s challenge to their validity and its relevance is discussed below) new pricing principles under s 152AQA of the Act – the 2007 LSS Pricing Principles.  As Telstra observes, this was some months after ACCC made the Final Determination on 1 August 2007, but before the making of the Adam Final Determination on 20 December 2007.

233               Telstra draws attention to differences between the LSS Pricing Principles and the 2007 LSS Pricing Principles:

·                    unlike the LSS Pricing Principles, the 2007 LSS Pricing Principles specifically adopt the Pooling and Allocation Method;

·                    unlike the LSS Pricing Principles, the 2007 LSS Pricing Principles set out indicative prices for the supply of the LSS (in respect of both periodic charges and connection and disconnection charges);

·                    the indicative prices, including the LSS periodic charge, are stated to apply only from 1 January 2008 to 31 July 2009, which is beyond the period of the Final Determination which expired on 31 December 2007.

ACCC itself recognised in the Adam FD Statement of Reasons that the 2007 LSS Pricing Principles had introduced changes (in paras 68 and 80 of the Adam FD Statement of Reasons).

234               I accept that in the Adam/Telstra arbitration ACCC had regard to the 2007 LSS Pricing Principles as it was required to do by s 152AQA(6) of the Act (assuming that the 2007 Pricing Principles were valid).  Telstra refers to references to the 2007 LSS Pricing Principles in paras 59, 74, 318, 394, 522, 753, 884 and fn 38 on p 102 of the Adam FD Statement of Reasons.  I have read all of those passages.  In my view, the only one that has any significance for present purposes is para 522, where ACCC states that there are “particular aspects of Telstra’s modelling that would be inappropriate to adopt, having regard to the 2007 LSS pricing principles and the section 152CR criteria” (my emphasis).

235               Telstra draws attention to statements in the Adam FD Statement of Reasons to the effect that certain submissions by Telstra on certain particular issues were inconsistent with the 2007 LSS Pricing Principles.  For example, in para 587 ACCC refers to the fact that Telstra’s approach on a particular issue was inconsistent with the requirement in the 2007 LSS Pricing Principles that the Pooling and Allocation Method be adopted.   Paragraphs 446 and 617 also refer to that requirement of the 2007 LSS Pricing Principles.

3. The Adam Final Determination is itself the subject of a judicial review proceeding in this Court (NSD 70 of 2008) in which Telstra seeks to call into question aspects of the Adam FD Statement of Reasons

236               In proceeding NSD 70 of 2008 Telstra contends that the 2007 LSS Pricing Principles were invalid.  If they are held to be invalid it will be shown that s 152AQA(6) did not require ACCC to have regard to them, including the Pooling and Allocation Method.  If the Adam Final Determination is set aside as a result, then the Adam Final Determination can hardly provide a sound basis for exercising a discretion against granting relief in respect of the Final Determination with which I am concerned.

Conclusion on motion to reopen

237               A final submission put by Telstra is that the public interest in the finality of litigation tells against a grant of leave to reopen, referring to Telstra Corporation Ltd v Australian Competition and Consumer Commission (No 3) (2007) 99 ALD 268 at [16].   However, the circumstances of that case are far removed from those of the present one.  Importantly, it was not possible for Request to tender the additional documents during the hearing, and I had not delivered judgment when the notice of motion seeking leave to reopen was filed.

238               For the reasons I gave at [226], the Adam Final Determination will be admitted as Exhibit JEA1 and the Adam FD Statement of Reasons will be admitted as Exhibit JEA2 but they are accorded no weight.

B.        INVALIDITY OF FINAL DETERMINATION

Telstra’s Ground 4:   Decision made in excess of jurisdiction, not authorised by the Act and otherwise contrary to law because decision expressed to have effect until 31 December 2007, yet the declaration of the LSS pursuant to s 152AL(3) of the Act expired on 31 October 2007

239               Telstra’s Ground 4 relies on the fact that the Final Determination was expressed to have effect until 31 December 2007, but that at the time when the Final Determination was made on 31 August 2007, the LSS Declaration was due to expire on 31 October 2007.

240               Telstra argues that the Act confers jurisdiction on ACCC only to make a determination on access to a “declared service” and that to the extent that the Final Determination purported to apply to a period after 31 October 2007 (the date on which the LSS Declaration was due to expire), it was made in excess of jurisdiction.  Telstra contends that the Final Determination is therefore invalid to the extent that it purports to apply in respect of any period after that date.  (In written submissions Telstra had claimed that the Final Determination was also invalid in respect of the period prior to and after 31 October 2007.  However, in oral submissions, Telstra accepted that the Final Determination would be pro tanto valid down 31 October 2007: see s 46(2) of the Acts Interpretation Act 1901 (Cth).)

Chronology of relevant events

241               It is convenient to recount the following relevant events.

242               On 7 October 2002 ACCC declared the LSS to be a declared service (with effect on 16 October 2002) pursuant to s 152AL(3) of the Act.

243               On 19 November 2003 ACCC made a determination, taking effect on 3 December 2003, that the LSS Declaration would expire on 31 October 2007.

244               On 18 April 2006 ACCC received Request’s written notice of 13 April 2006 that an access dispute existed.

245               On 1 August 2007 ACCC made the Final Determination, taking effect on 22 August 2007 pursuant to s 152DN.  The Final Determination was expressed to expire on 31 December 2007, a date that post-dated the expiry date of the LSS Declaration as it then stood. 

246               On 26 October 2007 ACCC extended the expiry date of the LSS Declaration (with effect on 29 October 2007) until 31 July 2009 pursuant to s 152ALA(4) of the Act.  An extension of the expiry date of a specified declaration under s 152AL by ACCC pursuant to s 152ALA(4) has the effect that the extended expiry date becomes the expiry date of the declaration.  Accordingly, s 152ALA(5) had the effect here that as from 29 October 2007, the LSS Declaration would not cease to be in force on 31 October 2007 but would do so on 31 July 2009.

Relevant legislative provisions

247               ACCC’s power and duty to make a final determination are to be found in s 152CP of the Act (set out at [38] above).

248               ACCC’s jurisdiction to make a final determination in respect of an access dispute is activated by notification to ACCC in writing that an access dispute exists (s 152CM of the Act).  In the present case, it is s 152CM(1) that is relevant.  That subs provides:

(1)        If:

            (a)        a declared service is supplied, or proposed to be supplied, by a                             carrier or a carriage service provider; and

            (b)        one or more standard access obligations apply, or will apply, to the                       carrier or provider in relation to the declared service; and

            (c)        an access seeker is unable to agree with the carrier or provider about                   the terms and conditions on which the carrier or provider is to                                 comply with those obligations;

            then:

            (d)        the access seeker; or

            (e)        the carrier or provider;

            may notify the Commission in writing that an access dispute exists.

249               Where ACCC is seized of an arbitration, s 152CP(1) provides:

Unless the Commission terminates the arbitration under section 152CS, the Commission must make a written determination on access by the access seeker to the declared service.

250               Section 152DNA(4) provides that a provision of a final determination may be expressed to cease to have effect on a specified date.

The parties’ submissions

251               Telstra accepts that there is no express requirement in the Act that the expiry date of a final determination must precede the expiry date of the relevant declaration, or even that a final determination is required to specify an end date.  Indeed, s 152DNC(1) expressly contemplates that a final determination may be of an indefinite duration (see para (c)).

252               Telstra’s argument is that in the context of Pt XIC, s 152CP does not authorise ACCC to make a final determination on access except in relation to a declared service.  However, so the argument proceeds, to the extent that the Final Determination was to apply in respect of a period after 31 October 2007, it was to apply in respect of a service that was not a declared service and was therefore made beyond ACCC’s jurisdiction.

253               Telstra points to the following provisions of the Act and makes the following submissions in support of its “context argument”:

·                    Section 152CM(1):  This section allows an access seeker or the carrier or provider to notify ACCC that an access dispute exists only in respect of a declared service that is supplied, or proposed to be supplied, and to which one or more SAOs apply or will apply.  Accordingly, ACCC’s jurisdiction to arbitrate the dispute is limited by reference to the continued subsistence of a declared service.

·                    Section 152CP(2): This section provides that a determination “may deal with any matter relating to access by the access seeker to the declared service including matters that were not the basis of the notification of the dispute”.  Accordingly, ACCC’s jurisdiction is confined to matters relating to access by an access seeker to a declared service: matters relating to access to a service that has ceased to be declared fall outside that scope.  The Final Determination, in so far as it related to the period after 31 October 2007, did not deal with matters relating to access by an access seeker to a declared service.  Furthermore, paras (a) to (e) of s 152CP(2) provide examples of matters with which a determination may deal, and relate to the present supply of a declared service and assume that SAOs apply.  These matters have no place where a service has ceased to be declared.  It could not have been intended that ACCC have jurisdiction in circumstances in which a determination would have no operational effect.

·                    Section 152ALA: This section provides that a declaration of a service (under s 152AL) must specify an expiry date for the declaration (s 152ALA(1)) within the five year period beginning when the declaration was made (s 152ALA(2)).  ACCC must conduct a public inquiry within the 12 months prior to the expiry date of a declaration to determine whether, inter alia, the declaration should be extended, revoked, varied or allowed to expire (s 152ALA(7)).  A determination which pre-empts ACCC’s decision on the future of a declaration would undermine the legislative intention that declarations be reviewed at regular intervals.

254               Request, on the other hand, submits that the only requirement to enliven ACCC’s jurisdiction is that the service be a declared service at the time when ACCC is notified that an access dispute exists.  Section 152CM requires only that a service be “a declared service” at the time of the notification of the dispute.  The reference to “the declared service” (my emphasis) in s 152CP(1) refers, so Request’s submission goes, to the declared service that was the subject of the notification under s 152CM.  There is no requirement limiting ACCC’s power to make a determination that the service be a declared service at any other time.

255               Request and ACCC (as mentioned at [102] above, ACCC made submissions on the question of construction relevant to this ground) point to the following provisions of the Act and make the following submissions in support of the construction they advance:

·                    Section 152CQ:  This section imposes various restrictions on ACCC’s power to make determinations, but imposes none by reference to any time limitation or to the duration of the declaration of the relevant service.

·                    Section 152ALA(1) and (2):  By these provisions, the legislature expressly imposed restrictions on expiry dates for, and the duration of, declarations.  It can not be assumed that the legislature intended a similar restriction in respect of final determinations where none is expressed.

·                    Section 152DNA:  This section permits ACCC to backdate a determination, although only to a time no earlier than when the parties commenced negotiations and therefore to a time after the service became a declared service.  It follows that a final determination may have a role to play even though a declaration has expired and that a final determination is therefore not dependent on the continued subsistence of the declaration, so long as the service was declared at the time of notification.

256               Request also draws attention to the practical consequences of the limitation on ACCC’s power inherent in Telstra’s argument.  Request submits that it would provide an undesirable incentive for access providers (such as Telstra) to delay the outcome of an arbitration for as long as possible, and ideally until after the service ceased to be a declared service.  Telstra responds to this particular submission by arguing that it is ACCC, not the access provider, that controls the conduct, and therefore the pace, of an arbitration.  Telstra refers to such provisions as ss 152CLA, 152CT and 152DB as illustrations of provisions that give ACCC control over arbitrations under Div 8.

257               Any practical dilemma of the Final Determination extending beyond the expiry date of the LSS Declaration did not eventuate in the present case because the LSS Declaration was extended before its original expiry date (of 31 October 2007) arrived.  However, the parties appear to be in agreement that absent such an extension, and subject to the operation of s 152DNC (discussed below), the Final Determination would have ceased to be effective once the LSS Declaration expired.  The reason is that once the LSS ceased to be a “declared service”, the SAOs would no longer apply and the Final Determination, the role of which is to determine the terms and conditions on which the SAOs would apply, would be rendered redundant.

258               As Request and ACCC explain, the situation just described is no different from that in which a final determination did not specify an end date.

259               ACCC submits that this situation demonstrates the desirability as a practical matter of the construction of the Act’s provisions supported by Request.  Given the prospect that a declaration may be extended (pursuant to s 152ALA(4)), the jurisdiction to make a final determination that extends beyond the current life of a declaration may avoid a costly reagitation of the dispute by the parties in the event that the declaration is in fact extended.

260               Something further should be said about s 152DNC(1).  Section 152DNC(1) was inserted into the Act at the same time as s 152ALA which provides that a declaration must have an expiry date being not more than five years from the date on which it was made (see Telecommunications Competition Act 2002 (Cth)).  It is clear, and the parties agree, that s 152DNC(1) had no work to do in the circumstances of the present case because, as events transpired, the LSS Declaration did not in fact expire on 31 October 2007 (see s 152DNC(1)(a)).  However, submissions addressed the question whether the provision lent support to the view as to the extent of ACCC’s power put forward by the respective parties.

261               Request and ACCC say that this provision presupposes that a determination might have an end date that extends beyond the end date of a declaration.  Therefore, so their argument continues, Telstra’s proposition (that a limitation on ACCC’s power to make final determinations must be implied in order to preserve the harmony of Pt XIC) is incompatible with s 152DNC.  Telstra, on the other hand, submits that s 152DNC(1) assumes that in the absence of such a provision, a determination would cease to have effect on the date when a declaration expires.  Telstra contends that this “powerfully indicates” that ACCC has no jurisdiction to make a determination that extends beyond the expiry date of the declaration because it cannot have been the legislative intention that ACCC have jurisdiction to make a determination in the knowledge that it may cease to have effect prior to its stated expiry date.  Telstra also contends that s 152DNC was introduced only as a savings provision and applies only to determinations that were current at the time of its introduction.

262               It is not necessary for me to decide whether s 152DNC is merely a savings provision or not.  In my opinion, s 152DNC addresses only the question of the operation of a final determination for particular limited purposes after a declaration has expired.  If it says anything about the power of ACCC to make a final determination extending beyond the then current expiry date of the declaration, which is the question before me, it seems to assume the existence of such a power.  I refer in particular to the recognition in s 152DNC(1) of the possibility of a determination’s having an indefinite duration.  The indefinite duration of a final determination would necessarily travel beyond the maximum five-year life of the declaration of a service under ss 152AL and 152ALA.

Consideration

263               Section 152CM(1) was satisfied in the present case:  the LSS, a declared service, was both supplied and proposed to be supplied by Telstra to Request; SAOs applied and would apply to Telstra in relation to the LSS; Request was unable to agree with Telstra about the terms and conditions on which Telstra was to comply with the SAOs; and on 18 April 2006 ACCC received Request’s written notice of 13 April 2006 that an access dispute existed. 

264               There is no policy reason that I can see that militates against the view that the Final Determination could have an operation from 31 October 2007 down to its own end date of 31 December 2007, once the expiry date of the LSS Declaration was extended on 26 October 2007 (with effect from 29 October 2007) to 31 July 2009.    I do not think that the provisions to which Telstra points suggest otherwise.  I see nothing in the structure of Part XIC suggesting that the declared service must be a declared service other than at the time of the notification of the access dispute to ACCC.  If the declaration expires prior to the date on which the final determination expires, the final determination will simply have no work to do beyond the expiry of the declaration (subject to s 152DNC).

265               When a final determination is made, the access provider and the access seeker know that it will operate to its own end date subject to the service in question being a declared service in respect of which the final determination can, in accordance with its terms, have an effect.  So, to take the present circumstances, all parties must be taken to have known that the Final Determination would have work to do to 31 December 2007 if the existing expiry date of the LSS Declaration, namely 31 October 2007, was extended to cover the period down to 31 December 2007. 

266               A final determination may have an indefinite duration yet a declaration of a service under s 152AL must specify an expiry date in the five year period beginning when the declaration was made, and if the expiry date is extended or further extended the extension or further extension must not be for more than five years (see s 152ALA(1)-(5)).  Accordingly, the Act accepts that at least in the case of a final determination of indefinite duration, a final determination is not rendered invalid by reason of the fact that its life exceeds that of the declared service.

267               For the reasons given above, Telstra’s Ground 4 is not sustained.

 

C.        POOLING AND ALLOCATION METHOD

Telstra’s Ground 5(a):   Procedural ultra vires and failure to take into account a relevant consideration, namely, the direct costs of providing access to the LSS (s 152CR(1)(d) of the Act) in adopting the Pooling and Allocation Method (s 152CR(1)(d) of the Act)

Telstra’s Ground 5(b):   Procedural ultra vires and failure to take into account a relevant consideration, namely, the long-term interests of end-users and in particular the legitimate commercial interests of Telstra including its ability to exploit economies of scale and scope (ss 152CR(1)(a), and 152AB(2)(e) and (6)(b) of the Act ) in adopting the Pooling and Allocation Method

Telstra’s Ground 5(c):   Procedural ultra vires and failure to take into account a relevant consideration namely, the LSS Pricing Principles, by using the Pooling and Allocation Method (s 152AQA(6) of the Act)

Telstra’s Ground 6:        Error of law by misconstruing s 152CR(1)(d) of the Act in concluding that the Pooling and Allocation Method allowed Telstra to recover its costs, including its direct costs

General

268               This ground of review relates to the way in which, and the extent to which, Telstra is able to recover its direct costs of providing the LSS to an access seeker (Request).

269               In section 3.3.4 of the FD Statement of Reasons headed “Section 152CR(1)(d) the direct cost of providing access to the declared service”, ACCC stated that it considered that the direct costs of providing access to a declared service  were those incurred (or caused) by the provision of access, and included the incremental costs of providing access.

270               In the both the DFD Consultation Paper and the FD Statement of Reasons, ACCC noted that the expression “specific costs” when used in relation to the LSS refers to the incremental cost of providing the LSS and includes “the costs associated with ordering, provisioning and qualifying a line sharing service”.  Obviously, there are costs that Telstra will incur where it is required to give access to the LSS that it would not incur if it were itself to provide (through its Bigpond business division) the services in question to the same end-user.  ACCC referred to “IT system development and operational costs; connection costs; wholesale management costs; and indirect costs” as examples of LSS-specific costs.  However, ACCC conceded that some of those cost categories were recovered through LSS connection charges and would therefore not be relevant to LSS periodic charges.

271               In section 4.1.8 of the FD Statement of Reasons entitled “Specific costs”, under the heading “Cost allocation”, ACCC adhered to a view that it had expressed in section 4.1.8 of the DFD Consultation Paper.  That view was that for the purposes of the calculation of the LSS annual charge, the “specific costs” associated with (i) the LSS, (ii) the ULLS, and (iii) Telstra’s own internal costs of a nature equivalent to the specific costs associated with the LSS and ULLS, should all be pooled, and that the pool should be allocated to a demand base that included all downstream ADSL services, not just the LSS (Pooling and Allocation Method).

272               ACCC noted that Telstra opposed the concept of a pooling and allocation of specific costs while Request supported it.

The nature of the Pooling and Allocation Method

273               In order to understand the Pooling and Allocation Method, it is necessary to understand some of the different ways in which xDSL services may be provided across lines.

274               A first possibility is that Telstra itself (through its Bigpond business division) may use the line to provide broadband services to its retail customers.

275               A second possibility involves the LSS.  In this case Telstra makes available the high frequency spectrum of the line to another entity such as Request which uses it to provide broadband services to a customer. 

276               A third possibility is the ULLS.  In this case Telstra makes available both the high frequency spectrum and the low frequency spectrum of the line to the same other entity which uses them to provide services to a customer, while no part of the spectrum remains available for Telstra or another entity to use.

277               The Pooling and Allocation Method is best illustrated by way of a simplified example (which, no doubt, does not take into account certain complexities that exist in the real world).  Assume that there are 100 lines (from the Telstra exchange to end-users’ premises) that are being used for xDSL purposes.  Assume that five of the 100 are being used for LSS, another five for ULLS, and the remaining 90 by Telstra (Bigpond) to provide xDSL services to its retail customers.  Assume that the LSS-specific costs are $10.00 per line per month, that the ULLS-specific costs are also $10.00 per line per month, and that Telstra’s own internal costs of a nature equivalent to LSS-specific costs are $5 per line per month.  The total of these monthly costs for the 100 lines is therefore $550.  According to Telstra’s proposal, the LSS-specific cost in respect of each line used to provide a LSS would be passed on to the LSS access seeker.  That access seeker would therefore bear a cost of $10 per line per month, whereas Telstra’s own costs for providing xDSL services would be only $5.00 per line per month.  However, under ACCC’s Pooling and Allocation Method, the total pooled cost of $550 would be allocated across all 100 lines, giving a cost of $5.50 per line per month.  Accordingly, the costs to be borne by an access seeker in the case of the LSS would be reduced from $10.00 to $5.50 per line per month. 

278               It can be seen from the above example that the Pooling and Allocation Method aligns more closely the cost base of the access seeker with that of Telstra for the provision of an xDSL service to an end-user.  Of course, the extent to which each access seeker or Telstra chooses to pass on costs to an end-user is a matter for its decision.

279               In its submissions Telstra summarises the difference between ACCC’s approach and its own as follows:

First, the ACCC’s approach pools costs associated with a range of services.  By contrast, Telstra’s approach is concerned solely with the specific costs of the LSS alone.  Secondly, the ACCC divides the relevant cost pool by all downstream ADSL lines.  That is, in general terms, those costs are allocated to all lines being used to provide broadband services.  Those lines may be being used by Telstra itself to provide retail broadband services to its retail customers.  They may be being supplied by way of the ULLS or the LSS by access seekers to provide broadband services to their customers.  Telstra’s approach allocates the costs of the LSS to LSS lines only.  This is, of course, a smaller demand base than that adopted by the ACCC.

 

280               The Pooling and Allocation Method results in a lower charge for the LSS than Telstra’s approach would do (see [296] below).  However, this of itself says nothing as to the appropriateness of the approach.

Telstra’s grounds of review

281               Telstra relies on four grounds in relation to the Pooling and Allocation Method.

282               Telstra submits (Ground 5(a)) that by adopting the Pooling and Allocation Method ACCC failed to take into account a mandatory relevant consideration, namely, “the direct costs of providing access to the declared service” (s 152CR(1)(d) of the Act).  Telstra argues that its own approach involves the recovery from LSS access seekers of those direct costs in the LSS periodic charge, whereas the Pooling and Allocation Method involves an under-recovery of those costs in the LSS periodic charge.

283               Telstra’s Ground 6 also depends on s 152CR(1)(d) of the Act.  It is that ACCC made an error of law in its construction of that provision.  Telstra argues that, properly construed, s 152CR(1)(d) requires ACCC to take into account “the direct cost of providing access to the declared service [through the access charge for that declared service]”.  In support, Telstra refers to the  Access Pricing Principles guide; a decision of the Tribunal in Application by Optus Mobile Pty Limited & Optus Networks Pty Limited (2006) 205 FLR 29 (Optus Mobile) at [137]-[138]; and the LTIE.  Telstra submits that ACCC’s conclusion that the Pooling and Allocation Method allows Telstra to recover its direct costs of providing Request with access to the LSS (see [299] below) involves a misconstruction of s 152CR(1)(d) and therefore an error of law. 

284               Telstra emphasises that its submission is not that s 152CR(1)(d) requires ACCC to ensure that Telstra’s direct costs are in fact recovered via the access charge for the LSS, but rather that ACCC is required to take into account the correct matter when determining the access charge for the LSS, which is the direct costs of providing access to that service.  By concluding that the direct costs criterion of s 152CR(1)(d) was satisfied when Telstra did not recover the direct costs of providing Request with access to the LSS through the access charge to be made for the LSS alone, ACCC did not take into account the correct consideration made mandatory by s 152CR(1)(d).

285               Telstra submits (Ground 5(b)) that ACCC failed to take into account another mandatory relevant consideration, namely, whether the Final Determination would promote the LTIE (s 152CR(1)(a)).  As a particular of this ground, Telstra contends that ACCC failed to have regard, as the Act required it to do, to the extent to which the Pooling and Allocation Method was likely to result in the achievement of the objective of encouraging the economically efficient use of, and the economically efficient investment in, the infrastructure by which the LSS was supplied (s 152AB(2)(e)), and, in particular, Telstra’s legitimate commercial interests, including its ability to exploit economies of scale and scope (s 152AB(6)(b)).

286               Telstra submits that s 152AB(6)(b) recognises that the supplier of a declared service has a legitimate interest in being able, as a vertically integrated firm, to exploit economies of scale and scope, and that  ACCC and the Tribunal have accepted that this is so.  Telstra refers again to the Access Pricing Principlesguide and Optus Mobile at [122] to [124].

287               Telstra gives examples of economies of scope and scale.  A firm that is vertically integrated may be able to supply a service more cheaply than one that operates at a one functional dimension because a particular cost item, such as an ordering system for a wholesale input, is not a cost that the vertically integrated firm incurs.  The capacity of the vertically integrated firm to avoid that cost, and so to produce and sell the retail service at a lower price, may be regarded as an “economy of scope”.

288               Similarly, a company with a larger market share than its competitors may be able to supply a service more cheaply than those competitors, and this may give rise to economies of scale.

289               Telstra argues that the Pooling and Allocation Method prevents it from exploiting any relevant economies of scope and scale that it might otherwise enjoy.  According to Telstra, Request had not addressed the application of s 152AB(6)(b) to the matters in dispute in its submissions to ACCC, whereas Telstra had provided “detailed submissions” on that issue.  ACCC failed, so the argument goes, to have regard to s 152AB(6)(b) and to Telstra’s submissions to ACCC on that provision.

290               Telstra submits (Ground 5(c)) that ACCC failed to have regard to the LSS Pricing Principles (s 152AQA(6) of the Act).  In the LSS Pricing Principles, ACCC adopted a TSLRIC pricing methodology (specifically, a TSLRIC+ pricing methodology) for the LSS.  In addition to the requirement imposed on ACCC by s 152AQA(6) of the Act to have regard to the LSS Pricing Principles, ACCC indicated in the DFD Consultation Paper that it was minded to apply the LSS Pricing Principles in making the Final Determination.  In the FD Statement of Reasons, moreover, ACCC stated that it accepted the TSLRIC pricing methodology. 

291               However, according to Telstra, the Pooling and Allocation Method is “radically inconsistent” with the TSLRIC pricing methodology because it does not base the calculation of the LSS annual charge on the TSLIRC of the LSS.  It submits that ACCC made only “mere formalistic reference” to TSLRIC in the FD Statement of Reasons, and,  importantly, did not refer to that aspect of the LSS Pricing Principles that stipulates that it is reasonable for an access provider to recover incremental LSS-specific costs through the LSS access charge.

History

292               Request draws attention to the fact that on at least eight occasions prior to the Final Determination, ACCC and the Tribunal have determined that the statutory criteria set out in Part XIC are better served by a pooling and allocation of costs than by the method proposed by Telstra.  The eight instances are referred to in the following paragraphs.

(1)        The first instance is ACCC’s October 2004 Assessment of Telstra’s undertakings for PSTM, ULLS and LCS: Draft Decision.  ACCC distinguished between “the first regulatory period” when the ULLS was established as a new service and future regulatory periods.  ACCC accepted that there would be ULLS-specific costs in the initial regulatory period, “in particular development costs, staffing costs and operational costs in the period during which the optimal design was determined”.  ACCC expressed the view (at 64) that in the case of subsequent regulatory periods efficiency dictated that there would be costs common to a number of related services which should be pooled then allocated and recovered across those services.

(2)        The second instance is ACCC’s March 2005 ULLS Undertakings Discussion Paper.  ACCC noted (at p 19) that since the declaration of the ULLS, there had been debate over which services should contribute to the ULLS-specific costs.  ACCC had initially stated that ULLS-specific costs should be recovered solely from ULLS access seekers, but several ULSS access seekers had argued that they should be recovered over a wider range of services.  ACCC noted Telstra’s submission to the contrary.  ACCC outlined three perspectives from which the issues could be viewed (namely, the width of the definition of “service” within the concept of TSLRIC;  the perspective of competitive neutrality found in s 152AR of the Act;  and the perspective of integration of systems) and invited comments on them.

(3)        The third instance is ACCC’s August 2005 ULLS and LSS Undertakings Draft Decision, sections 6.2 and 7.2 and Appendix A.  At para 6.2.1, ACCC summarised its conclusions in relation to ULLS-specific costs, including its view that it was appropriate that specific costs be recovered from a larger customer base than that proposed by Telstra, and that ideally they should be recovered from the largest customer base possible, including Telstra’s own customer base.  In relation to LSS-specific costs, ACCC stated (at para 7.2) that, as with ULLS-specific costs, there are “compelling arguments under the statutory criteria” to spread the costs across a broader range of services, and that for the reasons set out in Appendix A, ACCC believed it would be preferable to move to a broader cost  recovery base.

(4)        The fourth instance is ACCC’s December 2005 ULLS and LSS Undertakings Final Report.  ACCC repeated the views referred to in [292](3) above, and concluded (at [7.2]), in relation to the LSS periodic charge proposed by Telstra, that it was not necessary to come to a definitive view on the cost recovery base because under any method chosen the charges referred to in Telstra’s proffered undertaking were not reasonable (see s 152BV(2)(d) of the Act).

(5)        The fifth instance is the Tribunal’s 2006 Decision at [121]–[166].  The proceeding before the Tribunal was an application by Telstra pursuant to s 152CE(1) of the Act for review of ACCC’s decision under s 152BU(2) rejecting Telstra’s proffered access undertaking in respect of the LSS. 

In addressing “cost allocation”, the Tribunal stated (at [131]) that the allocation method supported by Telstra imposed all of the specific costs of providing the LSS onto its competitors, thereby raising their costs, in terms of competing with Telstra, as providers of retail DSL services.  According to the Tribunal, it followed that it was necessary to consider whether, having regard to the matters identified in ss 152AH and 152AB of the Act, it was reasonable for Telstra to restrict its allocation of what it claimed to be its LSS-specific costs to lines used, or forecast to be used, to provide the LSS (at [132]).  It will be recalled that the s 152AH mandatory considerations are, subject to one exception not presently relevant, identical to the s 152CR mandatory considerations that are of present concern (see [24] and [40] above). 

The Tribunal decided (at [134]), inter alia, that where Telstra was competing with access seekers in the retail DSL market, it was not in Telstra’s “legitimate business interests” to impose all its LSS-specific costs on those access seekers and to bear none of them itself. 

In relation to economies of scope and scale, the Tribunal stated (at [160]) that it was not necessary for Telstra to recover its LSS costs from LSS lines only, in order for it to be able to take advantage of these economies.  The Tribunal made the point that even with LSS-specific costs spread over a broader demand allocation base, Telstra would still be likely to have more retail customers and to provide more retail services than its rivals, with consequent advantages of economies of scope and scale.

(6)        The sixth instance is the Second Draft ID Issues Paper of October 2006 at pp 3-5 in which ACCC noted that the Tribunal’s 2006 Decision confirmed that there should be  a pooling of LSS-specific costs.

(7)        The seventh instance is the Second ID Statement of Reasons of 21 December 2006.  ACCC discussed the measurement of LSS-specific costs, and in particular whether they would approximate ULLS-specific costs. 

(8)        The eighth instance is found in the DFD Consultation Paper of 30 March 2007.  As noted above, the issue of Pooling and Allocation Method was dealt with in section 4.1.8 headed “Specific costs”.  I noted at [270] above ACCC’s explanation of the expression “specific costs” in the DFD Consultation Paper.

In section 4.1.8 ACCC referred to a pooling and allocation approach having been adopted by ACCC in the December 2005 ULLS and LSS Undertakings Final Report, and stated that it was consistent with the reasoning of the Tribunal in the Tribunal’s 2006 Decision.  ACCC concluded that it was important to note that it was only the like-for-like incremental costs associated with a Telstra internal request for line sharing (when a retail or wholesale ADSL service was requested) or a request for line sharing, or access to the full spectrum on the line from an external service provider (LSS or ULLS), that are to be pooled and allocated.  Costs associated with the conversion of line sharing into a downstream service are not included.

293               Telstra submits that consideration of a pooling and allocation approach in other contexts, such as the eight instances referred to above, provides no assistance in relation to the question whether ACCC fell into reviewable error in making the Final Determination.  Telstra points to the fact that in other contexts ACCC may not have been required to have regard to the s 152CR(1) criteria, or may have been required to have regard to additional considerations.  As an example, Telstra refers to the Tribunal’s 2006 Decision (see [292](5) above).  The power exercised by ACCC to which the Tribunal’s finding was directed required ACCC to have regard to the direct costs of providing access to a declared service, but subject to an overarching test of reasonableness, and with no express obligation to have regard to the LSS Pricing Principles in which ACCC accepted that LSS-specific costs should be recoverable in the LSS access charge (see [336] and [337] below).  

294               I agree with Telstra that the consideration of a pooling and allocation approach as against various criteria in other contexts does not provide “direct and authoritative guidance” as to whether ACCC fell into reviewable error by adopting the Pooling and Allocation Method in the Final Determination.  I do not rely on them for that purpose.  Their relevance is limited.  In so far as particular passages in the FD Statement of Reasons refer to them or to any of them, those passages may, properly understood, incorporate the reasoning processes in the passages referred to.  In addition, they may be relevant as showing a commonly understood background against which the FD Statement of Reasons is to be read.  They also negate any suggestion that the Pooling and Allocation Method was a novel idea introduced at the Final Determination stage.  Finally, the previous eight instances show the context in which certain earlier statements relied on by Telstra that were made by ACCC prior to the eight instances are to be viewed.

The FD Statement of Reasons

295               As mentioned at [271] above, in the FD Statement of Reasons under the heading “Cost allocation”, ACCC adopted the Pooling and Allocation Method which had been described in the DFD Consultation Paper.

296               ACCC noted three approaches to pooling:  that of Telstra which was opposed to pooling;  that of Request (and Chime) which supported pooling but proposed that the allocation should occur over all copper lines, not only ADSL lines;  and that which ACCC proposed (see above).  ACCC noted that adopting Telstra’s position would result in a higher access charge, while adopting Request’s position would lead to a lesser access charge.  ACCC also noted that its approach was consistent with the reasoning of the Tribunal in the Tribunal’s 2006 Decision at [150] to the effect that a spreading of the LSS-specific costs over a broader range of services would be more likely to promote competition between the providers of those services.  ACCC announced that having considered the parties’ submissions, it remained of the view that the approach it had proposed was “to be preferred having regard to the s 152CR(1) criteria”.

297               ACCC stated:

The Commission considers that its proposed approach, as compared to the Telstra approach, promotes competition, by better enabling LSS and ULLS based service providers to compete on an equal footing with Telstra’s wholesale and retail DSL services.  This supply has to date brought benefits to end-users in relevant service areas, in particular, by supporting higher quality, ADSL 2+, services.

 

298               ACCC went on to reject both the approach supported by the access seekers and that supported by Telstra.  In relation to the latter, ACCC stated:

The Commission considers that Telstra’s approach would tend towards encouraging less efficient use of and investment in ordering systems used to supply to LSS and ULLS, as well as infrastructure used to supply downstream DSL services.  As associated costs would only be met from access seekers, Telstra would have less incentive to ensure that investments were necessary and implemented at efficient cost levels.  Higher resulting unit costs for access seekers would discourage use of LSS and ULLS below efficient levels.  These inefficiencies would flow through to downstream services.

 

299               ACCC also stated:

Telstra’s legitimate commercial and business interests in this context involve it being able to recover its costs, including the direct costs associated with the LSS, and a normal return on its capital employed.  Theses [sic] interests are currently being met, and there is little if any potential that adopting any of the three proposed approaches [those of Telstra, the access seekers, and ACCC] would prevent Telstra from continuing to do so. 

 

The access seekers [sic] interest lies in being able to enter markets and compete on their relative merits.  The Commission considers that in this context it is access seekers’ ability to enter downstream DSL markets that should be assessed.  The Commission considers that its approach satisfies these interests.   Telstra’s proposed approach would not, as it would necessarily inflate LSS access seekers’ cost base relative to Telstra’s.  The approach advanced by access seeker’s [sic] would also be consistent with their interests, but the Commission considers moving to this position is unnecessary to ensure those interests are met.

 

Consideration

Telstra’s Ground 6

300               Ground 6 addresses the construction of s 152CR(1)(d) and I deal with it first.

301               Telstra’s submission is that in order to “take into account” “the direct costs of providing access to the declared service”, ACCC must take those costs into account “through the access charge for that declared service”.  Telstra continues:

It is erroneous to treat s 152CR(1)(d) as having been met in relation to a declared service where that service is priced below the direct costs, but cost recovery can be achieved by raising the price of some other service.  In finding that Telstra will recover its direct costs by application of the [Pooling and Allocation Method], the ACCC misconstrued s 152CR(1)(d).

 

Later in its submissions, Telstra puts its case as follows:

Section 152CR(1), considered in its entirety, is not intended to endorse the pricing of a service below cost, so that access providers must subsidise the operations of access seekers.  Rather, the criteria are intended to support efficient cost based pricing of a declared service.  This has been recognised both by the Tribunal and the ACCC on repeated occasions.  If the statutory criteria were intended to endorse the pricing of a service below cost, so that access providers had to subsidise the operations of access seekers, one would have expected that such an unlikely consequence would have been expressly mandated.

 

302               ACCC explained its approach to the s 152CR(1)(d) criterion in section 3.3.4 of the FD Statement of Reasons.It addressed the Pooling and Allocation Method separately in section 4.1.8 headed “Specific costs” under the sub-heading “Cost allocation”.

303               In section 3.3.4 ACCC accepted:

·                    that the direct costs referred to in para (d) of s 152CR(1) were costs incurred (or caused) by the provision of access and included the incremental costs of providing access;

·                    that the criterion did not extend to permitting compensation for loss of any “monopoly profits” that occurred as a result of increased competition; and

·                    that the Tribunal had considered that the direct costs criterion was concerned with ensuring that the costs of providing the service were “recovered”.

304               In connection with this last proposition, ACCC referred in fn 15 to “Telstra Corp Ltd [2001] ACompT 4 (7 Dec 2001) at paragraph [92]”.  The reference should have been to the Tribunal’s 2006 Decision ([2006] ACompT 4) at [92].  In the Tribunal’s 2006 Decision at [92], the Tribunal stated in passing that “a consideration of direct costs in [s 152AH(1)(d)] is concerned with ensuring that the costs of providing the service are recovered”, without saying anything about the source of the recovery.  ACCC went on immediately in the FD Statement of Reasons to observe as follows:

More recently, the Tribunal has noted that direct costs could conceivably be allocated (and hence recovered) in a number of ways, and that adopting any of those approaches would be consistent with this criterion.

 

Telstra’s approach to estimating a per unit cost is likely to be consistent with ensuring recovery only of direct costs.  However, while direct costs will be incurred by Telstra in order to provide the declared service, there are a number of cost allocation methods other than that adopted by Telstra (including those suggested by the Commission and other interveners in this matter) that would enable it to recover the direct costs of investment in infrastructure necessary to provide a LSS.  (Re Telstra Corporation Ltd [2006] ACompT 4 at [139]).

 

ACCC’s expression “More recently” is odd, since both passages occur in the same Reasons for Decision of the Tribunal.  The explanation may be that ACCC had wrongly thought that the Tribunal’s statement concerning recovery of costs had been made in a decision given in 2001 rather than, as was the case, in 2006.  In any event, as noted above, the Tribunal’s statement said nothing about the source of recovery.

305               Be all this as it may, ACCC correctly understood that the Tribunal did not see para (d)’s notion of “the direct cost of providing access to the declared service” as dictating “recovery” of those costs in any particular manner or from any particular source.

306               Telstra’s submission raises an interesting issue of construction but I do not think it prevails.  In substance, my reason is that the requirement to “take into account” in s 152CR(1), in its application to the matters listed in paras (a) to (g), some of which may be seen to point in opposite directions, allows much latitude to ACCC, and is not a requirement that ACCC take the matters or any of them into account in one particular way or with one particular result.

307               The expression “direct costs” was explained in the Explanatory Memorandum for the Trade Practices Amendment (Telecommunications) Bill 1996 (at p 44) as excluding “consequential costs which the provider may incur as a result of increased competition in an upstream or downstream market”.  The expression was chosen to mark costs that were not to be taken into account.  The present ground does not raise a question as to the scope of the expression “direct costs”.

308               It is true, as Telstra points out, that soon after Pt XIC was inserted into the Act, ACCC made a statement in conformity with Telstra’s present submission.  In July 1997, in the Access Pricing Principles guide (at p 10) ACCC stated that the requirement of s 152CR(1)(d) implied that “at a minimum, an access price should cover the direct incremental costs incurred in providing access”.  However, beginning in October 2004, ACCC came to abandon that view as the eight instances referred to at [292] above show.  In any event, neither the earlier statement by ACCC on which Telstra relies, nor the subsequent eight instances, is of much relevance to the issue of construction presently of concern.  Likewise, the Tribunal’s statement in Optus Mobile to which Telstra referredis not helpful if for no other reason than because it related to something that was not in issue between the parties.

309               I accept that s 152CR(1)(d)’s requirement that ACCC take into account the direct costs to Telstra of providing Request with access to the LSS, is a requirement that it take them into account as a factor in Telstra’s favour in the sense of a factor contributing positively to the amount of the periodic charge to be fixed.  In this way, some question as to recovery is inevitably raised by the very notion of direct costs.  ACCC accepted that this is so when, in its discussion of the inclusion of a contribution to line costs in the LSS periodic charge, it stated (at 4.1.7) that para (d) “calls for consideration of Telstra’s ability to recover these costs”.

310               In my opinion, there is no basis for saying, however, that ACCC misconstrued s 152CR(1)(d) by not assessing recoverability exclusively through the charge to be made by Telstra for the LSS alone.  I do not accept that s 152CR(1)(d), on its proper construction, requires such an approach.

311               There are countervailing considerations that s 152CR(1) requires ACCC to take into account.  In particular, it must take into account the LTIE of carriage services or of services supplied by means of carriage services (para (a) of s 152CR(1)).  In fact, this broad consideration includes not only the LTIE of the LSS, but also the LTIE of “carriage services or, of services provided by means of carriage services”.  It is difficult to conceive of a broader concept.  Paragraph (a) embraces the LTIE of all services provided over the ULL, including, of course, the LSS.  In determining whether a particular thing promotes the long-term interests of those various end-users, ACCC is required to have regard to various matters, including the extent to which the thing is likely to result in the achievement of the objective of promoting competition in markets for those services (s 152AB(2)(c)).

312               There is therefore a potential tension between the criteria of the LTIE referred to in para (a) and Telstra’s recovering its direct costs of providing access referred to in para (d). They must be weighed and balanced.  I am not persuaded that para (d) of s 152CR(1) should be construed in accordance with Telstra’s submission.  All that para (d) requires is that ACCC genuinely take Telstra’s direct costs of providing access into account, and to resolve the potential tension with para (a) (and other paras of s 152CR(1)) having regard to the object of Pt XIC.  That object stated in s 152AB(1) was, again, the promotion of the LTIE.

313               I agree that the Pooling and Allocation Method involves “cross-subsidisation” as Telstra contends, however, such cross-subsidisation may serve the object of Pt XIC, namely the LTIE, and I do not think that s 152CR(1)(d) is to be construed so as to preclude it.

314               In the result, I do not accept that ACCC misconstrued s 152CR(1)(d) or that taking that provision, on its proper construction, into account is inconsistent with ACCC’s adoption of the Pooling and Allocation Method.

Telstra’s Ground 5(a)

315               Ground 5(a), which also turns on s 152CR(1)(d) of the Act, is largely addressed by what I said above in relation to Ground 6.

316               ACCC did take into account and give genuine consideration to Telstra’s direct costs of providing access to the LSS.    It is not to the point that its doing so did not result in Telstra recovering its direct costs through the LSS annual charge alone. 

317               Until 2005, ACCC used the method supported by Telstra, that is to say, it treated service-specific costs as recoverable solely from the access seekers of each service.  In its March 2005 ULLS Undertakings Discussion Paper(to which I referred at [292](2) above), ACCC noted that this approach had been called into question and invited submissions on the issue.  

318               ACCC subsequently adopted an approach that pooled and allocated costs, and the rationale for doing so has been explained in the documents referred to at [292] above.

319               Essentially, in ACCC’s view, there was a problem associated with the existing method of charging the access seekers alone.  This was that because Telstra (Bigpond) did not purchase the particular declared service from Telstra, it did not incur certain service-specific costs that were incurred by its competitor access seekers.   If all of those costs were passed on to the access seekers, they could be expected to pass them on to their customers and would be placed at a competitive disadvantage vis-à-vis Telstra.  This would not be in the LTIE because end-users, acting rationally, would purchase from Telstra and not from the access seekers, with the result that the latter would disappear from the market and Telstra would be left without competitors. 

320               As noted above, in the FD Statement of Reasons ACCC explained its reason for adopting the Pooling and Allocation Method.  ACCC gave serious consideration to Telstra’s direct costs.  However, it remained of the view that its Pooling and Allocation Method in respect of those costs was preferable to Telstra’s approach, having regard to all of the criteria of s 152CR(1).

321               ACCC considered that under the Pooling and Allocation Method, Telstra would be able to recover in full its LSS-specific costs, albeit not from the LSS access seekers alone.

Telstra’s Ground 5(b)

322               Section 152CR(1)(a) obliged ACCC in making the Final Determination to take into account the promotion of the LTIE.  As noted at [17], this required ACCC to have regard, inter alia, to the objective of encouraging the economically efficient use of, and the economically efficient investment in infrastructure (s 152AB(2)(e)).  In determining the extent to which a particular thing was likely to result in the achievement of this objective, ACCC was required to have regard to, inter alia, Telstra’s legitimate commercial interests including its ability to exploit economies of scale and scope  (s 152AB(6)(b)).  Telstra criticises ACCC for not making specific reference to s 152AB(6)(b) in the FD Statement of Reasons in its discussion of the Pooling and Allocation Method.

323               Telstra points to:

·                    aspects of its submissions which did not elicit a specific response in the FD Statement of Reasons;

·                    a statement by ACCC in the 1997 Access Pricing Principles guide that the access charge should allow vertically integrated firms to exploit economies of scale and scope to deliver services to end-users at least cost; and

·                    a statement by ACCC referring to economies of scale and scope in Optus Mobile (at [124]).

324               I am not persuaded that ACCC failed to take into account and give genuine consideration to economies of scale and scope and think that it did so. 

325               When discussing “Cost allocation” in the FD Statement of Reasons, ACCC stated that its Pooling and Allocation Method was to be preferred having regard to the s 152CR(1) criteria (see [296] above).  ACCC went on to discuss several of those criteria specifically.  Although ACCC did not expressly refer to Telstra’s ability to exploit economies of scale and scope in its discussion under the heading “Cost allocation”, its broad reference to having had regard to the s 152CR(1) criteria needs to be read in light of the FD Statement of Reasons as a whole.

326               Prior to its discussion of “Cost allocation”, ACCC had discussed its general view of the s 152CR(1) criteria in some detail.  In relation to s 152CR(1)(a), and in particular s 152AB(2)(e), ACCC made the following comment:

…the Commission considers that access charges that reflect the efficient, forward-looking costs … are consistent with the access provider’s legitimate commercial interests and, in particular, enable access providers to exploit economies of scale and scope. [my emphasis]

327               When explaining its own views on cost allocation, ACCC stated that its Pooling and Allocation Method was consistent with the reasoning in the Tribunal’s 2006 Decision.  In this way, ACCC adopted (although it did not specifically refer to) the Tribunal’s conclusion (at [160]) that a pooling and allocation approach still allowed Telstra to exploit its economies of scope and scale at the retail level when competing in the provision of telecommunication services provided over its CAN to end-users (I referred to the Tribunal’s 2006 Decision at [160] at [292](5) above). 

328               No doubt ACCC might have discussed the issue of economies of scale and scope in greater detail.  The question, however, is whether it is established that ACCC failed to “take into account” economies of scale and scope.  In my opinion that is not established.

329               I think that ACCC’s broad comment that it had considered the s 152CR(1) criteria, when read in light of its earlier discussion of ss 152CR(1)(a)  and 152AB(2)(e), and its reference to the Tribunal’s 2006 Decision, provides sufficient evidence that although it did not explicitly discuss Telstra’s ability to exploit economies of scale and scope in relation to cost allocation, ACCC did have genuineregard to that consideration and to Telstra’s submissions in relation to it.

Telstra’s Ground 5(c)

330               Section 152AQA(6) of the Act required ACCC to have regard to the LSS Pricing Principles which, it will be recalled, were found in Ch 7 of the August 2002 LSS Declaration Final Report.  Telstra’s contention is that by adopting the Pooling and Allocation Method, ACCC failed to do so because that Method was inconsistent with the TSLRIC pricing methodology adopted in the LSS Pricing Principles.

331               Chapter 7 of the LSS Declaration Final Report comprises pp 79-102 of that document.  At p 79, ACCC stated that Ch 7 represented its thinking “at [that] stage” on the form that pricing principles should take for a declared LSS, but immediately continued:  “In this regard, the chapter constitutes the Commission’s final pricing principles for a LSS”.  It follows that Ch 7 constitutes the LSS Pricing Principles.  However, Ch 7 contains much more than a succinct setting out of pricing principles.  The section headings in Ch 7 were:

7.1       Legislative criteria

7.2       Which generic form of pricing principle is appropriate for a LSS?

7.3       Specific issues in the application of TSLRIC to a LSS

7.4       Other Issues

7.5       Summary of pricing principles

332               In section 7.1 ACCC noted the importance of the consideration of the LTIE, and referred to ss 152AB(2) and 152AH(1) and (2) of the Act.

333               In section 7.2 ACCC noted that in the 1997 Access Pricing Principles guide it had concluded that in the usual case ACCC would apply the TSLRIC methodology in determining access prices.  ACCC then described TSLRIC in some detail as follows:

The concept of TRSLRIC can be understood by breaking it up into its components:

 

     ·     ‘Total service’ refers to it being the cost of production of an entire service (or a production element) not to the cost of a particular unit.  However, with respect to carriage services, it is usually expressed on a per-minute (or per line) basis by dividing the annual total service cost by the number of minutes or lines carried.

     ·     ‘Long run’ refers to it being a long-run cost concept in contrast to a short-run one.  In the short run the amount of at least one factor of production (usually capital equipment) is fixed, while in the long run all factors of production can be varied.

     ·     ‘Incremental cost’ means that it is a form of ‘marginal cost’, although not the more familiar ‘marginal cost’ of the change in cost incurred through a change in the amount of output produced. [a footnote states ‘incremental’ and ‘marginal’ are synonymous and used interchangeably]

     ·     In it also an attributable cost concept as it refers only to those costs that can be attributed to the production of the service.  Costs common to more than one service cannot be attributed to a particular service and therefore do not form part of TSLRIC.  However, in practice, it is sometimes defined to include a contribution to indirect and overhead costs (‘TSLRIC+).  Sometimes an additional supplement is also included in recognition of an access deficit (‘TSLRIC++’).

 

Given these attributed TSLRIC can be defined in the following alternative ways:

 

     ·     It is the incremental or additional cost – on an annual basis – the firm incurs in the long run in providing a particular service (or production element) as a whole, assuming the scale of all of its other production activities remain unchanged; or

     ·     It is the total cost (on an annual basis) the firm would avoid in the long run if it ceased to provide the services as a whole.

 

For the purposes of estimating a TSLRIC figure, the TSLRIC of supplying a service can be expressed as the sum of the operating and maintenance costs and the capital costs (both physical and the risk-adjusted opportunity cost of capital) that the firm incurs in providing the service as a whole over a certain forward-looking period, typically annually.

 

After discussion of the parties’ submissions ACCC expressed its belief that, as for the ULLS, so for the LSS, a TSLRIC methodology was the most appropriate (p 84).

334               In section 7.3, ACCC began by noting that choosing the general type of pricing principle was only the first stage in developing pricing principles for a declared service, and that “many variations” were possible depending on the specific features of the declared service.  Most of section 7.3 was devoted to the question of a contribution to line costs – a matter not presently relevant.

335               Section 7.4 is not of present relevance either.

336               Most of section 7.5, headed “Summary of pricing principles”, was devoted to ACCC’s rejection of the inclusion of a contribution to line costs.  However, the first two paragraphs and the last paragraph are of present relevance (pp 101, 102):

In summary, the Commission believes that there are two types of cost that could be included in the price of a LSS – incremental LSS-specific costs and some allocation of the costs of a line over which a LSS is provided.

 

The Commission believes that it is reasonable for an access provider to recover incremental LSS-specific costs through the access charge for a LSS.

 

…

 

 

Hence, the price of Telstra’s LSS should only equal its LSS-specific costs.  The Commission believes these costs should not vary according to different geographic regions. [my emphasis]

 

337               I accept Telstra’s submission that the LSS Pricing Principles included a principle that the incremental LSS-specific costs should be recovered through the access charge for a LSS, and its submissions that the Pooling and Allocation Method is inconsistent with this principle.

338               However, the requirement to have regard to the LSS Pricing Principles (and the principles therein) did not require ACCC to adhere to those principles as if they had the force of legislation.  The question, rather, is whether ACCC had genuine regard to them.  Did ACCC appreciate that it was formulating a final determination that was inconsistent with them, in the respect mentioned?  I think that it did.

339               In section 4.1.8 of the FD Statement of Reasons under the heading “Specific costs”, ACCC noted that in accordance with the LSS Pricing Principles, “LSS prices should be cost based, with necessary cost estimates derived from a TSLRIC+ methodology”. ACCC went on to state:

There are a number of matters that need to be considered in implementing the TSLRIC+ methodology, and views reached on a number of such matters have the potential to influence … the measurement of TSLRIC+.  These are discussed in turn below.

 

For those matters considered to have a material bearing on TSLRIC+, and hence the LSS annual charges set in this arbitration, and where alternative approaches that could be practically implemented have been advanced, the Commission has considered these approaches against the section 152CR(1) criteria.

 

The Commission then assesses against the section 152CR(1) criteria the LSS annual charges that would follow from the adoption of the various approaches to these particular issues.

340               This extract shows that ACCC used a TSLRIC+ methodology, as specified in the LSS Pricing Principles, as a starting point, and then proceeded to balance the requirements of the LSS Pricing Principles with the other mandatory considerations that it was required to take into account.

341               In expressing the “Commission’s views” in section 4.1.8 of the FD Statement of Reasons, ACCC referred to ACCC’s having adopted a pooling and allocation approach in its December 2005 ULLS and LSS Undertakings Final Report and to the statement made in the Tribunal’s 2006 Decision at [150] in which the Tribunal noted that a “spreading” of LSS-specific costs over a broader range of services would be more likely to better promote competition.

342               In the December 2005 ULLS and LSS Undertakings Final Decision, ACCC addressed over 18 pages the possible means of recovery of ULLS- and LSS-specific costs.  I need not discuss the course of reasoning.  It suffices to say that ACCC’s final view was that the price terms and conditions proposed by Telstra in its proffered undertaking by which the ULLS- and LSS-specific costs would be recovered in its charges to the ULLS and LSS access seekers alone was rejected because it did not promote competition and was not in the LTIE.

343               At [150] of the Tribunal decision to which the FD Statement of Reasons referred, the Tribunal stated that while it was not concerned to inquire whether any other cost allocation method was more reasonable than the method proposed by Telstra, the spreading of the LSS-specific costs over a broader range of services would be more likely to promote competition between providers of those services and therefore the LTIE, subject to those costs being pooled with other specific costs relevant to the provision of DSL services in downstream markets (for example Telstra’s own internal costs of a nature similar to those of the LSS- and ULLS-specific costs).

344               By referring to the LSS Pricing Principles and adopting the approach referred to at [340] above, and subsequently referring to the ULLS and LSS Undertakings Final Decision and to para [150] of the Tribunal’s 2006 Decision, I think ACCC made it clear that it was aware of the fact that the Pooling and Allocation Method was inconsistent with the relevant aspect of the LSS Pricing Principles, but in light of other considerations, should nevertheless be adopted .

Conclusion on Telstra’s Grounds 5(a), 5(b), 5(c) and 6

345               For the above reasons, Telstra’s Grounds 5(a), 5(b), 5(c) and 6 are not made out.

D.        LINE COSTS RECOVERY

Telstra’s Ground 2(b):     Denial of procedural fairness by denying Telstra a reasonable opportunity to present its case as to whether Telstra was recovering its line costs

Telstra’s Ground 7:          Error of law by making a finding of fact that Telstra was recovering its line costs when there was no evidence to justify the finding

General

346               Telstra complains that on the basis of a statement in ACCC’s DFD Consultation Paper, Telstra understood that the calculation of its line costs and the question of whether it was already recovering them were issues that were not to be resolved in the Final Determination. 

347               Before I refer to that statement and to Telstra’s submission to ACCC in respect of line costs, I will note references to line costs that had previously occurred.   I will (as the parties have done) use the terms ULL, local loop or line interchangeably (see [13] above) to refer to the copper or aluminium wire that links the end-user’s premises to the local Telstra exchange.

The LSS Pricing Principles

348               In the LSS Pricing Principles, ACCC noted that a LSS is provided over a subset of the full frequency spectrum of a line (it will be recalled that according to the LSS definition in the LSS Declaration (see [52] above) a LSS uses only the high frequency spectrum where the low frequency spectrum is being used by Telstra or another entity), and that a key question in determining appropriate pricing principles was whether or not any allocation of the cost of the whole line should be recovered through the price of a LSS.  To answer this question, ACCC proposed a two-stage process: first, determine an appropriate methodology for costing a line used to provide a LSS, and second, determine how much of that cost should be attributed to the price of a LSS.

349               In relation to the first stage of the process, ACCC’s view was that if a TSLRIC methodology was used to determine the cost of a line used to provide a LSS, it was appropriate that the specific application of TSLRIC be TSLRIC+.  The difference between TSLRIC and TSLRIC+ is that the latter allows a contribution to indirect costs, whereas the former does not.  ACCC was not of the view that a TSLRIC++ application, in which TSLRIC+ is supplemented with an additional access deficit contribution (ADC), was appropriate.  ACCC explained the ADC and the conclusion it had reached (that the cost of a line used to provide a LSS should not be supplemented by an ADC) in the following way:

As a consequence of retail pricing regulation … Telstra is presently unable to recover the full costs of the [CAN] from customer access (or ‘line rental’) charges alone.  Telstra has traditionally retrieved the resulting access deficit (AD) through a mark-up to its service or call prices.  This practice has effectively been continued by the Commission allowing an [ADC] in call related access prices charged to service providers using the CAN …

ACCC went on to say:

While the Commission considered the applicability of an ADC for the case of ULLS pricing, it concluded that an ADC was not appropriate for the pricing of this service.  In contrast to the case of the PSTN, this was because the full cost of the line is recovered in the ULLS access price.  Therefore, an access deficit does not arise in respect of the lines taken by access seekers.  The Commission was also satisfied that the access deficit associated with the provision of voice services is fully acquitted by the totality of PSTN wholesale and retail pricing, and that the ability to do this would not be appreciably affected by the absence of an ADC in the price of the ULLS.

 

Similarly, the Commission does not believe that the cost of a line used to provide a LSS should be supplemented by an ADC.

350               In relation to the second stage of the process, ACCC noted three possibilities: a zero allocation of the line cost to the price of a LSS; an allocation of the entire line cost to the price of a LSS; or an allocation of part of the line cost to the price of a LSS.  After considering the parties’ submissions as to how the cost of a line should be apportioned between services that use the high frequency spectrum and low frequency spectrum of the line, ACCC expressed its own views.

351               ACCC outlined the case against a line cost allocation and stated its belief at that time that Telstra already recovered the cost of a line through a combination of four main sources of revenue: 

1.                  The price of line rental charged to end-users;

2.                  A mark up in the retail price of per call of services provided over the PSTN (where Telstra itself provided those services directly to end-users);

3.                  An ADC that was included in the access price of services used by access seekers in order to provide retail services to end-users, where provision of those services required access to the PSTN (the ADC was later removed – see [397] below); and

4.                  The price charged to access seekers for the ULLS (ACCC footnoted that for those lines used to provide the ULLS, Telstra was able to recover fully the cost of the line under ACCC’s pricing principles for the ULLS).

352               ACCC stated:

Based on the data the Commission collects as part of its Regulatory Accounting Framework [under Div 6 of Part XIB of the Act], the Commission believes that Telstra does currently recover the full costs of a line/ULL through these sources of revenue.

 

With the advent of a LSS, however, it would appear there is scope for a fifth potential source of revenue to help recover the costs of an ULL.  That is, any revenue gathered from the price of a LSS in excess of that needed to cover the LSS–specific costs could be considered to be revenue that was helping to recover the costs of the ULL used to provide the LSS.

 

Accordingly, for the purposes of these pricing principles, a key issue is whether or not Telstra’s LSS should be used as an additional source for recovering the costs of an ULL used to provide a LLS and, if so, what implications would this have for the current ways in which the costs of a line are recovered.

 

353               ACCC went on to agree with a submission that in circumstances in which Telstra already fully recovered its line costs through a combination of other charges, it would be inappropriate to allocate any part of the cost of an ULL to the price of a LSS since this would lead, in the absence of adjustments to the existing arrangements, to an over-recovery of the line costs and provide Telstra with an unfair competitive advantage over access seekers.

354               ACCC then outlined the case for a line cost allocation.  ACCC conceded that from an allocative efficiency perspective, it may be more appropriate for the price of a LSS to include some recovery of the costs of the line used to provide the LSS.   In relation to the question of the amount, if any, that should be allocated to the price of a LSS, ACCC emphasised that there must not be an over-recovery and that line cost recovery from the revenue from the price of the LSS would have to be deducted from one or more of the four sources referred to at [351] above.  In particular, a contribution to line costs in the price of a LSS would occur only if: the price of a LSS was greater than zero;  an adjustment was made to reduce the ADC levied on other interconnection services;  and an adjustment was made to decrease the price of other services.

355               ACCC formed the following overall view in relation to line costs:

In assessing an undertaking, or making an arbitral determination, with regard to the price of a LSS, the Commission may take into account the prices charged by a carrier for its other services … However, its powers are limited with regard to specifying the price of these other services.

 

Accordingly, in assessing an undertaking or determining a price for a LSS, the Commission can only have regard to the prices an access provider sets for these other services. Thus, even though it may be preferable from an efficiency in use perspective for there to be some allocation of the cost of an ULL over which a LSS is provided to be included in the price of a LSS, this would have to be dependent on changes to the price of other services.

 

Hence, to the extent that an access provider was recovering all of its line-related costs from other revenue sources, the Commission believes it would be inappropriate for the access provider to recover an additional amount of its line costs in the price of a LSS.  If, however, Telstra were to show it was not fully recovering its ULL line costs through its various other sources of revenue, it may be appropriate to consider including some allocation of the cost of the ULL over which a LSS is provided in the price of this service.

 

356               A similar approach was taken by ACCC in the LSS Undertaking Final Report of August 2004, the LSS Undertakings Discussion Paper of March 2005, the ULLS and LLS Undertakings Draft Decision of August 2005, and the ULLS and LSS Undertakings Final Report of December 2005.  That approach may be described as one of: (1) proceeding on the basis that Telstra was already recovering its line costs in full; (2) eschewing the over-recovery that would occur in the light of (1) if a component for line costs were to be included in the price of the LSS; and (3) leaving it open to Telstra to prove to the contrary of (1) following a change in the prices it was charging for other services.

The Second Draft ID, Telstra’s submissions in response to the Second Draft ID, and the Second ID

357               In the Second Draft ID Issues Paper of October 2006, under the heading “Contribution to line cost component”, ACCC stated:

Consistent with the Commission’s previous consideration of this issue, the proposed LSS annual charge does not include a contribution to the costs of the line.  This is because efficient line costs are being recovered through other charges imposed in respect of the line, such as line rental charges, and, in the absence of reductions in these other charges, to recognise a contribution to line costs as a cost component in LSS annual charges would lead to an over-recovery of efficient line costs [a footnote referred to the confidential versions of the LSS Undertaking Final Report and ULLS and LSS Undertakings Final Report].

The Second Draft ID Issues Paper went on to invite the parties to make submissions on a number of issues, including whether it was “appropriate for the purposes of an ID for the Commission to not include a contribution to line costs”.

358               Telstra’s submissions of October 2006 in response to the Second Draft ID Issues Paper addressed the issue of line costs in the following paragraphs (footnotes omitted):

A practical consequence of [the definition of the LSS as contained in the LSS Declaration] is that wherever LSS is provided, the local loop involved is being used to provide two types of services:

·  voiceband PSTN services; and

·  broadband data services.

 

The service definition does not require that the LSS access seeker who provides the broadband data services to end-users also be the provider of the voiceband PSTN services. … This raises a material issue regarding how the costs of providing the local loop should be most efficiently and equitably shared between the services that make use of it.

359               Telstra went on to quote statements from the LSS Pricing Principles that recognised:

·                    that a LSS price should include both specific and line costs;

·                    that ACCC believed that Telstra already fully recovered its line costs through a range of revenue sources;

·                    that the price of a LSS should therefore include only LSS-specific costs; but

·                    that if Telstra were to change its pricing structure so that it no longer recovered all of its line related costs through the other revenue sources, it may be appropriate to include an allocation of line costs in the price of the LSS.

360               Telstra then explained that to this end it had developed a new pricing construct:

Although the Commission has proceeded to date on the basis that LSS should only recover LSS-specific costs, the Pricing Principles also state that:

 

“... were Telstra to alter its pricing structure such that it no longer recovered all of its line related costs through its various other revenue sources, the Commission believes it may be appropriate to include an allocation of line related costs in the price of a LSS ...” (emphasis added)

 

Telstra recognises that an alteration to that pricing structure is desirable and has developed a new pricing construct which would, in its view, better reflect the LSS Pricing Principles.  Pursuant to this pricing construct, Telstra would no longer seek to recover all of its line related costs through its services other than LSS, but would instead seek to recover a portion of those costs from broadband service providers that utilise a portion of the [ULL] to provision data services to end user customers. [latter emphasis added by me]

 

The decision by Telstra to propose a new pricing structure, and the statement that Telstra would no longer seek to recover all of its line costs through its services other than the LSS, indicates that Telstra was agreeing, for present purposes, to proceed on the basis of ACCC’s view that it had been recovering all of its line related costs through those other services.

361               Telstra outlined the new pricing construct, which, briefly, provided for a contribution to the costs of a local loop to be included in the price of a LSS, and a rebate to the retail provider of the voiceband PSTN service to the end-user.  It will be recalled that the definition of LSS (set out at [52] above) requires that a PSTN service be already provided over the line over which LSS was provided.  The PSTN service might be provided either by Telstra itself or by an access seeker pursuant to the wholesale line rental service (WLR).   Generally speaking, the WLR allows the access seeker to use the lower frequency spectrum of the line. Since WLR relates only to the lower frequency spectrum (voiceband spectrum) of the line, Telstra remains free to use the higher frequency spectrum (broadband spectrum) of the line, for example by providing the LSS.  Telstra stated that its new pricing construct sought to ensure that Telstra did not over-recover the cost of a local loop from lines over which a LSS was provided.

362               The First ID (of 2 November 2006) did not provide for LSS periodic charges, and therefore did not address the question of inclusion in them of a contribution to line costs.

363               In ACCC’s letter to the parties dated 21 December 2006 enclosing the Second ID and the Second ID Statement of Reasons, ACCC referred to Telstra’s new pricing construct and noted that it would have consequences for the pricing of the LSS and the WLR.   

364               In its letter, ACCC stated that although “the actual price terms that Telstra suggested for the LSS and WLR [were] unlikely to be reasonable”, it encouraged the parties to negotiate and seek to agree on various issues, including the proportion of line costs that should be recovered in the price of the LSS and the consequent rebalancing of charges as between the LSS and the WLR, and the date from which the rebalanced charges should apply.  No contribution to line costs was included in the LSS periodic charges specified in the Second ID.  ACCC’s encouragement to the parties was directed to future negotiations.

ACCC’s letter to the parties of 6 March 2007, the DFD Consultation Paper, and Telstra’s submissions in response

365               The DFD Consultation Paper was preceded by a letter dated 6 March 2007 from ACCC to Telstra and Request advising them of the approach ACCC would adopt in progressing the access dispute towards a final determination.  ACCC stated in the letter that its “long standing (2002) LSS pricing principles provide[d] that a contribution to line costs in LSS charges [was] only appropriate where line costs [were] not already fully recovered from other charges”.  ACCC again noted Telstra’s submission in relation to the Second ID in which it proposed a new pricing construct that would reduce WLR charges on the proviso that a contribution to line costs was recognised in LSS periodic charges.  ACCC characterised this as a “rebalancing” as between LSS and WLR charges so that each would contribute to the recovery of the costs of the line over which the respective services were provided.  ACCC noted that it had considered that it was not appropriate to adopt Telstra’s particular rebalancing proposal and did not include a contribution to line costs in the LSS periodic charges specified in the Second ID.  ACCC also noted Request’s contention supporting that result. 

366               ACCC continued in its letter by stating that it was willing to consider the question whether a contribution to line costs should be included in the LSS periodic charges.  However, ACCC made the point that on the assumption that ACCC’s preliminary view was maintained, the Final Determination would expire as early as 31 December 2007 and so two issues arose on which submissions were sought: (1) whether, at a practical level, a rebalancing of LSS and WLR charges could be implemented within that time frame, and, (2) if it could, what the likely effect of the rebalancing would be on the LTIE.  ACCC concluded:

More detailed submissions on the extent of rebalancing that would be appropriate will be necessary only if the Commission forms the view that there is a case for including a contribution to line costs in LSS annual charges to apply during the period of the final determination.  Accordingly, the Commission will advise the parties if it will call for these further submissions after it has considered the parties’ views on the issues described.

 

ACCC was describing a two stage process.  The first comprised the two issues mentioned.  The second, which might never arise depending on the outcome of the first stage, concerned the “extent of rebalancing that would be appropriate”, an issue that would entail questions of quantification.

367               ACCC advised the parties that in coming to its final decision, it intended to have reference to, inter alia, the LSS Pricing Principles, the LSS Undertaking Final Report of August 2004, the ULLS and LSS Undertakings Final Report of December 2005, the Tribunal’s 2006 Decision and information made available by the parties during the arbitration on the final determination.  In this way, ACCC was advising the parties that it intended to have regard to the approach described at [356] above.  ACCC also noted the possibility that further matters to which it would have regard might be identified in the course of consultations. 

368               I note that although Telstra’s letter of 26 April 2007 to ACCC, which listed the documents Telstra understood ACCC was intending to take into account in making the Final Determination, did not include a reference to the LSS Undertaking Final Report of August 2004 or the ULLS and LSS Undertakings Final Report of December 2005, ACCC confirmed in its letter of 30 April 2007 to Telstra that it would indeed have regard to, inter alia, those documents that it had specified in its letter of 6 March 2007 (that is to say, the documents specified at [367] above).

369               In the DFD Consultation Paper, ACCC advised the parties under the heading “4.1.7 Contribution to line costs,” as follows:

As outlined in the Commission’s letter of 6 (7) March 2007, the Commission will focus on whether a contribution to line costs should be implemented within the period for which the final determination is to operate.

 

The Commission is at this time seeking submissions on this issue only to the extent necessary to reach a view as to whether or not it would be appropriate for the Commission to include a contribution to line costs in LSS annual charges to apply for the period of the final determination.

 

The Commission’s preliminary view is that, if any such contribution is to be recognised, it would only be recognised prospectively from the time following a rebalancing of LSS and WLR charges. [my emphasis]

 

The Commission is not seeking submissions on how any such contribution should be calculated – it will seek these submissions in this proceeding only if it first forms a view that such a contribution should be recognised. 

 

The particular matters that submissions should address are:

(i)      Whether at a practical level, a rebalancing of LSS and WLR charges could be implemented during the period of the final determination.

 

Redistributing line costs away from fixed voice services is a pre-requisite to recognition of a contribution to line costs in LSS annual charges. …

 

Parties are asked to provide their views on how the requisite changes to wholesale line rental charges would be implemented, and the likely timeframe by which these changes would be made. [emphasis in original]

 

 

(ii)     The likely effect of the LTIE, and the other section 152CR(1) criteria, of implementing the rebalancing of LSS and WLR charges during the period of the final determination, including the consequences for the LTIE of not adopting the transition path approach. 

 

The Commission has not previously recognised a contribution to line costs in LSS annual charges. …

 

Parties are asked to consider a rebalancing of WLR and LSS charges within the period of the final determination against the section 152CR(1) criteria, including its effect on the LTIE.

…

These passages repeated the two stage process to which ACCC had referred in its letter of 6 March 2007 (see [366] above).

370               ACCC’s proposal was that any contribution to line costs would be included prospectively only from a time following a rebalancing of the LSS and WLR charges down to 31 December 2007 (the contemplated expiry date of the Final Determination).  Although it was not then known that the Final Determination would be made on 1 August 2007, on any reckoning, the period envisaged was going to be short.

371               In Telstra’s submissions of 4 May 2007 in response to the DFD Consultation Paper, Telstra addressed the issue of line costs.  Telstra proposed LSS monthly prices of between $16.53 and $16.72 (excluding GST) per LSS per month, provided that Telstra was to pay a rebate of at least $11.97 on any WLR service supplied on the same line.   This was the “rebalancing” that Telstra was proposing.  The $11.97 can be understood as comprising the line cost allocation component that Telstra was seeking to have included in the LSS monthly price.  If there was to be no rebate, Telstra proposed LSS monthly prices of between $4.56 (being $16.53 less $11.97) to $4.75 (being $16.72 less $11.97) (excluding GST) per LSS per month.

372               In Telstra’s submissions in response to the DFD Consultation Paper, Telstra explained how it calculated the line cost allocation component.  Telstra took as a starting point ACCC’s “final indicative prices for WLR”.  Next, Telstra “allocated” 50% of this price to the price of a LSS because a 50% allocation “broadly reflects the ratio of voice to broadband revenue on lines over which both services are provided”.  Effectively, the price of the WLR is reduced by 50% by way of a rebate whenever Telstra provides both the LSS and WLR over the same line.  Telstra collects a line cost contribution from the LSS access seeker and rebates the full amount of that contribution to the WLR access seeker.

373               Telstra explained its reason for choosing the WLR price as the basis for calculating the line cost contribution from LSS access seekers.  Telstra submitted that ideally the loop cost allocation should be based on Telstra’s forward-looking cost of supplying loops rather than the WLR price, but Telstra proposed to base the allocation on ACCC’s “final indicative prices for WLR because it [was] simple and avoid[ed] having to directly address the issue of what Telstra’s loop costs actually [were]”.  Telstra then stated :

If the Commission disagrees with this simplified approach, Telstra will submit additional evidence in support of Telstra’s loop costs, which could form the basis of the allocation.  Telstra’s loop costs are higher than the Commission’s WLR prices.

 

Telstra emphasised that ACCC should not conclude that Telstra agreed with the final indicative WLR prices.  Telstra stated that in fact it did not agree with them and believed that they were well below Telstra’s actual cost of providing the WLR.

374               At no stage did Telstra submit evidence to ACCC in respect of its actual loop costs.  Matthew William Cole, Telstra’s Group Manager, Regulatory, testified that Telstra was in a position to supply additional evidence of its actual loop costs but had refrained from doing so because of the two stage process that ACCC said it would adopt. 

375               On the question of practicability, Telstra claimed that it could implement the rebate mechanism “within as little as two weeks of confirmation of [the rebate mechanism] from the Commission”.  Telstra added: “[o]bviously the more notice over and above two weeks that Telstra is able to provide to its WLR customers of the proposed rebate, the better able Telstra’s customers will be to plan for and manage the receipt of the rebate, and to understand its implications”.

The Final Determination and the FD Statement of Reasons

376               In section 4.1.7 of the FD Statement of Reasons ACCC stated that line costs were being recovered through other charges, and, in particular, through line rental charges.  ACCC referred to the two “first stage” issues on which it had invited submissions (see [366] above).  ACCC noted Telstra’s submission that LSS and WLR charges could be rebalanced within a matter of weeks of ACCC’s advising its view on the amount of line costs that should be allocated to each service, and that the minimum period would be two weeks, although six weeks would be preferable.  ACCC also noted Request’s submission that no contribution to line costs should be included in the LSS periodic charges.

377               Under the heading “Commission’s views” ACCC began by noting that neither party suggested that a contribution to line costs should be considered other than to apply prospectively and following a rebalancing.  ACCC stated:

The first matter on which the Commission sought the parties’ views is entirely practical.  If there is no prospect of implementing the rebalanced charges ahead of 31 December 2007, then there is little practical benefit in considering the issue further in these proceedings.  The Commission is conducting a separate, industry-wide inquiry into LSS regulation for the period following October 2007 [at the time of the Final Determination the LSS Declaration was due to expire on 31 October 2007].

 

ACCC accepted Telstra’s advice that a rebalancing could be implemented in a number of weeks following determination of how and in what amount to rebalance, but noted that the timing of the determination remained problematic, without a consensus from industry as to how to rebalance.

378               ACCC addressed in turn the various mandatory criteria specified in s 152CR(1) of the Act.  In a passage of which Telstra complains, ACCC stated:

Telstra is recovering these costs [investment in the access network and the LSS ordering system], including a normal return on its capital employed, and the Commission considers this will continue at least until 31 December 2007.  Whether a contribution to line costs is included in the LSS annual charges to be paid by Request and Chime until then is unlikely to materially affect this.  However, should an immediate implementation of rebalancing dampen LSS demand, efficient use and investment in the LSS ordering system would likely follow, with flow on consequences for efficient use and investment in downstream services.

 

ACCC’s concluding paragraph in section 4.1.7 was as follows:

In summary, the Commission doubts that rebalancing could occur before 31 December 2007.  If it could, the Commission considers that an immediate implementation of rebalancing within this period would be contrary to the section 152CR(1) criteria.  Having regard to these matters, the Commission has determined not to further consider in these proceedings the inclusion of a contribution to line costs in LSS annual charges payable by Chime and Request for the period up until 31 December 2007.  The Commission will give further consideration to this matter during the separate, industry-wide inquiry into LSS regulation for the period following October 2007.

 

379               Request rightly concedes that the Final Determination contained a finding that Telstra was already recovering its line costs.

Consideration

Telstra’s Ground 2(b) – the first answer

380               Telstra complains that it was deprived of a reasonable opportunity to present its case as to whether it was recovering its line costs. Telstra asserts that ACCC advised the parties that it did not seek submissions on the question of whether Telstra was in fact fully recovering its line costs, but then proceeded to make a positive finding that it was doing so.  That finding, according to Telstra’s submission, was based on ACCC’s making a preliminary finding as to how line costs are calculated, and ACCC’s then applying that method of calculation, leading it to the conclusion that Telstra was recovering its line costs in full.

381               In my view, Telstra’s complaint mischaracterises the two stage approach proposed by ACCC.   ACCC did not advise the parties that it did not seek submissions on whether Telstra was already recovering its line costs in full through other sources of revenue.  ACCC neither required nor excluded submissions addressed to the “first stage” issues set out at [366] and [369] above.  It was open to Telstra to put before ACCC evidence of what its line costs were if Telstra thought that the amount and content of them were relevant to those issues.

382               Telstra was aware that ACCC considered that it would be appropriate to include a contribution to line costs in the LSS periodic charges only if Telstra was not already recovering its line costs from other sources of revenue.  Both prior to and during the arbitration, ACCC made it clear that it considered, and was proceeding on the basis, that Telstra was already fully recovering its line costs from other sources of revenue.  Telstra was also aware that ACCC’s position was that if this ceased to be so, the issue of inclusion of a contribution to line costs in the LSS periodic charges could be revisited.

383               Telstra represented to ACCC that it was prepared to agree that it was in fact already recovering its line costs in full from other sources (see [360] above).  That is why it introduced its new pricing construct involving a rebate in respect of the WLR charge if a component for line costs was included in the LSS periodic charges.

384               In any event, Telstra indicated that it was content to proceed, at least in the arbitration, on the assumption, without admissions, that the WLR was equal to the average cost of a line.  In Telstra’s submissions in response to the DFD Consultation Paper, Telstra stated:

14        Telstra’s proposal is that any purchaser of a WLR service that is provided on the same line as an LSS service should receive a rebate equal to the LSS line cost contribution ($11.97 per line per month) for the following reasons:

 

            …

 

(e)        as Telstra and the Commission continue to hold different views as to the average cost of an access line, then as a practical matter and to avoid contention on this issue for the purposes of the arbitration, it is assumed that the existing WLR price is equal to the average cost of an access line (without compromise to Telstra’s continuing view that in reality the WLR price is significantly below the sum of average line costs and transformation costs); … [my emphasis]

 

385               Later in those submissions, Telstra again asserted that ACCC’s final indicative prices for WLR were below cost, but then continued as follows:

For pragmatic reasons, however, Telstra has decided not to seek to debate this issue within this arbitration as it has already been closely examined in other regulatory processes.  Telstra’s proposal for an LSS loop cost contribution in this arbitration would not change the extent to which Telstra recovers loop costs, so may therefore be regarded as neutral to Telstra’s legitimate business interests.

 

386               In these passages Telstra indicated that in the arbitration, it was content to proceed on a basis that did not involve establishing what Telstra’s line costs actually were.  Rather, it was content for ACCC to proceed on the basis that the final indicative prices for WLR represented the average cost of a line.  In my view, Telstra was content to proceed on the basis that recovery of that amount, whether through the WLR charge alone or through a combination of the LSS and WLR charge (if the rebalancing was implemented) would allow Telstra to recover its line costs in full.

387               In cross-examination, Mr Cole conceded that Telstra was “proceeding on the assumption that just for the purposes of this arbitration that [Telstra would] set the line cost contribution on the assumption that the Commission’s indicative price for WLR was accurate …”.

388               ACCC gave Telstra the opportunity to present its case during the arbitration as to whether Telstra was in fact recovering its line costs, but Telstra explicitly eschewed that opportunity.

389               In my view, Telstra’s Ground 2(b) is not made out.  A second answer to Telstra’s Ground 2(b) is dealt with at [408]ff below.

Telstra’s Ground 7 – the first answer

390               Telstra complains that ACCC made an error of law by making a finding of fact that Telstra was recovering its line costs when there was no evidence to justify the finding.

391               Both parties refer to Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 (Bond) in which Mason CJ discussed whether a finding of fact can constitute a reviewable decision, and when a finding of fact can constitute an error of law that contributes to a reviewable decision. 

392               In respect of both, Mason CJ stated (at 340-341):

… in ordinary circumstances, a finding of fact, including an inference drawn from primary facts, will not constitute a reviewable decision because it will be no more that a step along the way to an ultimate determination.  Of course an ultimate determination which depends upon a finding of fact vitiated by error of law or made without evidence is reviewable: see s. 5(1)(f) and (h) [of the ADJR Act].  In such a case the finding of fact may be challenged as an element in the review of the ultimate determination. 

393               His Honour went on to explain when a decision involves an error of law (at 353):

A decision does not “involve” an error of law unless the error is material to the decision in the sense that it contributes to it so that, but for the error, the decision would have been, or might have been, different.  The critical question on this aspect of the case is whether, but for the alleged error of law … the decision might have been different by reason of the possibility that the Tribunal would not have made the findings of fact … [that] were made.

394               Later in his Honour’s reasons, the Chief Justice stated (at 355) that findings of fact, including inferences, will have involved an error of law where there was no evidence or other material to justify the making of the finding (see s 5(1)(h) of the ADJR Act).  His Honour noted (again at 355) that the question whether there is any evidence of a particular fact, or whether a particular inference can be drawn from facts found or agreed, is a question of law, and that in the context of judicial review it has been accepted that the making of findings and the drawing of inferences in the absence of evidence is an error of law.  After quoting from Menzies J in Reg v District Court; Ex parte White (1966) 116 CLR 644 at 654, Mason CJ concluded (at 356) that according to the Australian authorities, at common law want of logic is not synonymous with error of law, and that so long as an inference is reasonably open, even if drawn as a result of illogical reasoning, there is no place for judicial review for error of law.

395               In oral submissions, senior counsel for Telstra stated that Telstra relied on the “common law no evidence” ground as expressed by Mason CJ in Bond.

396               As mentioned previously, Telstra submits that there was no evidence to support ACCC’s finding that Telstra was already fully recovering its line costs.

397               Although Telstra accepts that ACCC had expressed its view that Telstra was recovering its line costs at various times prior to the making of the Final Determination, it contends that it would be unsafe to assume that the support for that view continued to be available at the time of the Final Determination.  For example, Telstra notes that the ADC (referred to at [351] above) had been “discontinued” (see ACCC’s Final Determination for model price terms and conditions of the PSTN, ULLS and LCS services of October 2003, section 8.8, pp 60-61).  Although at the time of its discontinuance, ACCC concluded that Telstra would still recover its line costs even without the ADC, Telstra’s point is that Telstra operates in a “dynamic industry” and that its line costs and sources of recovery may change over time.

398               Request submits that in the context in which the arbitration took place, ACCC made it clear that it considered that Telstra fully recovered its line costs, and that Telstra took a deliberate decision not to challenge that view.

399               In my opinion, Telstra’s Ground 7 is not made out.  The first reason is that in the circumstances there was evidence or other material entitling ACCC to find that Telstra was recovering its line costs in full. 

400               In the context in which the arbitration took place, the conduct of Telstra (statements and acquiescence) in relation to the issue of line costs itself constituted evidence or other material that supported the making of the finding by ACCC that Telstra was already recovering its line costs from other sources. 

401               As noted above, ACCC had consistently claimed that Telstra was already recovering its line costs in full from other sources.  ACCC had alerted Telstra to the fact that it would take documents expressing ACCC’s view that Telstra was already recovering its line costs in full into account in making the Final Determination (see [367] above).  

402               Perhaps the most striking evidence consists of the statements concerning the proposed alteration to Telstra’s pricing structure by way of a rebate contained in Telstra’s submissions in response to the Second Draft ID Issues Paper, in particular, the statement that it would no longer seek to recover all of its line related costs through non-LSS services (see [360] above).  This was the same alteration to its pricing structure that Telstra proposed at the Final Determination stage.

403               Mr Cole accepted that he was aware, when they were made, of various assertions made by ACCC that in its belief Telstra was already fully recovering its line costs, but was not aware of any response from Telstra denying that that was so.  Mr Cole also agreed that no one said to him or in his presence that it was necessary for Telstra to attempt to convince ACCC that its long held and long expressed view that Telstra was already recovering line costs was wrong.

404               Mr Cole could not explain why Telstra had never challenged ACCC’s oft-stated view that Telstra was already recovering its line costs in full.  Interestingly, he said that Telstra had “agreed to disagree” with ACCC on the issue and to “take the path of least resistance”.  I accept Request’s submission that this testimony is not consistent with Telstra’s present assertion that it would have sought to challenge ACCC’s finding on line costs if it had known that that finding was to be made.  Mr Cole’s evidence is to the effect that Telstra chose to follow a strategy of not proving the amount of its line costs.

405               While the earlier documents and decisions referred to did not entitle ACCC simply to reproduce in the Final Determination a finding on line costs made in association with those earlier decisions, in the context of Telstra’s conduct, including acquiescence, in respect of those findings, they provided material supporting a conclusion by ACCC that Telstra was fully recovering its line costs at the time of the Final Determination.

406               In my view, in circumstances in which Telstra:

·                    was aware of ACCC’s repeatedly expressed view that Telstra was already recovering its line costs;

·                    was given notice that ACCC would take documents expressing that view into account in making the Final Determination;

·                    had the opportunity of making submissions and providing evidence to the contrary but did not do so;

·                    did not contradict that view;

·                    expressly adopted that view itself for the purposes of the Final Determination;

there was material before ACCC entitling it to make the finding that it did.

407               In reaching this conclusion that Telstra’s Ground 7 is not made out, I have not found it necessary to refer to a submission made by Request in reliance on Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389.

Telstra’s Grounds 2(b) and 7 - the second answer

408               A second answer to Telstra’s Grounds 2(b) and 7 is that ACCC’s finding that Telstra was already fully recovering its line costs did not contribute to its decision not to include a contribution to those costs in the LSS periodic charges. 

409               If I had found that Telstra was denied procedural fairness, or that ACCC had made an error of law, Telstra would still need to show that there was at least a possibility that a different result might have been reached: Bond at 353; ex parte Aala at [80].

410               There are two things that show that ACCC’s finding was inconsequential.

411               The first is that ACCC was not persuaded that a rebalancing could, as a practical matter, occur before 31 December 2007 or, if it could, that it would be consistent with the s 152CR(1) criteria, in particular the LTIE: see [377], [378] above.  These were the two practical issues that had been at the forefront of ACCC’s mind at the first stage.  Telstra made a submission expressly addressing those matters (see, for example, [375] above) but ACCC was not persuaded by that submission.  ACCC’s decision was to defer consideration of the question of inclusion of a contribution to line costs.

412               ACCC’s view that a rebalancing was not practicable having regard to the shortness of the period of the Final Determination and its associated decision to defer further consideration of the question of inclusion of a contribution to line costs were uninfluenced by the finding that Telstra was already fully recovering those costs.

413               The second matter which shows that ACCC’s finding on line costs was inconsequential is that there was evidence before the Court as to what would have happened if Telstra had made submissions and provided material on whether it was recovering its line costs and ACCC had decided the question.  Telstra made such submissions in 2007 as part of ACCC’s enquiry into whether the LSS Declaration should be extended.  The submissions were considered by ACCC in its Review of the Line Sharing Service Declaration – Final Decision of October 2007 in Chapter 3: “Pricing Principles”.  ACCC concluded that “[b]ased on its assessment, the ACCC considers that Telstra is currently recovering its line costs and will continue to recover its line costs for at least the period of the declaration”.  ACCC referred once again to that conclusion in relation to the pricing principles for the ULLS determined in November 2007: Unconditioned Local Loop Service – Final pricing principles.

414               Telstra submits that events which occurred between the making of the Final Determination on 1 August 2007 and the hearing in December 2007 which involved the exercise of a different power to that of making the Final Determination do not provide a basis for concluding that ACCC would have made the same finding as to recovery of line costs in making the Final Determination.  Telstra says also that it can not be assumed that Telstra would have presented and relied upon the same evidence as in that different context.

415               I do not accept Telstra’s submission.  Whether Telstra was already fully recovering its line costs is an issue on which it must be assumed Telstra put forward its best case in the other two contexts.  There is no basis for thinking that Telstra would or might have presented different or better evidence or made different submissions in relation to the Final Determination.  In my opinion, ACCC’s conclusion that Telstra was fully recovering its line costs in those other contexts, reached at times shortly after the date of the Final Determination, provides cogent evidence that ACCC would have made the same finding and the same Final Determination had Telstra made submissions and put material before ACCC on the question of recovery of line costs as part of the arbitration.

416               A further reason, therefore, why Telstra’s Grounds 2(b) and 7 are not established is that neither ACCC’s failure to follow the procedure that Telstra submits it should have followed nor ACCC’s having made the finding of fact impugned influenced or contributed to the Final Determination.

Conclusion on Telstra’s Grounds 2(b) and 7

417               In the result, Telstra’s Grounds 2(b) and 7 are not made out.

 

E.         DISCONNECTION CHARGES, CHURN PROCESS AND “OPTION 2”

Telstra’s Ground 8:          Procedural ultra vires when determining disconnection charges by not enquiring of Telstra concerning, or investigating solutions to address, the practical difficulties of adopting a more precise test that Option 2 – failure to comply with duty under s 153DB(1)(b) of the Act

Telstra’s Ground 9(a):     Denial of procedural fairness by failing to afford Telstra a reasonable opportunity to present its case in relation to disconnection charges by failing to disclose the issue of Option 2

Telstra’s Ground 9(b):     Denial of procedural fairness by failing to afford Telstra a reasonable opportunity to present its case in relation to disconnection charges by failing to disclose the material constituting the practical difficulties of a more precise test than Option 2

General

418               The Final Determination specified in Schedule 2 the amount payable for “single” connections and disconnections of a LSS, that is to say, connections and disconnections outside a MNM.  A MNM was defined in cl 8(ii) of Schedule 2 as:

the transfer or migration of services that is achieved by the project management by Telstra of a coordinated cancellation and connection of services.

Telstra’s complaint relates only to the disconnection charges for “single” LSS disconnections, and not MNM disconnections.

419               Clauses 5-7 of Schedule 2 were as follows:

LSS “single” disconnection charges

 

5.        Except where the parties subsequently agree otherwise, and subject to clause 5A, the charge payable for the disconnection of a LSS outside of a managed network migration is as follows:

 

2005-06	$34.70 (per disconnection)
2006-07	$35.10 (per disconnection)
2007-08	$36.70 (per disconnection)

 

5A.  A disconnection charge is not payable by Request in any of the following circumstances:

(i)          the disconnection occurs between 15 November 2006 and the date that this determination comes into effect; or,

(ii)        the disconnection occurs after this determination coming into effect and either:

 

        (a)    the disconnection is made pursuant to the Telstra LSS churn process; or,

 

(b)    Request is participating in the Telstra LSS churn process and Telstra (Bigpond) is not participating in the Telstra LSS churn process.

 

6.      The charges specified in clause 5 are not to apply to disconnections in Band 4.

 

7.      Clauses 5, 5A and 6 are not to apply to disconnections that were made before 1 February 2006 or after 31 December 2007.

 

420               The Final Determination allows Telstra to make disconnection charges on all LSS disconnections that occurred prior to 15 November 2006 (and after 1 February 2006).  The reason was that ACCC thought it reasonable for Telstra not to have implemented a LSS churn process (see below) prior to that date.  Telstra makes no complaint about the period prior to 15 November 2006.

421               By reason of cl 5A(i), however, Telstra was not permitted to charge for a disconnection occurring between 15 November 2006 and the date on which the Final Determination came into effect (22 August 2007) (No Charge Period).  The No Charge Period imposed by cl 5A(i) is challenged in Telstra’s Grounds 10(a), 10(b) and 10(c) discussed in Section F (Disconnection Charges, Backdating and the “No Charge Period”).  No more need be said of it here.  Of present concern is cl 5A(ii), and, in particular, para (b) of that subclause.

422               The expression “Telstra LSS churn process” was defined in cl 8(iii) of Schedule 2 as:

a Telstra process by which services can be transferred between LSS, and between LSS and DSL services.

 

423               “Churning” occurs when an end-user decides to switch from one service provider (the losing service provider) to another (the gaining service provider) in respect of a particular service, such as the LSS, as opposed to an end-user’s simply deciding to cancel the service altogether.  For example, an end-user might switch from Telstra (Bigpond) (in this example, the losing service provider) to Request (in this example, the gaining serviceprovider) or vice versa.  There would need to be a disconnection from Telstra (Bigpond) and a connection to Request.  Of course, the churn might not involve Telstra (Bigpond) at all.  It might, for example, be from Request to Chime.

424               The disconnection occurs by the removal of jumpers, which can be thought of as wires, and the connection occurs by the installation of jumpers.   A churn process can allow for the disconnection of the losing service provider and the connection of the gaining service provider to form part of the one operation.

425               Where disconnection and connection take place on the one occasion and as part of the one operation, the cost to Telstra is substantially less than what it would be if they were effected on different occasions and independently of each other.  In substance, the cost of the technician’s effecting both on the one occasion is little if any greater than the cost of his or her effecting one alone.  In such a case it is efficient for the cost of effecting both to be recovered from one or other of the two service providers, and it is practicable that it should be recovered from the gaining service provider.  In substance, such minor additional cost as Telstra may have of disconnecting the losing service provider is absorbed into the charge it makes for connecting the gaining service provider.  One would expect, however, that a disconnection associated with a simple cancellation of a service not part of a switch would attract a disconnection charge by Telstra to the losing service provider.

426               By the time of the Final Determination, there was no substantial dispute between Telstra on the one hand and ACCC and Request on the other that Telstra should have in place a regime under which it would not charge for at least some disconnections where the end-user was churning.  In fact, prior to ACCC’s making of the Final Determination, Telstra itself had implemented a “LSS Transfer Process” which incorporated that feature.  I discuss the details of the LSS Transfer Process in more detail below.

427               The area of difficulty has been in defining the circumstances when Telstra should be allowed to charge for a disconnection, even though the end-user is churning.  The dispute arose out of two considerations: first, Telstra’s LSS Transfer Process (which is in fact the “Telstra LSS churn process” referred to in cl 5A(ii)(a) of Schedule 2 to the Final Determination) required that in order for no disconnection charge to be levied, both the losing and gaining service providers must have agreed prior to the transfer to participate in that Process; and, second, a substantial provider of the LSS was Telstra’s own Bigpond business division which, as at the date of the Final Determination, had not agreed to participate in the LSS Transfer Process.  According to Telstra, Telstra (Bigpond) provided around 47% of all retail broadband services.

428               Because of Telstra (Bigpond)’s choice not to participate in the LSS Transfer Process, in the case of churns in which Telstra (Bigpond) was either the losing or gaining service provider a disconnection charge was payable to Telstra.  But because Telstra (Bigpond) is a business division of Telstra, in effect in those circumstances in which Telstra (Bigpond) would otherwise be liable to pay a disconnection charge, none would in fact be paid.  In this way, Telstra’s LSS Transfer Process gave Telstra a competitive advantage over competing LSS providers, such as Request.  All that Telstra had to do to retain that advantage was to continue to require that both the losing and gaining service providers be participants in the LSS Transfer process and to ensure that Telstra (Bigpond) continued not to participate in it.

429               Against this background it is convenient to refer again to cl 5A(ii) (set out at [419] above).  Paragraph (a) of cl 5A(ii) is straightforward.  It refers to Telstra’s existing LSS Transfer Process.  It involves a transfer or switch where both the losing and gaining service providers have previously agreed to participate in the LSS Transfer Process.  Telstra makes no complaint about para (a).

430               Paragraph (b), however, raises a complication.  While para (b), like the rest of cll 5 to 7, predicates a disconnection where Request is the losing service provider, para (b) is not limited to cases in which Telstra (Bigpond) is the gaining service provider.  Even if, for example, Request is a participant and the gaining service provider is Chime, a disconnection charge is not payable by Request to Telstra if Telstra (Bigpond) has not signed up to the Telstra LSS churn process.  Indeed, under para (b) a disconnection charge is not payable by Request to Telstra where it is a participant and Telstra (Bigpond) is not, even if the disconnection of Request marks a cancellation of the service and does not take place as part of a switch at all.

431               Paragraph (b) is calculated to operate as a strong inducement to Telstra (Bigpond) to sign up. 

432               Paragraph (b) was referred to as “Option 2” in ACCC’s FD Statement of Reasons.  “Option 1”, which was not adopted, was simply to allow disconnection charges on all disconnections not processed through the Telstra LSS churn process.  This was para (a) of cl 5A(ii), and, absent para (b), would have represented no more than a continuation of Telstra’s LSS Transfer Process.

433               As observed at [451] below, ACCC noted that although Option 2 would not “emulate” all outcomes expected if both the losing and gaining service providers had agreed to participate in the Telstra LSS churn process, there would be “practical difficulties” in the use of a more precise test.  I will discuss below what ACCC meant by this statement.

434               Telstra complains that ACCC did not inform it that it was considering Option 2, and did not make enquiries of Telstra as to the “practical difficulties” that ACCC had in mind.

The sequence of determinations

The Draft ID, the First ID and the Second ID

435               On 15 September 2006, ACCC sent to the parties the First Draft ID.  Paragraph 12 of the First Draft IDdistinguished between three situations.  It stated that except where the parties (Request and Telstra) subsequently agreed otherwise, the following charges would be payable by Request to Telstra for the disconnection of an LSS:

(i)                  for a disconnection that is requested on or before 15 November 2006, in circumstances where the LSS is not being migrated to a ULLS to be supplied to Request, $58 per service;

 

(ii)                for a disconnection that is requested after 15 November 2006, in circumstances where the LSS is not being migrated to a ULLS to be supplied to Request or an order is not placed by an end user or service providers for a new service(s) to be provided on that same copper pair/line within 30 calendar days of the disconnection request being made, $58 per service; and

 

(iii)               for all other disconnections, no charge is applicable.   [my emphasis]

 

436               In support of this proposal ACCC stated in an attachment:

The Commission considers that a charge should not be levied for LSS disconnections where the disconnection can be performed in conjunction with a connection of another service on the relevant line.  The Commission considers that to charge an additional amount (which the Commission understands is currently $90) to the ‘losing’ disconnection service provider, on top of the connection charge levied to the ‘gaining’ service provider, would be an over-recovery of costs.

 

This is because when the disconnection is performed as part of the connection of a new service, the incremental or discrete cost of performing the disconnection is so small and incidental to the connection process that it can be deemed to be recovered in the charge for the new connection.

 

In its final decision on Telstra’s LSS connection/disconnection charges access undertaking (section 6.4.6), the Commission identified a LSS disconnection occasioned by a customer churning the ADSL service to a new provider (including Telstra retail) as being an instance in which the LSS disconnection could be performed in conjunction with a new connection on the line.

 

The Commission proposes for the purposes of the interim determination that new orders which are received sufficiently proximate to the disconnection request are to be taken to be occasioned by a customer churning the ADSL service, and hence the relevant disconnection is not to be charged for.  In this regard, the Commission considers that it is appropriate for a period of 30 calendar days from the date of the request for the disconnection of the LSS to be allowed.

 

While a period such as this is necessary to facilitate the matching of new orders with an LSS disconnection, were a new order to be received more than 30 calendar days from the date of the disconnection request then it is unlikely that the LSS had been disconnected as part of a customer churn process.  A longer period would also appear to have the potential to unduly complicate the order matching process.

 

The Commission considers that this particular aspect of the proposed LSS disconnection charge terms should only apply to LSS disconnections that are made after 15 November 2006.  This is to permit any necessary systems changes to be effected by Telstra so as to coordinate disconnections and connection orders from other service providers.  This date has been proposed as it has been previously nominated by the Commission to Telstra as the date by when it would be reasonable for Telstra to have this functionality available.

 

Another instance in which the disconnection could be performed in conjunction with a new connection on the line is where the LSS disconnection is performed as part of a migration from the LSS to the ULLS (either as part of or outside an MNM). [footnotes omitted]

 

437               On 2 November 2006, ACCC made the First IDwhich adopted the provisions that had been foreshadowed in the First Draft ID.

438               As noted earlier, the Second ID, made on 21 December 2006, revoked the First ID, introduced provisions for LSS periodic charges, and stipulated in relation to disconnections of a LSS:

Except where the parties subsequently agree otherwise, the following charges are payable by Request to Telstra for the disconnection of a LSS:

 

(i)                  for a disconnection that is requested in circumstances where the LSS is not being migrated to an ULLS to be supplied to Request or an order is not placed by an end user or service provider for a new service(s) to be provided on that same copper pair/line within 30 calendar days of the disconnection request being made, $58 per service; or

 

(ii)                for all other disconnections, no charge is applicable. 

 

[my emphasis]

 

439               As can be seen, in both the First ID and the Second ID, ACCC sought to implement a criterion of temporal proximity between the request for a disconnection and the making of a new connection, in relation to the question whether Telstra would or would not be permitted to charge for the disconnection of a LSS.  Prior agreement of the parties to participate in any “churn process” was irrelevant.

The DFD

440               In the DFD, ACCC proposed that a disconnection charge should be payable only in circumstances essentially the same as those contemplated in the First ID and the Second ID: a charge was payable where the disconnection request was made before 15 November 2006, but in the case of disconnection requests made on or after that date, there was to be no charge where the end-user placed an order for a new service to be provided on the same line within 30 calendar days of the making of the disconnection request.

441               The DFD Consultation Paper stated under the heading “Jumpering, travel, vehicle and tool costs”:

The Commission’s preliminary view is that a disconnection charge should not be imposed in respect of disconnections made after 15 November 2006 where an order on the same line is received within 30 days of the disconnection request being made, as would be the case where the disconnection is caused by an end-user churning to another service provider.

 

This is because the Commission considers that an efficient operator would wait this period to see if the disconnection of the jumpers can be combined with the new jumpering on the relevant line.

 

Telstra nominated 15 November 2006 as the date by when it would make any necessary changed to its processes to implement the arrangement.

[my emphasis]

442                In Telstra’s submissions in response to the DFD Consultation Paper of 4 May 2007, Telstra stated that it had already instituted “a formal LSS transfer process” (a reference to the LSS Transfer Process).  It noted that a disconnection could be undertaken under that Process only if both the losing and gaining service providers had signed up to it, and that Request was one of a number of major LSS service providers that had not done so.   Telstra submitted that ACCC must not disentitle Telstra to charge Request for disconnections in these circumstances.  Telstra did not disclose whether Telstra (Bigpond) had signed up to the LSS Transfer Process. 

443               Telstra noted that further details of the LSS Transfer Process were set out in a statement by Ashwini Pradhan, a Product Manager in “Telstra Wholesale”, which was Annexure B to Telstra’s DFD Submissions.   In that statement, Mr Pradhan explained why it was that the LSS Transfer Process required that both the gaining and losing service provider have signed up.  He stated:

18        … the [LSS Transfer Process] cannot be adopted more broadly.  To do so would be to mandate the use of that particular process.  This is to force onto [service providers] a choice which has concomitant commercial and legal requirements.  For the [LSS Transfer Process] to operate the [service provider] must provide its “pre-consent” to the transfer of any of its customers to another [service provider].  In fact the new transfer process works by expediting the disconnection and connection process by the reliance on the pre-existing authority of both the gaining [service provider] and the losing [service provider].  Under the current disconnection process, authority must be obtained from the losing [service provider] for each individual disconnection and from the gaining [service provider] for each connection.  In both cases the authority to disconnect and connect ultimately comes from the end-user.

 

19        Telstra cannot mandate the [LSS Transfer Process] for all [service providers].  Absent an industry code, Telstra would have to negotiate arrangements with all LSS [service providers] and potentially notify access disputes against all these [service providers]) to allow for this process to be implemented.

Apparently this was the first time that Telstra had provided ACCC with details about its LSS Transfer Process (see below).

444               Telstra’s submissions in response to the DFD Consultation Paper identified what it said constituted significant practical difficulties that would be associated with ACCC’s proposal that Telstra hold back a disconnection for 30 days.  Mr Pradhan’s statement also addressed these practical difficulties.  One of these, from which some of the others flowed, was that the existing LSS remained physically active for the 30-day period.

445               Telstra submitted that to devise and implement a system that would recognise a disconnection where in fact the LSS remained active (because the physical disconnection had not occurred) would itself involve cost.  In this respect Telstra relied on a report of Dick Prince, Civil Engineer, who concluded:  “For reasons of business efficacy, risk management and equity, I remain of the opinion that a network provider such as Telstra should remove jumpers upon disconnection of an LSS”.

446               In summary, the disconnection issue to which Telstra’s submissions to ACCC were directed was the proposed 30-day waiting period.  Telstra was prepared not to charge for a disconnection where it was processed within its LSS Transfer Process.  This required that there be a request for both connection and disconnection, and that both the losing and gaining service providers had previously agreed to participate in the LSS Transfer Process.

447               As will be seen below, because, inter alia, of Telstra (Bigpond)’s non-participation, this did not allow ACCC to achieve its objective of ensuring that a losing service provider would not pay a disconnection charge in all cases where the end-user was changing service providers (as opposed to simply cancelling the LSS service).

The Final Determination

448               The part of the Final Determination relevant to “single” disconnection charges is cll 5 to 7 of Sch 2 which were set out at [419] above.

449               It will be noted that the concept of a 30-day waiting period was not repeated in the Final Determination.  Apparently ACCC accepted Telstra’s submission that it was impracticable.  Paragraph (a) of cl 5A(ii) implements Telstra’s LSS Transfer Process, referring to it as the “Telstra LSS churn process” (I will use, as I have done above, the terms interchangeably, depending on the context).  It will be recalled that under the LSS Transfer Process there was no 30-day waiting period and the prior agreement of both losing and gaining service providers to participate was essential.

450               Under para (b) of cl 5A(ii), if Request is participating in the Telstra LSS churn process no disconnection charge is chargeable by Telstra to Request as a losing service provider regardless of the identity of the gaining service provider unless and until Telstra (Bigpond) agrees to participate in the Telstra LSS churn process.  On the other hand, Telstra is entitled to make such a charge to Request if Request is not participating in the Telstra LSS churn process whether Telstra (Bigpond) is participating in it or not.  Paragraph (b) is an inducement to both Telstra and Request to sign up to the Telstra LSS churn process, or at least eliminates any advantage to them of not doing so.

451               In the FD Statement of Reasons, ACCC stated under the heading “Circumstances in which ‘single’ disconnections charges are to apply”:

The Telstra LSS churn process has potential to provide an effective means by which to churn a LSS (either to or from another LSS, or a DSL service), and would allow exchange work to be aligned, and unnecessary cost avoided.  It also appears consistent with the DSL churn process, which has gained acceptance from a number of service providers; and represents a least cost option by which to introduce a churn process for LSS, given it avoids reconfiguration of Telstra’s ordering systems.

 

Accordingly, the Commission considers that it should harmonise its approach to LSS disconnection charges with the implemented Telstra churn process.  The Commission has revised its ‘churn’ definition to encompass only service transfers processed within the Telstra LSS churn process.

 

The Commission is concerned, though, as to whether the Telstra LSS churn process will be fully effective in ensuring that LSS access seekers do not pay avoidable costs. Primus has provided a media article in which Telstra (Bigpond) is reported as not intending to participate in the Telstra LSS churn process.  The most recent listing that Telstra has published concerning participants in its broadband churn processes (May 2007) confirms that Telstra (Bigpond) was participating in the DSL churn process, but not the LSS churn process.  It is possible this position may have since changed, but for the purposes of this discussion, the Commission has proceeded on the basis that Telstra (Bigpond) is not a participant in the LSS churn process.

 

The Telstra LSS churn process is available only where the gaining and losing service providers are participants, and it appears that Bigpond (which has the largest share of DSL services) is not a participant. And so, a number of churns could attract a disconnection charge, even though Telstra could avoid the underlying costs.

 

Accordingly, the Commission has considered whether LSS disconnection charges should also be avoided where the Telstra LSS churn process could be unavailable due to Bigpond’s non-participation. The two options considered by the Commission against the section 152CR(1) criteria are: (i) allowing disconnection charges on all LSS disconnections that are not processed via the Telstra LSS churn process [Option 1]; and (ii) disallowing LSS disconnection charges otherwise payable under option (1) where the LSS access seeker is a participant in the Telstra LSS churn process, but Telstra (Bigpond) is not [Option 2].

 

Option (2) will not emulate all outcomes expected if both the losing service provider and Telstra (Bigpond) were participants in the Telstra LSS churn process, as there is the potential for additional disconnection charges being disallowed under this option. However, there would be practical difficulties in use of a more precise test, and this option provides slightly stronger incentives on Telstra (Bigpond) to participate. Bigpond currently has relatively weak incentives to participate.  Unlike other service providers, Bigpond does not itself face these disconnection charges, and has a larger share of the retail market.  [my emphasis]

 

452               The FD Statement of Reasons then went on to assess Option 1 and Option 2 against the criteria in s 152CR(1).   ACCC adopted Option 2 and stated:

It may be that some refinements in approach may be appropriate in future. For instance, further consideration may become necessary if a significant number of services remain outside the ambit of the LSS churn process, or any problems or limitations in the process that could be identified in the process in future are not able to be resolved.

453               It is useful to analyse cl 5A(ii) of the Final Determination in more detail.  In any case where both Request and the other provider have agreed to participate in the Telstra LSS churn process, para (a) applies.  It is only where either Request or the other service provider has not done so that there is a possibility of a disconnection charge being made and that para (b) has to be considered.

454               Where the parties to the churn are Request and Telstra (Bigpond), the position is straightforward: if both are participants, para (a) applies to deny Telstra a disconnection charge;  if Telstra (Bigpond) is participating but Request is not, para (b) leaves Telstra entitled to make a disconnection charge; if Telstra (Bigpond) is not participating but Request is, para (b) denies Telstra a disconnection charge; if neither Telstra (Bigpond) nor Request is participating, para (b) leaves Telstra free to make a disconnection charge.

455               However, para (b) also has the potential to deny Telstra a disconnection charge where Telstra (Bigpond) is not a party to the churn, or there is no churn but simply a cancellation of the service.  Assume a switch from Request to Chime, with Request participating in the Telstra LSS churn process and Chime not participating in it:  para (a) does not apply but para (b) does if Telstra (Bigpond), a non-party to the particular churn, is not participating in the Telstra LSS churn process.  Paragraph (b) would also disentitle Telstra to charge even where there was a simple cancellation, without transfer, of a LSS service provided by Request, where Request had signed up to the Telstra LSS churn process but Telstra (Bigpond) had not.

456               As Telstra correctly points out, neither the First ID, the Second ID, the DFD Consultation Paper nor the DFD itself had contained any reference to Option 2 and the participation of Telstra (Bigpond) as a requirement of Telstra’s being able to make a disconnection charge.  In those documents, ACCC had stipulated only the requirement of a 30-day waiting period in which Telstra had to wait to see if a connection request over the same line was made.  If no connection request was made, Telstra could disconnect and make a charge to the losing service provider for doing so.  If a new connection eventuated subsequently, Telstra would charge the gaining service provider for that new connection as well.  The agreement of the losing and gaining service providers to participate in any churn process was irrelevant.

Telstra’s Ground 8

457               Telstra complains that ACCC failed to comply with its duty under s 152DB(1)(b) of the Act because it made the Final Determination without making enquiries of Telstra as to the “practical difficulties” that precluded the adoption of a more precise test than Option 2.  ACCC has admitted for the purpose of this proceeding that it did not disclose to Telstra, or make enquiries of Telstra as to, the practical difficulties that ACCC said existed in the use of a more precise test than Option 2.

458               Section 152DB(1) was set out at [42] above, and I discussed s 152DB(1)(b) in Section A (Telstra’s Cost Model) at [160]ff.

Parties’ submissions

459               Telstra submits that:

·                    ACCC did not have information before it as to the practical difficulties associated with any other “more precise test” than that of Option 2 (the only information of practical difficulties being those in relation to the 30-day waiting period);

·                    ACCC did not seek to obtain such information;

·                    ACCC therefore did not have the information before it necessary to support a finding that any more precise test than that of Option 2 was precluded by “practical difficulties”.

460               Telstra submits that if ACCC apprehended that there were practical difficulties associated with a more precise test than that of Option 2, ACCC had a duty under s 152DB(1)(b) to make enquiries of Telstra as to whether they did exist.  Telstra submits that ACCC knew or ought reasonably to have known that information on this issue was readily available from Telstra.

461               Telstra gives the following example of an option that it says would have been “more precise” in eliminating the “avoidable costs” identified by ACCC: no disconnection charge to be payable by Request to Telstra if:

·                    Telstra (Bigpond) is the gaining service provider;

·                    Request is the losing service provider;

·                    Telstra (Bigpond) is not a participant in the Telstra LSS churn process; and

·                    Request is a participant in the Telstra LSS churn process.

This differs from Option 2 in that it would exclude the disconnection charge only where the churn is from Request to Telstra (Bigpond). Unlike Option 2, it does not have the potential to disentitle Telstra to a disconnection charge on a churn from Request to Primus, for example, or on a simple cancellation of a LSS provided by Request.

462               Request submits that s 152DB(1)(b) does not assist Telstra.  It contends that the following matters need to be taken into account when applying s 152DB(1)(b):

·                    ACCC first received notification of the LSS access dispute on 18 April 2006.

·                    ACCC had been enquiring of Telstra for information about details of the Telstra LSS Transfer Process since April 2006 but Telstra did not provide it with any information until Telstra’s DFD Submissions of 4 May 2007.

·                    By the time the Final Determination was made (on 1 August 2007 with effect on and from 22 August 2007), the LSS Declaration had only two to three months left to run (until 31 October 2007, although it was later extended), and the Final Determination itself was to operate for only a little more than four months (from 22 August 2007 to 31 December 2007), so that the impact of Option 2 would be felt by Telstra for only that period.  Furthermore, Mr Pradhan’s statement showed that the number of single disconnections in which Request was the losing service provider was likely to be small.

·                    The relatively limited nature of this part of the Final Determination was recognised by ACCC when it referred in its FD Statement of Reasons to potential changes to the system in the future (see [452] above).

·                    Option 2 was in fact more favourable to Telstra than other models that had been considered by ACCC up to that time (although, as Telstra points out, it is less favourable with respect to quantum than the “Request Access Agreement” dated 30 August 2000 which had been in place between the parties and which allowed Telstra to charge Request in respect of all LSS disconnections).

463               Request submits that these factors demonstrate that a further delay in resolving the dispute, in order to make enquiries of Telstra, would have disabled ACCC from complying with s 152CLA(1).  Section 152CLA(1) requires that ACCC must, in exercising its powers in resolving access disputes, have regard to the desirability of their being resolved in a timely manner.  Request submits that s 152CLA(1) and s 152DB(1)(b) require a balancing exercise between speed and the need to enquire, and that in the circumstances ACCC did not fail to discharge its statutory obligation under s 152DB(1)(b) by not making enquiries of Telstra in relation to the practical difficulties in adopting a more precise test than Option 2.

Consideration

464               Section 152DB(1)(b) recognises a “need to carefully and quickly inquire into and investigate the dispute and all matters affecting the merits, and fair settlement, of the dispute”, although it does not in terms impose on ACCC an obligation so to act.  As noted above, Telstra submits that the provision had the effect of requiring ACCC to enquire of Telstra specifically concerning the practical difficulties of adopting a more precise test than Option 2.

465               As I indicated in Section A (Telstra’s Cost Model) at [160]ff, I have considerable difficulty with s 152DB(1)(b).  The desiderata that it identifies conflict if they are considered in isolation and free from any moderating influence.  That moderating influence is found in the requirement of a “proper consideration of the dispute” (although this requirement may exclude any meaningful role for the desiderata).  Did a proper consideration of the dispute between Telstra and Request demand that ACCC enquire of Telstra concerning the proposed para (b) of cl 5A(ii)?

466               In order to answer this question it is necessary to return to the circumstances of the case.  These include, in particular, the timing of the notification to ACCC of the implementation of the Telstra LSS Transfer Process and certain features of the Telstra LSS Transfer Process, including whether Telstra (Bigpond) was participating in it.

467               In Telstra’s submission of February 2006 in response to ACCC’s draft decision in respect of Telstra’s LSS undertaking relating to connection and disconnection charges, Telstra advised ACCC that it intended to “trial” a LSS churn system in 2006, noting that it would be necessary for all relevant parties to agree to appropriate transfer arrangements to allow end-users to move between access seekers.

468               In ACCC’s Assessment of Telstra’s LSS undertaking relating to connection and disconnection charges: Final Decision ofApril 2006, ACCC expressed the view that Telstra’s expression of intent did not seem to imply that a churn system would be especially difficult for Telstra to develop and invited Telstra to supply information concerning the nature of the process being trialled.

469               On 28 March 2007 ACCC supplied to the parties a number of documents, including a report by Consultel BWP Pty Ltd (Consultel) dated 23 February 2006. 

470               The Consultel report stated, inter alia, that the absence of a transfer process was “inefficient”.  It concluded that a LSS transfer process would provide an efficient mechanism for end-users to move between service providers and that the lack of one was causing access seekers to incur costs over and above the efficient costs to which they would be subject if a LSS transfer process was in place.

471               During the LSS arbitration, Telstra said nothing further in relation to the Telstra LSS Transfer Process prior to filing its submissions in response to the DFD Consultation Paper on 4 May 2007.  Even then, it did not disclose that Telstra (Bigpond) was not a participant.  In fact, as noted in the FD Statement of Reasons (see [451] above) it was Primus that informed ACCC of reported statements that Telstra (Bigpond) would not participate in the Telstra LSS Transfer Process. 

472               In the absence of information from Telstra, ACCC concentrated on the question of whether Telstra should be allowed to charge for disconnections that occurred as part of a churn at all:  thus, the 30-day waiting period required at the First ID, the Second ID and the DFD stages.  The effect was that Telstra would not be entitled to make a disconnection charge in any case of a new connection occurring within 30 days of an end-user’s request for disconnection.  Essentially, ACCC determined that outside the 30-day period, the end-user was taken not to be churning, and Telstra would be entitled to make a disconnection charge.

473               Option 2 was directed to achieving the same objective of ensuring that in the case of a churn there was no disconnection charge, but it went further in the two respects mentioned earlier (at [430] and [455]).

474               In an internal ACCC memorandum dated 25 May 2007 from Mr Riordan to Messrs Samuel and Willett, Mr Riordan noted expert advice that ACCC had received to the effect that the “technical concerns” raised by Telstra in relation to ACCC’s proposed approach to disconnection charges (which was the approach that referred to the 30-day waiting period) were overstated and that ACCC officers were proposing that ACCC maintain that approach.

475               In a later internal ACCC memorandum dated 19 July 2007 to the same addressees Mr Riordan observed that Telstra had now implemented a churn process that included the LSS.  He recommended that as far as possible the Final Determination be harmonised with that churn process.  Mr Riordan indicated his concern, however, that Telstra (Bigpond), which he noted had the largest share of DSL services, was not a participant in that churn process, and so a number of churns would attract a disconnection charge even though this could be avoided if Telstra (Bigpond) was a participant.  Mr Riordan suggested that the problem that Telstra (Bigpond) did not itself face disconnection charges and so had weak incentives to participate, could be overcome by a provision that access seekers should not pay a disconnection charge so long as they were participating in the Telstra LSS churn process and Telstra (Bigpond) was not.  Mr Riordan added:

There could be some sensitivity to Bigpond being singled out in this way on the face of the determination.  An alternative would be to signal in the reasons that we may intervene in future if Bigpond remains outside the Telstra LSS churn process, but not go so far as to intervene in this way now.

 

ACCC did “single out” Telstra by adopting (as Option 2) the mechanism described in Mr Riordan’s memo of 19 July 2007.

476               Telstra does not suggest, and could not reasonably suggest, that ACCC was obliged to give it an opportunity to be heard on any form of final determination that ACCC proposed to make.  In my opinion, ACCC’s adoption of Option 2 without making further inquiries of Telstra wasnot inconsistent with a proper consideration of the dispute, whether or not ACCC’s obligation to reach a decision speedily is taken into account.

477               It was clear to Telstra that ACCC wished to ensure that transfers between service providers by an end-user be free of any disconnection charge to the access seeker.  Telstra was not forthcoming as to the nature of its own LSS Transfer Process.  ACCC learned of it late in the day as the above account shows.  ACCC decided to change its proposed approach to disconnection charges  by building on Telstra’s own LSS Transfer Process with modifications directed to ensuring that both Telstra (Bigpond) and Request would sign up to the LSS Transfer Process so that there would be no escaping the exemption from the disconnection charge in the case of an end-user switching service providers.

478               Accepting, as ACCC did, that Telstra’s existing LSS Transfer Process depended on the agreement of both the losing and gaining service providers to participate, an appropriate way of ACCC’s achieving its objective was to take that LSS Transfer Process as the starting point and to apply commercial pressure to Telstra (through its Bigpond business division) and Request to agree to participate.  In the arbitration between Telstra and Request, ACCC could impose terms on them alone, and not on other service providers who were not a party to the arbitration.  While other courses could have been chosen, one that was open was to deny Telstra a disconnection charge in the case of all disconnections of a Request LSS so long as Telstra (Bigpond) had not signed up and Request had signed up, and to deny Request, as losing service provider, the benefit of the “no disconnection charge” aspect of a churn so long as it (Request) had not signed up.

479               The alternative option suggested by Telstra in its present submissions (see [461] above) was obvious and may be taken to have been rejected by ACCC.

480               In my opinion, Telstra’s Ground 8 is not made out.

Telstra’s Ground 9(a) and (b)

General

481               The relevant facts were set out in relation to Ground 8 above.

482               As the parties agree, the Act does not dispense with ACCC’s obligation to accord Telstra procedural fairness. 

483               Telstra submits that procedural fairness requires a decision-maker to disclose to an interested party the substance of material that is significant, relevant, credible and obtained from a source other than that party (citing Kioa v West (1985) 159 CLR 550 (Kioa v West) and Applicant VEAL of 2002 v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 225 CLR 88 (VEAL)).  As formulated, the submission is based on the High Court judgment in VEAL at [14]-[18] which refers to the judgment of Brennan J in Kioa v West at 628-629.  Brennan J there referred to adverse information that is credible, relevant and significant which the decision-maker possesses and proposes to take into account.  VEAL concerned an unsolicited letter from a third party which had been forwarded by the Department of Immigration and Multicultural and Indigenous Affairs to the Refugee Review Tribunal.

484               In my respectful opinion neither Kioa v West nor VEAL is of direct relevance to the present case, which is not one of “information” of the kind referred to in them.  The relevant information that ACCC “possessed” was that Telstra had implemented a churn process that required the participation of both the losing and gaining access seekers, and that neither Telstra (Bigpond) nor Request were participants in that process.  This information came from Telstra or was at least known to Telstra.  Furthermore, Telstra knew that ACCC’s objective was to avoid disconnection charges in the case of an end-user switching service providers, and the information referred to was of obvious relevance to that objective.  The procedural fairness issue raised in the present case concerns the solution arrived at and the reasoning process that led to it.  This is a different area of discourse from that of information received by a decision-maker from a third party.

485               A party liable to be directly affected by a decision (such as Telstra) is, however, entitled to have its mind directed to the critical issue or factor on which the administrative decision is likely to turn (Kioa v West at 587; Sinnathamby v Minister for Immigration and Ethnic Affairs (1986) 66 ALR 502 at 517; Broussard v Minister for Immigration and Ethnic Affairs (1989) 21 FCR 472 at 481-482; Somaghi v Minister for Immigration, Local Government and Ethnic Affairs (1991) 31 FCR 100 (Somaghi) at 108).  This does not mean that the party is entitled to have its mind directed to the provisional views of the decision-maker so that it may have a further opportunity of criticising the decision-maker’s mental processes before a final decision is reached (Commissioner for Australian Capital Territory Revenue v Alphaone Pty Ltd (1994) 49 FCR 576 at 590-592).  Similarly, a decision-maker is not required to alert parties to “evaluative conclusions” on the material before the decision-maker (Somaghi at 108).  What the rules of procedural fairness require depends on the statutory framework and the facts and circumstances of the particular case: SZBEL v Minister for Immigration and Multicultural and Indigenous Affairs (2006) 228 CLR 152 at [26].

Consideration of Telstra’s Ground 9(a)

486               In his affidavit, Mr Cole states that in all correspondence from ACCC in the course of the access dispute between Telstra and Request of which he was aware, ACCC did not disclose that it was proposing to adopt Option 2.  He states that if Option 2 had been disclosed, he would have proposed that Telstra make submissions addressing it.  In fact, he says, Telstra did make submissions in subsequent LSS access dispute arbitrations urging ACCC not to adopt Option 2.  Mr Cole also states that he was aware that ACCC had expressed a view that “charges for avoidable disconnection costs associated with end-user ‘churn’” should not be allowed.

487               Although I accept that Mr Cole would have done as he says, I do not find his evidence persuasive in the absence of any evidence whatever of the general nature of the submissions that he would have urged be made on Telstra’s behalf.

488               In a notice disputing facts ACCC disputes that between 30 March 2007 and 1 August 2007 it did not disclose Option 2 to Telstra.  It is clear that ACCC did not do so expressly.  Request contends, however, that ACCC disclosed the “issue of Option 2”.  Request submits that Option 2 fell within the general issue of disconnection charges as disclosed to the parties, because:

·                    Telstra knew that its LSS Transfer Process, which it disclosed to ACCC, was a consideration relevant to the calculation of disconnection charges; and

·                    the non-participation of Telstra (Bigpond) in the LSS Transfer Process was raised in the submissions of the other parties (of which Telstra had received copies).

Telstra points out, however, that ACCC has led no evidence, including no evidence to support an inference that ACCC did disclose the “issue” of Option 2.  I dealt with a similar submission made by Telstra at [179]ff above in Section A (Telstra’s Cost Model).

489               In my opinion ACCC was not obliged to disclose anything further in relation to, or to give Telstra an opportunity to be heard on, Option 2 specifically.  Telstra knew that ACCC wished to eliminate disconnection charges in the case of all transfers or churns.  Telstra could not have complained if ACCC had adopted Telstra’s LSS Transfer Process without qualification.  ACCC embraced that process with additional features that imposed commercial pressure on Telstra and Request to ensure that they participated in order to achieve its “no disconnection charges on churns” objective.

490               Telstra’s complaint is that ACCC went too far by denying Telstra a disconnection charge on certain churns to which Telstra (Bigpond) was not a party and on certain cancellations of a LSS service (non-transfers), in each case until Telstra (Bigpond) signed up to the Telstra LSS churn process.  However, ultimately that is all that Telstra’s complaint is: a complaint over a matter of degree rather than over a solution that was alien to the considerations that had arisen in the course of the arbitration.

491               I think that ACCC was entitled to adopt Option 2 without first acquainting Telstra with its intention to do so and allowing Telstra a further opportunity to be heard on Option 2.

Consideration of Telstra’s Ground 9(b)

492               Telstra asserts that it does not know what the “practical difficulties” to which ACCC referred are.

493               The reference to the potential disallowance of “additional disconnection charges” in the first sentence in the emphasised final paragraph in the passage set out at [451] above is a reference to the situations referred to at [430] and [490] above.  ACCC was aware that those two situations were ones in which Option 2 would disallow disconnection charges over and above the circumstances in which they would be disallowed under Telstra’s existing LSS Transfer Process even if Telstra (Bigpond) had signed up.  ACCC was also aware that in consequence, Option 2 “provide[d] slightly stronger incentives on Telstra (Bigpond) to participate”.

494               There remains a question what ACCC meant by the words “However, there would be practical difficulties in the use of a more precise test”.  What was the more precise test than Option 2 that ACCC had in mind?  What were the practical difficulties associated with that test?

495               The more precise test that suggests itself most obviously is the one identified by Telstra in its submissions to this Court set out at [461] above.  The practical difficulty with that option may have been that it did not impose the maximum pressure available on Telstra (Bigpond) to sign up.   Or perhaps the more precise test ACCC had in mind was ACCC’s original 30-day waiting period approach which ACCC considered would avoid disconnection charges in the case of all end-user churns.  In that case, the practical difficulties were those identified by Telstra in its submissions to ACCC referred to above.

496               The merits of Option 2 were a matter for ACCC.  It chose a simple solution knowing precisely what it was doing.  The objective was to apply commercial pressure to Telstra (Bigpond) and Request to sign up to the Telstra LSS churn process with a view to the elimination of all disconnection charges on churns throughout the industry.  Telstra knew that this was an objective that ACCC wished to achieve in the arbitration.  Option 2 was a means directed to that end which ACCC was entitled to adopt without according to Telstra an opportunity to be heard any further on the practical difficulties to which ACCC referred.

497               In my opinion ACCC was not required to inform Telstra of the “practical difficulties” that ACCC had in mind and give Telstra an opportunity to address them before ACCC adopted Option 2 in the Final Determination.

Conclusion on Telstra’s Grounds 8, 9(a) and 9(b)

498               For the above reasons, Telstra’s Grounds 8 and 9(a) and (b) are not sustained.

499               It is therefore not necessary for me to address Request’s motion for leave to reopen but as full submissions were made on it, I will do so.

Request’s motion for leave to reopen

500                I referred at [201]ff in Section A (Telstra’s Cost Model) to Request’s motion for leave to reopen by putting into evidence the Adam Final Determination and the Adam FD Statement of Reasons.  I will not repeat here what I said there and will confine my attention to issues relating specifically to Option 2.  In its application for judicial review of the Adam Final Determination, Telstra does not raise a ground attacking cl 5A(b) in the Adam Final Determination (which is equivalent to cl 5A(ii) in the Final Determination).

501               In the Adam/Telstra arbitration, ACCC advised the parties that it was considering adopting Option 2 in relation to single disconnection charges.  Telstra, represented by Mallesons, had the opportunity of making submissions on the issue and did so.  Nonetheless, ACCC adopted Option 2.

502               Request submits that this evidence is relevant to the questions whether ACCC failed to accord procedural fairness to Telstra in the Request/Telstra arbitration and whether, as a matter of discretion, relief should be refused to Telstra if ACCC did fail to accord Telstra procedural fairness.

503               In the Adam FD Statement of Reasons, ACCC again addressed Option 1 and Option 2 which it had addressed in the FD Statement of Reasons.  At paras 813-817, ACCC stated:

The practical difference between these options [Option 1 and Option 2] is that Option (2) provides the parties incentives to participate in the Telstra LSS churn process, making the process more effective, and thereby more capable of ensuring that disconnections caused by end-user churn are not charged. …

 

…

 

In the short term, neither of these options will emulate the outcome of a condition that disallowed disconnection charges in all cases of end-user churn.  For instance, Option (2) has the potential for additional disconnection charges to be disallowed (those relating to ‘non-churns’) until Bigpond participates in the Telstra LSS churn process.  Whether this is the case will depend upon whether the access seeker has signed up to the process.

 

Conversely, each option has the potential to allow additional disconnection charges (where the disconnection is a churn processed outside the Telstra LSS churn process) until all significant service providers are participating.  However, in the longer term, option (2) has the greater potential to ensure that disconnection charges are not imposed in cases of end-user churn.

 

Option 2 will be far simpler to implement as compared to possible alternatives of the type that the Commission proposed in previous arbitrations, which would require Telstra to assess each LSS disconnection to identify whether a new service has been installed on the relevant line within a certain period of time.  In contrast, option 2 only requires Telstra to check at the time of the disconnection whether the access seeker and Bigpond have signed up to the Telstra LSS churn process.  Listings of participants in the Telstra LSS churn process are readily available.

 

504               In relation to Option 2, Telstra submits that the Adam Final Determination and the Adam FD Statement of Reasons should not be admitted for the reasons to which I referred at [224]ff and for certain additional reasons peculiar to Option 2.  In relation to the latter, Telstra again observes that whereas the LSS Pricing Principles of 2002 applied in relation to the Request/Telstra arbitration, it was the 2007 LSS Pricing Principles that applied in respect of the Adam/Request arbitration.  Importantly, Part 2 of Sch 1 to the 2007 LSS Pricing Principles adopted Option 2 for disconnection charges, whereas the LSS Pricing Principles of 2002 did not do so. 

505               Telstra submits that ACCC relied on the 2007 LSS Pricing Principles in support of its Adam Final Determination.  In particular, Telstra draws attention to para 840 of the Adam FD Statement of Reasons, which occurs under the heading “Summary” (and after the paras set out at [503] above).  In that paragraph ACCC stated:

Further, option 2 is specified in the 2007 LSS pricing principles (indicative prices), and hence its adoption here is consistent with those pricing principles.

 

506               This passage can be read as implying that one consideration that influenced ACCC to adopt Option 2 in the Adam Final Determination was the presence of the indicative prices in the 2007 LSS Pricing Principles – a feature that was absent from the LSS Pricing Principles of 2002.  Request, on the other hand, submits that this paragraph was no more than a statement that the adoption of Option 2 was consistent with and not prohibited by the 2007 LSS Pricing Principles.   This submission raises a difficult question of construction of para 840 quoted at [505] above.

Conclusion on motion to reopen

507               For the reasons I gave in Section A (Telstra’s Cost Model) at [226] mutatis mutandis, I have decided to admit the Adam Final Determination and the Adam FD Statement of Reasons, but to accord them no weight. 

F.         DISCONNECTION CHARGES, BACKDATING AND THE “NO CHARGE PERIOD”

Telstra’s Ground 10(a):   Failure to take into account a relevant consideration, namely, Telstra’s costs when determining disconnection charges during the No Charge Period

Telstra’s Ground 10(b):   Procedural ultra vires by failing to take into account matters referred to in s 152CR(1) and to have regard to the LSS Pricing Principles when determining disconnection charges during the No Charge Period

Telstra’s Ground 10(c):    Jurisdictional error by asking itself the wrong question in relation to disconnection charges during the No Charge Period

General

508               Clauses 5 to 7 of Schedule 2 to the Final Determination were set out at [419].  Since they are of present relevance, I set them out again:

5.         Except where the parties subsequently agree otherwise, and subject to clause 5A, the charge payable for the disconnection of a LSS outside of a managed network migration is as follows:

 

2005-06	$34.70 (per disconnection)
2006-07	$35.10 (per disconnection)
2007-08	$36.70 (per disconnection)

 

5A.      A disconnection charge is not payable by Request in any of the following circumstances:

(i)          the disconnection occurs between 15 November 2006 and the date that this determination comes into effect; ...

(ii)        the disconnection occurs after this determination coming into effect and either:

(a)    the disconnection is made pursuant to the Telstra LSS churn process; or,

(b)    Request is participating in the Telstra LSS churn process and Telstra (Bigpond) is not participating in the Telstra LSS churn process.

 

7.         Clauses 5, 5A and 6 are not to apply to disconnections that were made before 1 February 2006 or after 31 December 2007.

 

509               Clause 5A(i) refers to the period from 15 November 2006 to 22 August 2007 (No Charge Period).  The date 15 November 2006 was the date by which ACCC considered it reasonable for Telstra to have implemented a churn process in respect of LSS connections and disconnections, and 22 August 2007 was the date the Final Determination came into effect.

510               I dealt with Telstra’s attack on cl 5A(ii) in Section E (Disconnection Charges, the Churn Process and “Option 2”).  Clause 5A(ii) operates entirely prospectively, that is to say, in respect of the period after the Final Determination came into effect on 22 August 2007 down to its expiry on 31 December 2007.  Clause 5A(i), on the other hand, operates entirety retrospectively, that is to say, in respect of a period prior to the Final Determination’s coming into effect on 22 August 2007.

511               Telstra contends that the mandatory relevant considerations listed in s 152CR(1) and the LSS Pricing Principles (see s 152AQA) applied to ACCC’s making of cl 5A(i).  Request and ACCC contend that they did not.  (As mentioned at [102] above, ACCC made submissions on the general issue of construction involved.)  They submit that cl 5A(i) was an exercise of the power to “backdate” given by s 152DNA of the Act.  That section contains in subs (7) an exhaustive list of the matters to which ACCC must have regard when exercising the backdating power conferred by s 152DNA(1).

512               It was not contended for Request and ACCC that ACCC had in fact applied the s 152CR(1) criteria and the LSS Pricing Principles when deciding to adopt cl 5A(i). 

513               Telstra relies on three grounds in relation to the No Charge Period.

514               First (Telstra’s Ground 10(a)), Telstra claims that ACCC failed to take into account a mandatory relevant consideration, namely, Telstra’s efficient costs of effecting disconnections during the No Charge Period. Although not specified in Ground 10(a), in its written submissions, Telstra also claims that ACCC failed to have regard to another mandatory consideration, namely, the LSS Pricing Principles.

515               I have already discussed the applicable legal principles in relation to a failure to take into account a mandatory relevant consideration.

516               Second (Telstra’s Ground 10(b)), Telstra claims that ACCC failed to observe procedures that it was required by law to observe by reason of its failure to take into account the matters referred to in s 152CR(1) of the Act and the LSS Pricing Principles.  Telstra refers, in particular, to para (a) (the LTIE), para (b) (Telstra’s legitimate business interests and its investment in facilities to supply the LSS) and para (d) (the direct costs of providing access to the LSS).

517               Third (Telstra’s Ground 10(c)), Telstra claims that ACCC fell into jurisdictional error by asking itself whether the ID supported Telstra’s applying charges for LSS disconnections during the No Charge Period, rather than asking the correct question, namely, whether Telstra had incurred costs in effecting disconnections of the LSS during the No Charge Period and if so, whether allowing Telstra to levy a charge for such disconnections would balance the statutory criteria in s 152CR(1) and the LSS Pricing Principles.

518               Jurisdictional error occurs where a decision-maker fails to exercise the jurisdiction it has by making or refusing to make an order or decision by reason of “a mistaken assumption or denial of jurisdiction or a misconception or disregard of the nature or limits of jurisdiction” (Craig v South Australia (1995) 184 CLR 163 at 177).  In Ex parte Hebburn Ltd; Re KearsleyShire Council (1947) 47 SR (NSW) 416 at 420, Jordan CJ said that there was a failure to exercise jurisdiction where the decision-maker “misunderstand[s] the nature of the jurisdiction which [he or she] is to exercise, and … appl[ies] a ‘wrong and inadmissible test’ … or … ‘misconceive[s his or her] duty,’ … or ‘[fails] to apply [himself or herself] to the question which the law prescribes’ … or ‘… misunderstand[s] the nature of the opinion which [he or she] is to form’”.  This description of constructive jurisdictional error was approved by Guadron J in Re Minister for Immigration and Multicultural Affairs; ex parte Miah (2001) 206 CLR 57 at [80].

Section 152DNA

519               At [45] above I set out s 152DNA(1) and (2).  It is convenient now to set out, with certain observations, all of the subsections of s 152DNA.

Subsection (1)

520               Subsection (1) of s 152DNA provides:

(1)        Any or all of the provisions of a final determination may be expressed to have taken effect on a specified date that is earlier than the date on which the determination took effect.

521               This provision assumes the existence of provisions of a final determination (substantive provisions) and provides for backdating as a collateral step.

Subsection (2)

522               Subsection (2) of s 152DNA provides:

(2)        The specified date must not be earlier than the date on which the parties to the determination commenced negotiations with a view to agreeing on the terms and conditions as mentioned in paragraph 152AY(2)(a).

523               Request and Telstra entered into an access agreement dated 30 August 2000 which, as amended on 3 November 2005, provided for a disconnection charge of $90 for the period 3 November 2005 to 31 January 2006.  Beginning on 20 January 2006, negotiations took place over the arrangement that was to apply following expiration of that agreement.  However, by mid February 2006 the negotiations had became deadlocked.

524               As noted previously, on 18 April 2006 ACCC received Request’s notification to ACCC of an access dispute under s 152CM(1) of the Act.  The dispute as notified extended to all the terms and conditions of access to Telstra’s LSS including the rate of monthly charge and amount of connection and disconnection charges.  Any backdating for which the Final Determination provided was not to a date earlier than the date of those negotiations. 

525               Schedule 1 to the Final Determination provides a clear example of a backdating of a provision.  It states:

1.         Except where the parties subsequently agree otherwise, the LSS Annual Charge payable by Request to Telstra for the LSS for the period from 1 February 2006 until 31 December 2007 is $30.00 per LSS per annum ($2.50 per LSS per month).

526               Clause 5A which is in Schedule 2 to the Final Determination, although retrospective, is of a different kind.  Like cl 1 of Schedule 1, it does not operate in relation to the period before 1 February 2006 or the period after 31 December 2007 (cl 7 of Schedule 2 states so expressly), but unlike cl 1 of Schedule 1 it is not the very same provision that operates before, as operates after, the Final Determination came into effect on 22 August 2007.  Clause 5A in Schedule 2 establishes different substantive regimes as between the period 15 November 2006 to 22 August 2007 (cl 5A(i)) and the period 22 August 2007 to 31 December 2007 (cl 5A(ii)). 

527               Clause 5, set out at [508] above, is in part like cl 5A(i) and in part like Schedule 1.  For the period from 22 August 2007 to 31 December 2007 the disconnection charge is $36.70.  That same disconnection charge is backdated to 1 July 2007.  In this respect it is like Schedule 1.  However, it fixes different disconnection charges of $35.10 for the year 1 July 2006 to 30 June 2007 and $34.70 for a period prior to 30 June 2006.  In those respects, it is like cl 5A(i).

Subsection (3)

528               Subsection (3) of s 152DNA provides:

(3)        For the purposes of subsection 152CPA(9) in determining the time when a final determination takes effect, a provision covered by subsection (1) of this section is to be disregarded.

529               Section 152CPA(9) provides that if an ID is in force and a final determination relating to the same access dispute takes effect, the ID is taken to have been revoked when the final determination takes effect.  In the present case, the Final Determination took effect on 22 August 2007.  Clause 18 of the Second ID provided that that ID remained in force until, in the events that occurred, the Final Determination came into effect.  Accordingly, there was no occasion for the revocation provided for in s 152CPA(9) to operate.

Subsections (4) to (6)

530               Subsections (4), (5) and (6) of s 152DNA provide:

(4)        A provision of a final determination may be expressed to cease to have effect      on a specified date.

(5)        This section has effect despite anything in section 152DN.

(6)        If:

            (a)        a provision of a determination is covered by subsection (1); and

            (b)        the provision requires a party to the determination (the “first party”)                     to pay money to another party;

            the determination may require the first party to pay interest to the other party,       at the rate specified in the determination, on the whole or a part of the money,            for the whole or a part of the period:

            (c)        beginning on the date on which the parties began negotiations with a                     view to agreeing on the terms and conditions as mentioned in                               paragraph 152AY(2)(a); and

            (d)        ending on the date on which the determination would have taken                          effect if no provision of the determination had been covered by                                 subsection (1) of this section.

531               Subsection (6) calls for attention to be given to cl 10 of the Final Determination which provides:

The total amount that arises from the difference between charges that have been paid by Request and the charges specified in this determination (“the settlement amount”) is to be paid:

(a)        where the charges paid by Request are less than the charges specified in this determination, by Request to Telstra; or,

(b)        where the charges paid by Request are more than the charges specified in this determination, by Telstra to Request.

 

Clause 11 of the Final Determination provides for payment of interest on the settlement amount for the period commencing on the date that the charge specified in the Final Determination commences, and ending on the date that the Final Determination takes effect.  These provisions (cll 10 and 11) suggest that ACCC contemplated that the Final Determination may entitle Telstra in respect of a past period to less money than had been paid to it.

532               If Request paid Telstra any disconnection charges for disconnections occurring between 15 November 2006 and 22 August 2007, they would be refundable with interest.   Telstra informed ACCC that by reason of the 30-day waiting period for which the First ID and Second ID provided (see [538] and [542] below), Telstra had in fact not been able to make any disconnection charges.  The First ID applied in respect of disconnections requested after 15 November 2006 and the Second ID applied in respect of disconnections requested on and from 21 December 2006.  If Telstra’s statement to ACCC is to be accepted at face value, there would not, as a matter of fact, be any refund payable by Telstra to Request in respect of disconnection charges.

Subsections (7) to (10)

533               Subsections (7) to (10) of s 152DNA provide:

(7)        In exercising the powers conferred by subsection (1) or (6), the Commission must have regard to:

(a)        any guidelines in force under subsection (8); and

(b)        such other matters as the Commission considers relevant.

(8)        The Commission must, by writing, formulate guidelines for the purposes of subsection (7).

(9)        The Commission must take all reasonable steps to ensure that the first set of guidelines under subsection (8) is made within 6 months after the commencement of this subsection.

(10)      Guidelines under subsection (8) are to be made available on the Internet.

 

534               ACCC did formulate guidelines for the purposes of subs (7) as required by subs (8).  They are set out in ACCC’s Resolution of telecommunications access disputes – a guide of March 2004 in section 7.4 headed “Backdating”.

The First ID, the Second ID, the DFD and the DFD Consultation Paper, and the Final Determination in relation to the making of charges for disconnections effected by Telstra during the No Charge Period

535               I referred at [523] to [524] above to the access agreement between Request and Telstra, the failed negotiations for a new arrangement to operate on and from 1 February 2006, and ACCC’s receipt of Request’s notification of the access dispute on 18 April 2006.

536               In dealing with the access dispute, ACCC made the First ID, the Second ID and the Final Determination, all of which addressed the question of disconnection charges.

The First ID and the Second ID

537               ACCC provided the First Draft ID and First Draft ID Issues Paper relating only to “LSS connection and disconnection charges” to the parties on 15 September 2006.  The parties made submissions in response.  ACCC made the First ID and provided the First ID Statement of Reason) on 2 November 2006.

538               The question of disconnection charges was dealt with in identical terms in cl 12 of the First Draft ID and cl 12 of the First ID.  In both cases, cll 12-15 were as follows:

12.               Except where the parties subsequently agree otherwise, the following charges are payable by Request to Telstra for the disconnection of a LSS:

            (i)         for a disconnection that is requested on or before 15 November 2006, in circumstances where the LSS is not being migrated to an ULLS to be supplied to Request, $58 per service;

            (ii)        for a disconnection that is requested after 15 November 2006, in circumstances where the LSS is not being migrated to an ULLS to be supplied to Request or an order is not placed by an end user or service provider for a new service(s) to be provided on that same copper pair/line within 30 calendar days of the disconnection request being made, $58 per service; or

            (iii)       for all other disconnections, no charge is applicable.

 

13.       Subject to clause 14, and except where the parties subsequently agree otherwise, other terms and conditions upon which Telstra supplied the LSS to Request at the time of notification are to continue to apply.

 

14.       In the event of any inconsistency between the terms and conditions upon which Telstra supplied the LSS to Request at the time of notification and the intended operation of this interim determination, this interim determination is taken to apply to override any such pre-existing agreement to the extent of any inconsistency.

 

15.       This interim determination shall take effect as and from 2 November 2006 [the First Draft ID stated “[the date it is made]”], and will remain in force for 12 months, unless:

(i)         a final determination comes into effect; or

(ii)        this interim determination is revoked or taken to be revoked under the Act;

in which case this interim determination will cease to have effect on the day that the relevant event occurs.

 

539               Under these provisions there was no backdating (the power to backdate given by s 152DNA is available only in respect of final determinations).  Clause 12(i) addressed disconnections requested between 2 and 15 November 2006; and cl 12(ii) addressed disconnections requested after 15 November 2006.  In summary, and putting to one side migrations from an LSS to an ULLS (in which a disconnection charge was never applicable), under cl 12(ii) there was to be no charge for disconnections effectedafter 15 November 2006 if an order was placed for a new LSS over the same line within 30 calendar days of the disconnection request being made.

540               In both the First Draft ID Issues Paper and in the First ID Statement of Reasons, ACCC stated that the charges had been derived by applying the LSS Pricing Principles and, in particular, their requirement that LSS prices should comprise the forward looking efficient costs of supplying the LSS.  In the First Draft ID Issues Paper under the heading “Basis for the proposed disconnection charge terms”, ACCC stated:

The Commission considers that a charge should not be levied for LSS disconnections where the disconnection can be performed in conjunction with a connection of another service on the relevant line.  The Commission considers that to charge an additional amount (which the Commission understands is currently $90) to the ‘losing’ disconnection service provider, on top of the connection charge levied to the ‘gaining’ service provider, would be an over-recovery of costs.

 

This is because when the disconnection is performed as part of the connection of a new service, the incremental or discrete cost of performing the disconnection is so small and incidental to the connection process that it can be deemed to be recovered in the charge for the new connection.

 

In its final decision on Telstra’s LSS connection/disconnection charges access undertaking (section 6.4.6), the Commission identified a LSS disconnection occasioned by a customer churning the ADSL service to a new provider (including Telstra retail) as being an instance in which the LSS disconnection could be performed in conjunction with a new connection on the line.

 

The Commission proposes for the purposes of the interim determination that new orders which are received sufficiently proximate to the disconnection request are to be taken to be occasioned by a customer churning the ADSL service, and hence the relevant disconnection is not to be charged for.  In this regard, the Commission considers that it is appropriate for a period of 30 calendar days from the date of the request for the disconnection of the LSS to be allowed.

 

While a period such as this is necessary to facilitate the matching of new orders with an LSS disconnection, were a new order to be received more than 30 calendar days from the date of the disconnection request then it is unlikely that the LSS had been disconnected as part of a customer churn process.  A longer period would also appear to have the potential to unduly complicate the order matching process.

 

The Commission considers that this particular aspect of the proposed LSS disconnection charge terms should only apply to LSS disconnections that are made after 15 November 2006.  This is to permit any necessary systems changes to be effected by Telstra so as to coordinate disconnections and connection orders from other service providers.  This date has been proposed as it has been previously nominated by the Commission to Telstra as the date by when it would be reasonable for Telstra to have this functionality available.

 

Another instance in which the disconnection could be performed in conjunction with a new connection on the line is where the LSS disconnection is performed as part of a migration from the LSS to the ULLS (either as part of or outside an MNM).

541               This material was reproduced in the First ID Statement of Reasons.

542               The relevant terms of the Second ID (which it will be recalled revoked the First ID and applied as and from 21 December 2006) were found in cl 15.  Clauses 15-18 of the Second ID were as follows:

15.       Except where the parties subsequently agree otherwise, the following       charges are payable by Request to Telstra for the disconnection of a       LSS:

            (i)         for a disconnection that is requested in circumstances where the LSS                   is not being migrated to an ULLS to be supplied to Request or an                  order is not placed by an end user or service provider for a new                                 service(s) to be provided on that same copper pair/line within                               30 calendar days of the disconnection request being made, $58 per                       service; or

            (ii)        for all other disconnections, no charge is applicable.

 

16.       Subject to clause 17, and except where the parties subsequently agree      otherwise, other terms and conditions upon which Telstra supplied the          LSS to Request at the time of notification are to continue to apply.

 

17.       In the event of any inconsistency between the terms and conditions upon which Telstra supplied the LSS to Request at the time of notification and the            intended operation of this interim determination, this interim determination is taken to apply to override any such pre-existing agreement to the extent of           any inconsistency.

 

18.       This interim determination shall take effect as and from 21 December      2006, and will remain in force until 2 November 2007, unless:

            (i)         a final determination comes into effect; or

            (ii)        the LSS ceases to be a declared service; or

            (iii)       this interim determination is revoked or taken to be revoked                                 under the Act:

            in which case this interim determination will cease to have effect on the day         that the relevant event occurs.

 

By the time of the making of the Second ID on 21 December 2006, there was no need for a provision similar to para (i) of cl 12 of the First ID.    It was necessary for the Second ID only to repeat para (ii) of cl 12 and only in respect of the period on and from 21 December 2006.

543               In substance the Second ID Statement of Reasons addressed only the newly introduced annual charges.  So far as “connection, cancellation and disconnection charges” were concerned, the Second ID Statement of Reasons merely directed attention to the First ID Statement of Reasons (in fn 1).

The DFD and the DFD Consultation Paper

544               The DFD proposed that a disconnection charge should only be charged in essentially the same circumstances as those specified in the First ID and the Second ID.  The DFD Consultation Paper stated:

The Commission’s preliminary view is that a disconnection charge should not be imposed in respect of disconnections made after 15 November 2006 where an order on the same line is received within 30 days of the disconnection request being made …

The Final Determination in relation to the No Charge Period

545               In section 4.2.7 of the FD Statement of Reasons ACCC stated:

Until 15 November 2006, charges will be payable on all LSS disconnections, as the Commission considers that it was likely to have been reasonable for a LSS churn process not to be implemented before this time.  For the period between 15 November 2006 until the time the final determination takes effect, no disconnection charges will be payable.  This maintains the position taken at the interim determination stage in the absence of a Telstra LSS churn process, and Telstra’s advice that in practice those arrangements did not support Telstra applying charges for any LSS disconnections.

 

546               The reference to “Telstra’s advice” was a reference to advice provided by Telstra that while the terms of the First ID and the Second ID theoretically permitted it to levy a disconnection charge (after waiting 30 days to ensure no request for a new LSS connection on the same line was received), in practice Telstra had been unable to levy any LSS disconnection charges under either the First ID or the Second ID.

The matters relevant to ACCC’s Final Determination (and the First ID and the Second ID)

547               As previously observed, s 152CR(1) of the Act sets out matters that ACCC must take into account in making a final determination, while s 152CR(2) provides that in doing so ACCC may take into account any other matters that it thinks are relevant.

548               In contrast, s 152CR(3) sets out the matters which ACCC may take into account when making an ID.  These are the s 152CR(1) matters, and any other matter ACCC considers relevant.  There are no mandatory considerations relevant to the making of an ID (other than the LSS Pricing Principles - see below).  Section 152CR(4) provides that in making an ID, ACCC does not have a duty even to consider whether to take into account a matter mentioned in s 152CR(1). 

549               Section 152AQA(6), however, requires ACCC to have regard to the LSS Pricing Principles when arbitrating an access dispute.  That includes when making an ID, as well as when making a final determination.

550               The extract from the FD Statement of Reasons set out at [545] shows that ACCC’s reason for adopting cl 5A(i) was simply to continue the regime that it thought had operated in respect of the period after 15 November 2006 under the First ID and the Second ID, with one modification.  Taking “Telstra’s advice” that in practice the 30-day waiting period had meant that Telstra had not been able to impose disconnection charges, ACCC simply eliminated all charges for disconnections occurring between 15 November 2006 and the date the Final Determination came into effect.

551               As noted earlier, ACCC had not been required to take any particular matters into account when making the First ID or the Second ID, and it is plain that it did not take the s 152CR(1) criteria or the LSS Pricing Principles into account when deciding upon cl 5A(i) of the Final Determination.  The question for decision, therefore, is simply whether ACCC was required to do so.  (As mentioned previously, neither Request nor ACCC advanced arguments that ACCC had taken those matters into account, but rather advanced the argument that ACCC was not required to do so.)

Consideration

The parties’ submissions

552               According to the construction propounded by Request, ACCC’s determination with respect to the No Charge Period was an exercise of ACCC’s power under s 152DNA(1) to backdate a provision.  In deciding whether and how to backdate provisions of a final determination, ACCC was required to have regard only to the factors referred to in s 152DNA(7) (set out at [533] above), and was not required to have regard to those referred to in s 152CR(1). 

553               ACCC characterises the provision with respect to the No Charge Period as a decision not to backdate part of the Final Determination because cl 5A(i) represented a continuation of the status quo ante as it existed in practice.  According to ACCC’s submission, s 152DNA(1) allows ACCC to make “consequential orders’ that apply “to” a final determination that are not part of that final determination itself.  Therefore, so the argument goes, in exercising the s 152DNA(1) power, ACCC is not required to have regard to the s 152CR(1) criteria which are the matters that ACCC is required to take into account “in making a final determination”.

554               It follows, according to the submissions of Request and ACCC, that ACCC was not required to test cl 5A(i)’s provision for the No Charge Period against the s 152CR(1) criteria.

555               Telstra’s submissions, on the other hand, proceed along the following lines.

556               Clause 5A(i) is a substantive term or condition of the Final Determination.  But for it, the disconnection charges applicable during the No Charge Period would have been those specified by the First ID and the Second ID (see [538] and [542] above) or those agreed upon between Telstra and Request. (Telstra notes that there may be some uncertainty as to which of those charges would have applied in the absence of cl 5A(i) but asserts, and I agree, that it is not necessary to decide between the two for present purposes).  Clause 5A(i) varies that position by reducing to zero the disconnection charge payable during the No Charge Period. 

557               Had a decision been made not to “backdate” the Final Determination with respect to disconnection charges, it would have been those charges in the First ID and Second ID or as agreed between Telstra and Request that would have applied.  Had a decision been made, on the other hand, to “backdate” a provision of the Final Determination, the disconnection charges applicable in respect of the period from 15 November 2006 to 22 August 2007 would have been the charge specified in the last line of the table in cl 5 of the Final Determination.   Clause 5A(i) is therefore simply one of the provisions of the Final Determination with respect to the terms and conditions of access (specifically, disconnection fees) for the No Charge Period.  It is substantively different from both the disconnection fees that previously applied during that period and from the disconnection fees fixed by cl 5. 

558               The correct characterisation of the Final Determination with respect to the No Charge Period is therefore, according to Telstra, that the Final Determination retrospectively varied the terms and conditions of access existing between the parties in relation to the matter of disconnections, and it is not merely an exercise of the power to backdate a provision of the Final Determination given by s 152DNA(1).  In determining on cl 5A(i), ACCC was exercising both the power in s 152CP to make a determination on access, to which the s 152CR criteria applied, and the power given by s 152DNA(1) to apply that provision retrospectively. 

559               In relation to the matters to which ACCC must have regard in exercising the backdating power in s 152DNA(1), Telstra acknowledges that s 152DNA(7) specifies criteria to which ACCC must have regard.  However, Telstra submits that in the context of Pt XIC, other mandatory relevant considerations also apply.

560               First, ACCC must have regard to the LSS Pricing Principles if “it is required to arbitrate an access dispute under Division 8 in relation to the declared service” (s 152AQA(6)).  The LSS Pricing Principles apply to any aspect of an arbitration under Div 8, including the exercise of the power to backdate.

561               Second, in exercising the discretion under s 152DNA(7)(b), ACCC must take into account relevant considerations that ACCC is required to take into account in the light of the subject matter, scope and purpose of the Act (citing Peko-Wallsend at 39-40in support of this proposition).  True backdating under s 152DNA(1) is merely adjectival to the making of a final determination under s 152CP and ACCC is required to take into account the matters specified in s 152CR(1) both when making the final determination and when exercising its discretion in respect of backdating that determination.  According to Telstra, if this were not so, backdating could undermine ACCC’s findings and its balancing of the matters identified in s 152CR(1).

Resolution

562               In my opinion, cl 5A(i) was not merely an exercise of the backdating power to which s 152DNA(7) applied, and s 152CR(1) and s 152AQA(6) did not apply.

563               There is a distinction between the backdating power contained in s 152DNA(1) and the power to decide upon the substantive provisions of a final determination that is recognised in s 152CR(1) and (2) on the one hand, and s 152DNA(7) on the other.  The latter is addressed to substantive provisions which it assumes have been decided upon following the application of the s 152CR(1) and (2) criteria.

564               Section 152DNA(1) is addressed to provisions of a final determination that take effect prospectively, that is to say, from the time when the final determination has effect (21 days after it is made – see s 152DN) and it allows ACCC to express those provisions to have taken effect on a specified earlier date.

565               This construction is consistent with the objective of s 152DNA(1) as stated in the Supplementary Explanatory Memorandum for the Telecommunications Legislation Amendment Bill 1998 (Cth) (p 33), namely, that the provision was intended to:

... encourage commercial agreement and co-operation during access arbitrations by removing incentives for delay and to ensure a considered and reasonable outcome is ultimately applied to the interim period which may otherwise be covered by an interim determination or a  commercial agreement which one or more parties may be disputing.

 

566               The backdating provision reflects an assumption that in a perfect world, the final determination would have been made when the parties to the access dispute commenced their negotiation, or that at that time they would have reached agreement on the terms and conditions which came to be those of the final determination.  Neither party should benefit from the passing of time between the commencement of negotiations and the date on which the final determination takes effect.

567               This limited adjectival nature of the power to backdate explains why s 152DNA(7) imposes less stringent requirements than does s 152CR(1).

568               Paragraph (i) of cl 5A, however, does not fit the notion of a mere backdating of a substantive provision in relation to which the ss 152CR(1) and the LSS Pricing Principles have already been taken into account.  Rather, para (i) of cl 5A is a substantive provision in respect of a period preceding the coming into effect of the Final Determination different from any substantive provision governing disconnections occurring after the Final Determination came into effect. 

569               Nor does cl 5A(i) reflect a decision of ACCC not to backdate the Final Determination, since it provides for a disconnection charge regime different from that otherwise applicable during the No Charge Period. 

570               Telstra’s Grounds 10(a), 10(b) and 10(c) are made out by reason of ACCC’s failure to take into account the s 152CR(1) criteria and the LSS Pricing Principles as required by s 152AQA(6) of the Act, when deciding upon the retrospectively operating cl 5A(i).

571               Since I have found that cl 5A(i) was not solely an exercise of ACCC’s power under s 152DNA(1), I need not deal with Telstra’s submissions in relation to the other mandatory considerations that apply to ACCC’s exercise of that power (see [559]ff above).

I certify that the preceding five-hundred and seventy-one (571) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren.

Associate:

Dated:         19 September 2008

Telstra Corporation Ltd v ACCC and Request Broadband Pty Ltd (NSD 1744 of 2007)

Counsel for the Applicant:	Dr J E Griffiths SC and Ms M Allars
Solicitor for the Applicant:	Mallesons Stephen Jaques
Counsel for the First Applicant:	Mr J S Hilton SC and Mr S J Free
Solicitor for the First Applicant:	Australian Government Solicitor
Counsel for the Second Applicant:	Mr N J O’Bryan SC and Mr M J Hoyne
Solicitor for the Second Applicant:	Herbert Geer & Rundle

Date of Hearing:	3, 4, 5, 6, 7 December 2007, 4 March 2008
Date of Judgment:	19 September 2008

Telstra Corporation Ltd v ACCC and Primus Telecommunications Pty Ltd

(NSD 1743 of 2007)

Counsel for the Applicant:	Dr J E Griffiths SC and Ms M Allars
Solicitor for the Applicant:	Mallesons Stephen Jaques
Counsel for the First Applicant:	Mr J S Hilton SC and Mr S J Free
Solicitor for the First Applicant:	Australian Government Solicitor
Counsel for the Second Applicant:	Mr N J O’Bryan SC and Mr M J Hoyne
Solicitor for the Second Applicant:	Herbert Geer & Rundle

Date of Hearing:	3, 4, 5, 6, 7 December 2007, 4 March 2008
Date of Judgment:	19 September 2008

Telstra Corporation Ltd v ACCC and Chime Communications Pty Ltd

(NSD 1560 of 2007)

Counsel for the Applicant:	Dr J E Griffiths SC and Ms M Allars
Solicitor for the Applicant:	Mallesons Stephen Jaques
Counsel for the First Applicant:	Mr J S Hilton SC and Mr S J Free
Solicitor for the First Applicant:	Australian Government Solicitor
Counsel for the Second Applicant:	Mr N J O’Bryan SC and Mr M J Hoyne
Solicitor for the Second Applicant:	Herbert Geer & Rundle

Date of Hearing:	3, 4, 5, 6, 7 December 2007, 4 March 2008
Date of Judgment:	19 September 2008

Acronyms and Terms

 

2007 LSS Pricing Principles	Pricing principles made by ACCC pursuant to s 152AQA of the Act in October 2007 (set out in Ch 3 of the Review of LSS Final Decision).
ACCC	Australian Competition and Consumer Commission, the first respondent (also referred to as the Commission).
ACCC SC model	Cost model in respect of specific costs developed by ACCC, sent to the parties on 30 March 2007.
Access Pricing Principles guide	ACCC’s Access Pricing Principles – Telecommunications: a guide published in July 1997.
Access provider	Carrier or carriage service providerthat supplies declared services to itself or other persons – see s 152AR of the Act.
Access seeker	Service provider that makes, or proposes to make, a request for access to a declared service under s 152AR of the Act.
Act	Trade Practices Act 1974 (Cth)
Adam	Adam Internet Pty Ltd
Adam FD Statement of Reasons	Statement of ACCC’s reasons for making the Adam Final Determination which accompanied the Adam Final Determination.
Adam Final Determination	The written determination on access to the LSS made by ACCC on 20 December 2007 in relation to the arbitration between Adam and Telstra.
ADC	Access Deficit Contribution
ADJR Act	Administrative Decisions (Judicial Review) Act 1977 (Cth)
ADSL	Asymmetric Digital Subscriber Line.  A compression technology that supports high speed digital services over conventional copper telephone lines.
Broadband	Imprecise, but often used to refer to telecommunications capable of providing multiple channels of data over a single communications medium, typically using some form of frequency or wave division multiplexing.
CAN	Customer Access Network. The portion of the PSTN which comprises the transmission system connecting customers to an aggregation point within the network (usually a local exchange building). In Australia, that connection is normally achieved by copper wire pairs.
CCA	Current Cost Accounts maintained under the RKR.
CD	Compact Disc
Chime	Chime Communications Pty Ltd, the second respondent in proceeding NSD 1560 of 2007.
Churn	The transfer of a telecommunications customer from one provider to another, such as from Telstra to Request or from Request to Chime or from Primus to Telstra. The “Telstra LSS churn process” was defined in para 8 of Schedule 2 to the Final Determination to be “a Telstra process by which services can be transferred between LSS, and between LSS and DSL services”.
DFD	Draft Final Determination provided by ACCC to Telstra and Request on 30 March 2007.
DFD Consultation Paper	Consultation paper provided by ACCC to Telstra and Request on 30 March 2007 which set out issues on which ACCC sought submissions.
DSL	Digital Subscriber Line.  DSL services are provided over the high frequency spectrum of a ULL.
End-user	Retail customer
FD Statement of Reasons	Statement of ACCC’s reasons for making the Final Determination which accompanied the Final Determination.
Final Determination	The written determination on access to the LSS made by ACCC on 1 August 2007 (with effect from 22 August 2007 and expiring on 31 December 2007) in relation to the arbitration between Request and Telstra.
First Draft ID	ACCC’s draft ID in respect of LSS connection and disconnection charges provided to the parties with the First Draft ID Issues Paper and associated papers on 15 September 2006.
First Draft ID Issues Paper	Issues paper accompanying the First Draft ID.
First ID	ACCC’s ID in respect of LSS connection and disconnection charges of 2 November 2006.
First ID Statement of Reasons	ACCC’s reasons in support of the First ID.
GST	Goods and Services Tax
ID	Interim determination made under s 152CPA of the Act.
LCS	Local Carriage Service
Local loop	Line between end-user’s premises and a local exchange.
LSS	Line Sharing Service (also known as the High Frequency Unconditioned Local Loop Service).  The LSS was defined in the LSS Declaration Final Report (set out at [52] in these reasons).
LSS Declaration	Declaration of LSS as a declared service with effect on 16 October 2002.  With effect from 3 December 2003, the LSS Declaration was extended to 31 October 2007.  With effect from 29 October 2007, the LSS Declaration was further extended to 31 July 2009.
LSS Declaration Final Report	ACCC’s Line Sharing Service: Final Decision on whether or not a Line Sharing Service should be declared under Pt XIC of the Trade Practices Act 1974 published in August 2002 following ACCC’s inquiry into whether or not an LSS should be declared under Pt XIC of the Act.
LSS Pricing Principles	Pricing principles determined by ACCC in relation to the LSS pursuant to s 152AQA of the Act (set out in Ch 7 of the LSS Declaration Final Report).
LSS Undertaking Final Report	ACCC’s A final report on the assessment of Telstra’s undertaking for the Line Sharing Service published in August 2004
LSS Undertakings Discussion Paper	ACCC’s Telstra’s Undertakings for the Line Sharing Service – Discussion Paper published in March 2005.
LTIE	Long-term interests of end-users.  The object of Pt XIC of the Act is to promote the LTIE (s 152AB(1)) and the LTIE is a matter that ACCC must take into account in making a final determination in resolution of a dispute over access to a declared service (s 152CR(1)(a)).
Mallesons	Mallesons Stephen Jaques, solicitors for Telstra
MNM	Managed Network Migration.  In Schedule 2 to the Final Determination, a Managed Network Migration was defined to be “the transfer or migration of services that is achieved by the project management by Telstra of a coordinated cancellation and connection of services”.
Narrowband	A reference to the low frequency spectrum or voiceband frequency spectrum.
Primus	Primus Telecommunications Pty Ltd, the second respondent in proceeding NSD 1743 of 2007
PSTN	Public Switched Telephone Network.  The switched telephone telecommunications network to which public customers can be connected.  The infrastructure for basic telecommunications services (including telephones, switches, local and trunk lines, and exchanges).  It enables any customer to call and communicate with any other customer.
Request	Request Broadband Pty Ltd, the second respondent in proceeding NSD 1744 of 2007
Review of LSS Final Decision	ACCC’s Review of the Line Sharing Service Declaration – Final Decision published in October 2007 following an inquiry pursuant to s 152ALA(7) of the Act as to whether the LSS Declaration should be extended, revoked or varied.
RKR	Record Keeping Rules made by ACCC under Div 6 of Pt XIB of the Act.
RMAC	Retail-minus avoidable cost.  A pricing methodology that uses a “top-down” approach, in contrast with a “bottom-up” approach used by a TSLRIC methodology (and its variants).
SAOs	Standard Access Obligations provided for in s 152AR of the Act.
Second Draft ID	ACCC’s draft ID in relation to LSS periodic charges provided to the parties with the Second Draft ID Issues Paper and associated papers on 6 October 2006.
Second Draft ID Issues Paper	Issues paper accompanying the Second Draft ID.
Second ID	ACCC’s ID, which revoked the First ID and reproduced it and as well dealt with LSS periodic charges, of 21 December 2006.
Second ID Statement of Reasons	ACCC’s reasons in support of the Second ID.
SIO	Service in operation
Telephony	A generic term describing voice telecommunications.
Telstra	Telstra Corporation Ltd, the applicant.
TFP	Total Factor Productivity
Tribunal	Australian Competition Tribunal
Tribunal’s 2006 Decision	Telstra Corporation Limited [2006] ACompT 4.  Decision of the Tribunal affirming ACCC’s decision to reject Telstra’s proffered LSS access undertaking.
TSLRIC	Total Service Long-Run Incremental Cost.  TSLRIC was explained in the Access Pricing Principles guide and the LSS Pricing Principles.
TSLRIC+	TSLRIC plus a contribution to indirect and overhead costs.
TSLRIC++	TSLRIC+ plus an additional amount as an ADC.
ULL	Unconditioned Local Loop.  The bare or unqualified wire between the end-user’s premises and the local exchange.  The LSS and the ULLS are both provided over the ULL.
ULLS	Unconditioned Local Loop Service
ULLS and LLS Undertakings Draft Decision	ACCC’s Assessment of Telstra’s ULLS and LSS Monthly Charge Undertakings – Draft Decision published in August 2005.
ULLS and LSS Undertakings Final Report	ACCC’s Assessment of Telstra’s ULLS and LSS monthly charge undertakings published in December 2005.
ULLS Undertakings Discussion Paper	ACCC’s Telstra’s Undertaking for the Unconditioned Local Loop Service – Discussion Paper published in March 2005.
WACC	Weighted Average Cost of Capital. A reference to the cost to Telstra of attracting equity and loan capital investment in its business.
WLR	Wholesale Line Rental service
xDSL	The “family” of DSL services, including ADSL services.

 

CHRONOLOGY OF EVENTS

 

REQUEST/CHIME/PRIMUS ACCESS DISPUTES