Money Matters - Simplified

ACCC to take legal action against Telstra for network regulation breach

Melbourne, March 19: Australia’s competition watchdog is pursuing legal action against Telstra Corp for allegedly preventing rivals from accessing its network. The latest move has resulted in a serious blow to the shares of the phone company.

The ACCC (Australian Competition and Consumer Commission) has alleged that Telstra denied access of its fixed line network to its rivals at seven major exchanges despite the fact that there was sufficient capacity available.

“The ACCC alleges that Telstra has refused access seeker requests for interconnection at seven key metropolitan exchanges claiming they were 'capped',” stated the regulator.

The nation's largest phone company, Telstra (Telstra- ASX) had claimed the exchanges were “capped”. The ACCC argued that Telstra was guilty of deceptive conduct by prohibiting telecommunication companies from accessing the copper-wire at telephone exchanges in Australia.

The ACCC also accused Telstra of breaching the Trades Practices Act and the Telecommunications Act.

Telstra is required by law to provide access to the telephone exchanges of Australia to enable its competitors to install equipment and provide broadband services to customers.

The ACCC warning dealt a severe blow to the Telstra stock price, which went down by 2 percent at $2.97 a share. The share price happened to be 23 percent below the price of $3.84 on February 24.

It may be worth mentioning that Telstra market value went down by nearly $13 billion since the company lost its candidature for the national broadband network way back in December last year.

The blow comes just two weeks ahead of the Federal Government’s expected move to unveil its tender for national broadband network above $10 billion.

The market had responded favorably, gaining nearly one percent after the U.S Federal Reserve had announced its decision to buy long-dated treasuries to stabilize the economy, reeling under the global crisis.

The ACCC said it was seeking injunctions and declarations from telecommunication giant Telstra. Meanwhile, no officials of Telstra were available for comments.

The initial hearing for the case is slated to be held in the Federal Court of the Melbourne Court on April 17.

Although the events took place quite a few years ago, it is not clear why the Australian competition watchdog suddenly felt the need to drag Telstra to court.

Telstra happens to be the controller of the main networks. Rivals, including Vodafone and Singapore Telecommunications’ Optus are required to interconnect their equipment to provide competing services.