ACCC takes aim at Telstra

Tesltra’s (ASX: TLS) internet haulage rates have come under scrutiny by the Australian Competition and Consumer Commission (ACCC) amid claims that the company is using its market dominance in an unfair way.

The announcement of an inquiry into its transparency came just hours after iiNet (ASX: IIN), Macquarie Telecom (ASX: MAQ) and Vodafone, owned by Hutchison Telecommunications Australia (ASX: HTA), claimed that Telstra’s market power will become worse when the NBN is rolled out.

Earlier this month the ACCC said that Telstra had breached measures that would prevent it from taking an unfair advantage over rival ISPs. The agreement, which is known as the Structural Separation Undertaking (SSU), required Telstra to divide its retail and wholesale fixed line businesses.

Despite the ACCC rejecting Telstra’s first NBN Information Security Plan (NBNISP), the country’s biggest telcos and the NBNCo itself believe that the attraction for Telstra to take advantage of customers outweighs the punishment that it would be dealt.

The SSU was supposed to safeguard competition until the NBN is rolled out and contains mandatory compliance obligations. One of the obligations required that commercially sensitive information not flow from Telstra’s wholesale customers to its retail businesses.

The structural separation was a condition of Telstra’s $11 billion agreement with the NBN Co and in addition, required Australia’s biggest telco to transfer existing customers on the copper network to the NBN as soon as the service became available.

However, the NBN Co’s submission to the watchdog was troublesome and said the loose-natured and watered down commitments were not fair. “Where Telstra has formed the opinion that particular information will not provide Telstra with an unfair commercial advantage over its wholesale customers, Telstra has sought to exclude this information from the definition of NBN Co migration information”.

Foolish takeaway

Recently, Telstra has been in the media spotlight and copped criticism from the ALP for taking sides and marketing for a Coalition victory at the next election. Telstra’s contract with the government is extensive and many believe that if we see a change, the chances of negotiating a new network will be complicated and difficult given the amount of work already completed.

Telstra has a history of breaking rules and is accustomed to a position of market dominance, but if the review can produce some meaningful outcomes, it will be good for other ISPs and encourage competition.

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Motley Fool contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies.

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