KEY POINTS:
SYDNEY - Telstra is mounting a constitutional challenge in Australia's highest court against the price-setting powers of the competition watchdog.
The decision follows a dispute between Australia's biggest telco and the Australian Competition and Consumer Commission (ACCC) over the amount Telstra can charge rivals like Optus to use
its broadband network.
Telstra group general counsel Will Irving said Telstra shareholders had had their property "compulsorily acquired" under the current regime. The company is mandated by the ACCC to sell its broadband infrastructure to competitors for A$3.20 ($3.57) a month, a level it considers to be a record low.
"For the loss of this property, shareholders are forced to accept the prices set by the ACCC," Irving said.
"These prices don't represent fair, or what is known as 'just terms' compensation as guaranteed by the Australian constitution."
The constitution gives the federal government the right to compulsorily acquire property, but only on so-called just terms.
Telstra said it was taking the unprecedented legal step in the High Court to protect the rights of its approximately 1.6 million direct investors, most of whom were ordinary Australians, as well as those who held investments through superannuation funds.
Telstra group managing director public policy and communications Phil Burgess said Telstra's competitors were being given more and cheaper ways to take a free ride on its network, even though the telco's costs were increasing.
Fuel costs had risen by 52 per cent in the four-year period between September 2002 and September 2006, the manufacturing inputs copper and brass by 76 per cent, while Telstra's prices had been cut by 55 per cent, Burgess said.
"We are not trying to prevent access, but we are trying to be permitted to get a fair commercial return for our property - a commercial return that is determined by real costs, plus a competitive return, not by arbitrary and capricious decisions by the regulator," he said.
"The ACCC is steering the industry towards a price spiral, some would call a price war, that will feed turbo-charged competition in the cities."
Burgess said there would be no winners from such a war.
He said it would just result in carnage in the industry - "consumers left with failing providers and services, and continued below-par investment in the nation's broadband future".
The ACCC said Telstra was exercising its legal right, and the challenge would not affect its relationship with the telco.
"We'll continue to administer the law as it's been given to us by the Parliament," an ACCC spokeswoman said.
However, she noted that in previous cases launched by telcos against the ACCC in the past 12 months, each of the commission's decisions had been upheld.
Telstra estimated the cost of the legal action to be relatively low, around $A1 million.
It will keep existing pricing arrangements with wholesale customers in place while the case plays out.
Telstra conceded the case could run for the next two years.
Telstra lawyer Irving said the issue of compensation was some way off, with the first stage looking at whether the act was valid and whether there was an appropriate mechanism for compensation.
"If the legislation is invalid, any remedy will be a matter for government, and we will then be in a position to assess all options," he said.
-AAP
