The ACCC says it expects the new pricing model will promote competition amongst Internet Service Providers and to be passed on to end users in the form of lower prices and new, innovative services.

Under the ACCC’s final access determination (FAD) released on Thursday the new DTCS pricing will see average prices for short distance, low capacity services (2Mbps) decline by 13% in metro areas and 22% in regional areas.

In addition, average prices for long distance, high capacity services (100Mbps) decline by 76% in metro areas and 78% in regional areas.

Transmission – or backhaul - is a high capacity wholesale service used by telecommunications companies to carry large volumes of data between locations where they do not have their own infrastructure.

With this final decision by the ACCC, the cost to ISPs for wholesale data is cheaper.

ACCC chairman Rod Sims says the extent of the reduction in pricing for a specific part of the market will depend upon the geographic route type, capacity, and distance of a particular service.

“We have seen a downward trend in commercial transmission prices in recent years and this trend is reflected in lower DTCS pricing, particularly on high capacity, regional routes.”

“Because transmission is an essential input for many services, we consider that lower prices will promote competition in downstream markets and put more downward pressure upon wholesale transmission prices, particularly in regional areas. We expect that these lower prices will be passed on to end users in the form of lower prices and new, innovative services.”

The prices for regulated transmission services are based upon a domestic benchmark of prices in competitive areas and under approach taken by the ACCC, transmission prices on competitive routes are used to determine prices that would be expected for declared (or regulated) routes if these routes were priced competitively by the market.

This final decision by the ACCC follows a period of consultation and analysis of the data after the regulator issued a draft decision in September last year.

Now, with this final decision, there have been some adjustments to the model, particularly for the pricing of low capacity, short distance services which are used to provide voice services in the corporate and government sectors.

The final access determination (FAD) also sets an uplift factor for services to Tasmania, which the ACCC says seeks to account for the increased costs and risk in providing services which use an undersea cable component, such as those across Bass Strait.

Sims said the current outage in the Basslink cable is an example of the increased costs that can be incurred when relying upon an undersea cable.

“It is important that regulated prices reflect, and allow for, the recovery of these costs, but still promote competition,” Sims said.

“While the higher uplift factor provides pricing similar to current commercial pricing at the lower capacity levels, there are significant reductions in regulated prices for higher capacity services.”

Sims says the ACCC has provided a calculator on its website to assist access seekers and providers determine regulated prices for declared DTCS routes. Prices for the DTCS will apply from 21 April 2016 to 31 December 2019.

According to Sims, the ACCC’s inquiry has benefited significantly from the engagement and consultation with industry stakeholders during the development of the pricing model.

“We believe that this collaborative process has resulted in a model that better predicts prices for regulated routes and areas.”