Australia Orders 9.4% Lower Wholesale Acess Prices for Copper Network

The Australian Competition and Consumer Commission has ordered a 9.4 percent decrease in wholesale access prices on the Telstra copper access network, beginning on No. 1, 2015, and continuing until June 30, 2019.

That decrease, despite fewer customers on the network, incorporates other changing input prices.

Downward pressures come largely from lower expenditures, falling cost of capital and impact of migration of users to the National Broadband Network.

These more than offset upward pressures from a shrinking fixed line market due to consumers moving away from fixed line services and to mobile services, ACCC Chairman Rod Sims said.

The ACCC noted, however, that fewer customers on the copper network will mean higher costs to serve the remaining customers.

That is a generic issue for many fixed network operators. Sowmyanarayan Sampath, Verizon Communications SVP of transformation says Verizon’s copper-based revenue is declining eight percent to 10 percent a year.

At that rate, the revenue stream disappears in a decade. The business will have become unprofitable long before then. Some might argue the business already is unprofitable, if allocated overhead is included. Others would argue the business is slightly profitable, but getting worse as more customers churn off the network.

Verizon might have operations spanning 150 countries, but its revenue is highly concentrated in the U.S. mobile business. By 2016, the mobile business is likely to account for 85 percent of Verizon earnings (EBITDA).

In 2014, mobile contributed 70 percent of revenue, so mobile is generating an increasing share of earnings.