Australia’s Federal Court dismisses incumbent’s claim that mandated price cut would make it harder to recover costs.

Telstra this week lost its bid to overturn the Australian Competition and Consumer Commission (ACCC)’s mandated wholesale price cut, after the country’s Federal Court sided with the regulator.

The ACCC in June 2015 proposed a 9.6% cut in Telstra’s wholesale access prices, on the basis that end users should not have to shoulder the cost of customers switching to services offered by NBN, Australia’s nationwide wholesale broadband network. Following a consultation period, the ACCC in October of that year made a final decision to impose a 9.4% reduction.

The price cut was due to apply from 1 November 2015 until 30 June 2019.

Unsurprisingly, the decision did not find favour with Telstra, which argued that the migration of end users to the NBN was eroding the scale efficiencies of providing copper-based broadband. Far from lowering wholesale prices, Telstra wanted to raise them, so it would have greater certainty that it could recover its costs.

It opted to take the ACCC to court in November 2015.

On Tuesday, the Federal Court dismissed Telstra’s grounds for review. According to the Sydney Morning Herald, Justice Lindsay Foster found that Telstra failed to prove that the ACCC was wrong to take the action that it took, and ordered the operator to pay the ACCC’s costs.

Telstra is also receiving payments in return for transferring ownership of its copper network to the NBN.

"The court has recognised that ACCC decisions involve evaluating a range of competing factors, and that our role as the regulator is to consider all relevant information to arrive at an outcome that will promote the long-term interests of end-users," said ACCC chairman Rod Sims, in a statement.

"The remaining users of Telstra’s network shouldn’t pay higher costs due to a shrinking customer base on the copper network as others migrate to the NBN," he said.

Telstra was disappointed by the ruling.

"We will review the court’s decision in more detail before considering any further options we may have," a spokesman for the telco said, in the Sydney Morning Herald report.