Optus launched today legal action against Telstra, challenging its December 2005 increase in wholesale line rental prices.

The legal action follows the Australian Competition & Consumer Commission (ACCC) issuing a Competition Notice against Telstra on 12 April - an official finding by the regulator that it believes the line rental price increase is anticompetitive.

Paul Fletcher, Optus' Director of Corporate and Regulatory Affairs, said Telstra was trying to erode a key principle of telecommunications competition - the rule that a competitor like Optus can combine its own long distance services with resold Telstra line rental to deliver a complete package to customers.

"In December last year, Telstra increased its wholesale line rental prices from $26.95 (GST inclusive) to $30.36 (GST inclusive), but no changes were made to its most popular retail line rental plans. The monthly line rental under Telstra's HomeLine Complete package remains at $26.95," Mr Fletcher said.

"This produces the absurd result that Optus is forced to pay Telstra a wholesale price which is $3.41 more than the price at which Telstra sells the very same product in the retail market.

"This is blatantly anticompetitive. Telstra is trying to use its market power to drive its resale competitors out of the marketplace."

Optus is suing Telstra for breaches of Section 46 and Part XIB of the Trade Practices Act. These sections prohibit a company with a substantial degree of market power from taking advantage of that market power to lessen competition, eliminate or substantially damage a competitor, or deter a competitor from engaging in competitive conduct.

Optus is seeking damages which will include the excess amounts it has been forced to pay to Telstra to date and an order that Telstra reverse the price increase in the future.

The case will be heard by the Federal Court over coming months.

"The incumbent's new management team is trying to muscle competitors out of the market and drive up the telephony prices that Australians pay," Mr Fletcher said.

"It is time for them to learn what the rules are in Australia.

"As the champion of competition, Optus is going to stand up to Telstra's bullying - and show its new management team the meaning of the phrase, 'a fair go'," he said.

Media contact:
Luisa Ford
Optus Corporate Affairs
Tel: (02) 9342 5045