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transparency-02-10-21

transparency-02-10-21

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Published by Core Research

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Published by: Core Research on Jan 09, 2009
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05/09/2014

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21st October, 2002
Achieving Price Transparency in Bundles
A Report on behalf of Hutchison Telecommunications
Joshua Gans and Stephen King

The analysis here represents the views of CoRE Research Pty Ltd (ACN 096 869 760) and should not be construed as those of Hutchison Telecommunications.

Contents
Page
July, 2001
i
1
Background............................................................................. 2
2
Competitive concerns about bundling.............................. 3
3
Transparency to Competitors and Authorities................. 5
4
Customer-Level Transparency............................................. 9
5
Conclusion............................................................................. 11
6
Appendix............................................................................... 13
Section1
Background
2
1
Background

On the 19th July, 2002, Telstra and Telstra Pay TV filed a notice with the ACCC regarding its intention to use a bundled price when re- selling the pay television services of Foxtel. That price would offer to customers who have pre-selected a Telstra fixed line service a further discount of 5 percent on eligible services if they also subscribed to one of Telstra internet, mobile or pay TV services and 10 percent if they subscribed to any two of these.

This report focuses on one aspect of Telstra\u2019s proposed pricing policy \u2013 the issue of transparency. Section 14 of their submission deals with this issue. Telstra write:

Telstra is aware that one of the primary concerns with the practice of bundling is that, where a single price is offered for the package, there is potential for disguising the prices of individual components of the package. The economist, Professor Stephen King has suggested that: \u201cThe problem is not that Telstra can sell a bundle of pay-TV, high-speed internet and telephony services, but rather that it can set a single price for the bundle of services.\u201d1

The Telstra Rewards Options programme will not offer a single price for the bundle of packaged services. Neither the 5% nor the 10% discount would operate to disguise the prices of the individual elements of the package, such as the prices of mobile telephony services.

The Telstra Rewards Options programme does not, and will not, allow Telstra to disguise the price of its telephony services. It will still be possible to compare Telstra\u2019s telephony prices with those of its competitors. There is total transparency of pricing and no potential for Telstra to disguise the pricing of different elements of the Rewards Options programme. For this reason, the proposed conduct will not have the anti-competitive effect feared by Professor Stephen King. (p.27)

1 Stephen King, \u201cWhy this bundle should worry the ACCC,\u201d Australian Financial
Review, 16 April 2002, p.67.

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