Telstra has lost a significant legal case against the competition watchdog, after trying to maintain prices on the copper network while parts of it became redundant and are leased to the national broadband network.
Telstra said it was disappointed with the outcome. However its loss is a gain for its wholesale customers, who were potentially facing hundreds of millions of dollars in back pay if the case had gone the other way.
Justice Lindsay Foster of the Federal Court in NSWon Tuesday dismissed Telstra's application for judicial review of the Australian Competition and Consumer Commission's 2014 Final Access Determination.
"Telstra has failed to show that the ACCC committed any reviewable error in the course which it took," Justice Foster wrote.
"At best, the grounds of review advanced by Telstra rise no higher than impermissible review of the merits of the ACCC's decision and impermissible attacks on methodologies employed by the ACCC which were plainly open to it."
Justice Foster also ordered Telstra to pay the ACCC's costs and left open the possibility of Telstra paying the costs of five other respondents, including TPG Telecom, Optus Network, Macquarie Telecom, Telcoinabox, and Symbio Wholesale.
A spokesman for Telstra said it was disappointed with the outcome.
"We believe without the fixed principles being binding, there is less certainty for businesses like Telstra in planning future investments," he said.
"We will review the court's decision in more detail before considering any further options we may have."
ACCC chairman Rod Sims said his agency was "clearly delighted with the outcome".
"This gives us confidence that in applying regulatory principles we can also use a bit of common sense," Mr Sims said.
In 2014 the ACCC issued a determination for a one-off 9.4 per cent decrease in copper network wholesale prices from November 2015 to June 2019.
Telstra argued it was still entitled to a return on its fixed network assets, even though it had just agreed to lease some of those assets over to NBN Co, Mr Sims said.
The ACCC's decision had to take into account the unprecedented situation of some of Telstra's assets being leased by NBN Co, and some being made redundant by NBN Co's new network.
The ACCC believed users of the fixed line network had not caused the asset redundancy and under-utilisation caused by the NBN, according to an ACCC statement.
The regulator considered that it would not be in the long-term interests of end-users for these costs to be allocated to users of the network who do not cause them, given that Telstra had an opportunity to be compensated for these costs.
Justice Foster dismissed 10 arguments put forward by Telstra, finding the ACCC had not made any mistakes.
Under the 2011 Definitive Agreement Telstra is expected to receive at least $11 billion of compensation during the NBN roll out for leasing parts of the copper network to NBN.
A spokeswoman for Optus said this was a good decision for competition and showed the ACCC's two-year consultation process worked through all the processes.
"It's also a vindication and testimony to the careful and considered way the ACCC approached the fixed line pricing," she said.
The Competitive Carriers Coalition released a statement on Tuesday saying its members were potentially looking at million of dollars in backpay if Telstra had won the case.
"The Federal Court's rejection of Telstra's attempt to overturn an ACCC ruling on prices for its monopoly services shows yet again that Telstra's willingness to use the courts to undermine industry certainty, even when it has the flimsiest case," the CCC said.
CCC chairman Matt Healy added that "Telstra was, in effect, asking for a multimillion-dollar double dip".
