THE competition watchdog is reviewing Telstra prices, just months after the federal government aired concerns about a lack of competition in the telecommunications sector. 

But the Australian Competition and Consumer Commission says it's a periodic review and will be as much about ensuring Telstra's bottom line as it is about delivering cheaper phone bills.

The watchdog announced on Friday that it had begun investigating the price control arrangements that apply to Telstra on a request from Communications Minister Stephen Conroy.

The price control arrangements, designed to bolster competition in the market, include caps on the prices Telstra can set for telephone calls and line rental, as well as other services.

The current arrangements are due to expire in June.

Submissions from the public and stakeholders are now being sought, ahead of the ACCC's final report, which is due before the minister by March 12.

The new arrangements will cover Telstra from July this year until mid-2012.

Competition law expert Frank Zumbo said the review was standard - the last occurred in 2005 - but comes amid an interesting episode in relations between the government and the telco.

While the Government says it remains committed to bolstering competition, it won't want to get Telstra offside amid the raging battle over Australia's future broadband network.

Any changes to the price control arrangements, if they do happen, "won't have enough teeth," Prof Zumbo predicted.

This despite the latest government report found that competition in Australia's telecommunications sector was still not up to scratch.

"The incumbent (Telstra) retains substantial market power," according to the June 2009 report.

It maintains government regulation is required to ensure competition grows.

The review will take in the current state of the market, ACCC chairman Graeme Samuel told AAP.

Stakeholders will be invited to assess whether Telstra prices are adequately regulated, he said, adding there was no suggestion the regulations would be thrown out altogether.

"We are looking at the design and level of possible price control arrangements for Telstra in the future," he said.

"The level itself is set by the minister."

The last review of price control arrangements came in 2005.

It set certain requirements that allow Telstra to change the prices of individual services, while ensuring there is no overall rise in costs.

Telstra said it welcomed the latest review.

"Telstra will be participating in the review of price controls, keen to ensure that any controls take into account the increased level of competition in the marketplace," a spokesman said.

Meanwhile, the telcos in general got a tick of approval in the latest assessment by the Australian Communications and Media Authority.

It found Telstra, Optus and AAPT had delivered general improvements in telecommunication services in the financial year ending 2008, although some benchmarks had yet to be met.