Telstra's competitors have scored a win, with the Australian Competition and Consumer Commission (ACCC) setting the prices that the telco can charge its retail competitors for wholesale ADSL services.
In areas where retail competitors do not have DSLAM equipment, the ACCC has set interim prices that Telstra can charge its competitors in "Zone 1" CBD locations and "Zone 2 and Zone 3" metropolitan, regional and rural locations, ahead of making a final access determination in the next six months.
Zone 1 prices will be $25.40 per month, and Zone 2/3 prices will be $30.80 per month. Aggregating virtual circuit or VLAN charges will be $45.50 per month per megabits per second (Mbps) until 30 June 2012, but will go down to $33.65 per month per Mbps from 1 July 2012. The service will be declared for five years, the ACCC said.
The ACCC decided to hold an inquiry into regulating wholesale ADSL pricing after Internode, iiNet, TPG and Optus had complained about Telstra squeezing competitors out of regional Australia by charging them more for wholesale services than BigPond charged its retail customers. iiNet and TPG in particular had blamed this squeeze for high churn in regional Australia.
The ACCC had originally decided not to look into the matter, but after finding that Telstra's Structural Separation Undertaking — which will see the telco's wholesale and retail arms firmly split — did not address the issue, the ACCC decided to take action, starting an inquiry into whether it should regulate Telstra wholesale on 16 December.
The commission found that Telstra retained a dominant position in wholesale and retail markets, with Telstra having a fixed-line broadband market share of approximately 45 per cent. In the two regional area categories, Telstra has 95 and 99 per cent market share respectively, vastly different to the 31.9 per cent and 51.9 per cent respective market shares in the metropolitan categories.
"The ACCC considers that, despite the deployment of competitive infrastructure in some geographic areas over the past decade, on a national basis, competition for the supply of wholesale ADSL services is not effective," the commission said in its decision paper.
It said that declaration of the wholesale service would promote the long-term interests of end users, finding that the decision wouldn't affect connectivity, or investment in infrastructure.
Although Telstra warned that declaring the service would limit its rivals from deploying extra DSLAMs, the ACCC said that it believes the other telcos will continue to deploy DSLAMs where it is efficient to do so and where the costs can be recouped before the roll-out of the NBN makes those DSLAMs obsolete. The ACCC also said that the investment in wholesale ADSL infrastructure had slowed in recent years and that it considered that significant further investment was unlikely.
Andrew Sheridan, Optus' general manager of interconnect and economic regulation welcomed the decision.
"This is a significant win for competition for both consumers and the industry, and an important step in the transition to an NBN environment," he said in a statement.
"For the industry, the declaration of wholesale ADSL will enable Telstra's competitors to compete on a level playing field while ensuring more competitive and uniform access terms for ADSL services," he said.
Sheridan said that the decision will lead to more affordable prices and better competition in regional Australia. This was a view shared by iiNet's chief regulatory officer Steve Dalby, who told ZDNet Australia that the decision will let internet service providers (ISPs) in regional Australia compete with a closer to level footing with BigPond.
"It is good news for regional customers and other customers stuck behind RIMs. It is good news for ISPs who will start to win customers back that have been churned by BigPond in recent times," he said.
"Clearly, the ACCC has found that the price squeeze behaviour by Telstra was unacceptable and has finally taken steps to regulate this service. This is good news."
Telstra, however, was not pleased with the decision.
"Telstra does not believe that market conditions justify increased regulation of Telstra's copper network at this time and is assessing the financial implications of this decision," Telstra said in a statement.
Updated at 10:01am, 15 February 2011: added Optus, Telstra and iiNet comment.