ISPs prep for ACCC, Telstra ADSL war

Discontented telecommunications providers have welcomed a possible Australian Competition and Consumer Commission review into Telstra's wholesale pricing, which could end in the commission imposing regulation to prevent anti-competitive behaviour.

analysis Discontented telecommunications providers have welcomed a possible Australian Competition and Consumer Commission review into Telstra's wholesale pricing, which could end in the commission imposing regulation to prevent anti-competitive behaviour.

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The proposed inquiry was triggered by allegations that Telstra had broken competition laws by lowering its retail broadband prices below wholesale rates available to competitors, the length of time it takes to negotiate new access costs and whether the telco discourages the use of competitive infrastructure.

Communications Minister Stephen Conroy had refused to regulate wholesale prices despite complaints by telcos that profit margins were too tight for Telstra's broadband rates to be challenged.

Rivals have somewhat predictably asserted that the Australian Competition and Consumer Commission (ACCC) must pull Telstra into line, and say the telco has manoeuvred to exploit the government's promise to not regulate wholesale pricing.

Internode general manager of regulatory and government affairs, John Lindsay, said that in order for the government to keep its promise about not regulating Telstra wholesale pricing, the telco was supposed to maintain government talks about it. These talks never happened, he said.

"As much as Telstra feels aggrieved [because] the government said it would not regulate wholesale prices, on the other hand, the government thought it had an agreement that Telstra would not gouge wholesale customers," Lindsay said.

"I would suggest between then and now Telstra's corporate memory has forgotten about [ACCC talks] and has placed a lot of weight on the statement that the government would not declare wholesale service."

Lindsay said the move signals a breakdown of trust between the government and Telstra over wholesale access, and that regulation is now needed.

iiNet has sided with Internode and hopes for a speedy resolution to the inquiry.

Telstra, on the other hand, has rejected the need for regulation. It says it always provides competitive access pricing across the country and does not distinguish between regions that have or lack broadband competition.

"Regulation of wholesale DSL is unnecessary. This situation creates uncertainty and risk for companies who want to invest in new services for customers," said Telstra deputy communications head, Julia Foley.

"The real problem is not DSL, it is an ACCC pricing approach which advantages competitors serving city customers over those in rural Australia."

"Our competitors can provide their customers with broadband using a range of services from us or other providers, including using Line Sharing Service from Telstra Wholesale for $2.50 a month — if you look at retail price levels, healthy margins are available."

Yet even if Telstra does provide cheap wholesale in many areas, Internode and iiNet said that there were competition blackspots, for example, in areas where Telstra has remote integrated multiplexers (RIMs) or Velocity fibre to the home.

Internode and iiNet plan to submit additional information to the ACCC on the matter.

For its part, the ACCC is keeping its options open, and is quick to not prejudge the inquiry decision. Michael Cosgrave, who signed the ACCC inquiry letter to industry, said the regulator is considering taking Telstra's power to determine the terms and conditions for wholesale access.

A possible competition breach of the Trade Practices Act is also on the table.

"There may be concerns, not clear, on the basis of the information we have. We don't comment on ongoing investigations into breaches of the Act, [but] one of the reasons we have written the letter is to say there are a number of ways to look at these concerns," Cosgrave said.

On the flip-side, Larry Kestelman, chief executive of discount telco Dodo, said that the complaints are simply cheap shots by Telstra's competitors that don't want to shell out for infrastructure in areas that aren't terribly profitable.

"Dodo Australia is not supporting the recent complaints our competitors have made," Kestelman said.

"It is clear some of our competitors have been cherry picking and rolling out their networks based on costs as little as $2.50 per line. If it is only in areas where there is no option to build, then it's something worth looking into, [but] I feel what our competitors are asking of the ACCC is unreasonable."

Whatever the case, it will likely be a long wait until the regulator makes a call, which is feeding the frustration of a fiercely competitive industry.

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