ISPs scoff at Telstra's "band-aid"

Summary:Telstra's drop in wholesale broadband prices has been labelled a "band-aid offering" by an association representing ISPs. Telstra yesterday announced it would "adjust the pre-GST wholesale price for its 256k end-user access charge so it is available to wholesale customers at a rate lower than the post-GST AU$29.

Telstra's drop in wholesale broadband prices has been labelled a "band-aid offering" by an association representing ISPs.

Telstra yesterday announced it would "adjust the pre-GST wholesale price for its 256k end-user access charge so it is available to wholesale customers at a rate lower than the post-GST AU$29.95 price that applies for retail customers".

"Whilst there has been a drop of the tail prices, ATM and AGVC prices remain the same," Charlie Stephens, spokesperson for the WA Internet Association told ZDNet Australia  , referring to additional infrastructure costs that ISPs reselling Telstra services must pay for. "The new pricing does not address the fundamental issue that retail prices are lower that actual wholesale prices (when accounting for the total cost of the services)."

Telstra spokesperson Rod Bruem could not reveal Telstra's wholesale rates, claiming they varied from customer to customer. "We believe the margins that will be obtainable under the new rates are equivalent to what was available previously," Bruem told ZDNet Australia  , adding that he was referring to absolute margins, not proportional margins.

Stephens was unimpressed with Telstra's behaviour. "Telstra's approach to the reduction of market prices was very confrontational -- whilst the regulator has stepped in, the changes have not gone far enough to reflect the new retail market position," he said, adding Telstra should have released wholesale price cuts before announcing retail price cuts.

"Their strategy we believe (that has been ratified by their press release stating an 85 percent increase in applications) was to release retail pricing knowing that it would take some time for the regulator to react," said Stephens. "In the meantime they would be fielding significant enquir[ies] in order to gain market share. The difference between this and other examples the industry has seen is numerous ISPs recognised this typical Telstra strategy and choose to take a loss leading position in order to maintain market positioning."

Bruem had a different spin on the events of the past few weeks.

"We were in talks with our wholesale customers' right through -- there was an expectation that this was coming," said Bruem. "Several wholesale customers had already adjusted their rates in anticipation, and it comes down to whether people want our wholesale and retail arms working hand in hand or whether they want some autonomy, and I think it's the latter that is the preferred model in the industry."

"I think the important thing is that the wholesale rates apply from the same time the retail rates change so no-one will be disadvantaged," said Bruem, ignoring the fact that businesses have to plan ahead when introducing new pricing schemes.

Telstra is also yet to reveal wholesale pricing for the high-end 1500/256 Kb "unlimited" data plans, which many ISPs view as a bigger threat.

Topics: Broadband, Government, Government : AU, NBN, Telcos, Telstra

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