The Australian Competition and Consumer Commission (ACCC) has proposed limiting the amount that Telstra can charge internet service providers (ISPs) to wholesale ADSL services directly through it to the estimated cost of providing that service. The move will likely spur competition in regional and remote Australia.
In February last year, the ACCC declared wholesale ADSL and set interim prices that Telstra could charge access seekers to get services for customers. Wholesale ADSL is generally used by telcos in areas where Telstra's retail competitors, such as iiNet, Internode, and Optus, don't have their own DSLAM infrastructure and are therefore required to wholesale the entire broadband service from Telstra. In these areas, commonly referred to as "off-net" areas, Telstra has been under fire for charging wholesalers more than it charges retail customers through BigPond.
The interim prices were set at AU$25.40 per month for a port in CBD and metro areas, AU$30.80 per month for a port in regional and rural areas, and a monthly aggregating virtual circuit or virtual LAN charge of AU$33.65 per megabit per second (Mbps).
This has been altered slightly, with metro port pricing coming down to AU$24.56 per month, regional port pricing dropping to AU$29.81 per month, and aggregating virtual circuit cost rising to AU$36.08 per Mbps.
The ACCC said it determined the price based on the cost for Telstra to offer the service to other telcos, taking into account the cost of running and maintaining the network. The price uses the same framework to estimate prices for the other declared fixed-line services it offers over its copper network.
"Using the same pricing approach ensures consistency in the way prices have been set for services that are provided using many of the same infrastructure assets," the ACCC said.
The watchdog's chairman Rod Sims said he expects this to spur competition in wholesale ADSL.
"The proposed decision will foster competition in retail fixed-line broadband markets and maintain efficient investment incentives in the transition to the National Broadband Network," Sims said in a statement.
Telstra attempted to convince the ACCC that prices need to be kept higher in order to avoid "congestion" as customers begin using more data over Telstra's network through video streaming and other data-intensive applications. The telco said there would be congestion on the ageing network, and current congestion prices for ADSL in Australia do not reflect "optimal congestion prices", being lower than Telstra would like.
But the ACCC rejected that, stating in the discussion paper (PDF) accompanying the draft decision that congestion management is not a primary objective for retail ADSL service providers.
"Given that many retail plans offer lower per-unit prices as data usage increases, and some retail services include unmetered content downloads," the commission said. "The ACCC considers that such retail pricing encourages high data use, which in turn increases traffic on the ADSL network."
Bringing in congestion pricing for wholesale where it doesn't exist in retail pricing would just put Telstra's rivals at a competitive disadvantage, the ACCC said.
The draft price would be in effect until June 30, 2014, but the ACCC is accepting submissions on the draft price until April 5, 2013, with a view of making a final decision before August 2013.