Internode: leave us, but it's not our fault

Internode: leave us, but it's not our fault

Summary: Internode's managing director Simon Hackett has said he understands that his company will lose customers to BigPond because the internet service provider's ADSL2+ broadband plans using Telstra ports continue to be more expensive than the telco's retail prices, but added that he isn't prepared to go broke selling plans lower than Telstra Wholesale's (TW) cost price.

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Internode's managing director Simon Hackett has said he understands that his company will lose customers to BigPond because the internet service provider's ADSL2+ broadband plans using Telstra ports continue to be more expensive than the telco's retail prices, but added that he isn't prepared to go broke selling plans lower than Telstra Wholesale's (TW) cost price.

Price Squeeze

(Squeeze if you feel pain image by Artotem, CC2.0)

In July, Internode and fellow internet service provider (ISP) iiNet lodged a complaint with the Australian Competition and Consumer Commission (ACCC) over a recent drop in price for a number of BigPond's ADSL2+ plans causing a "price squeeze". The drop in price meant that the cost for a retailer to gain access to an ADSL2+ port from Telstra Wholesale was more than a customer would pay on the average BigPond ADSL2+ broadband plan. In order to remain competitive with BigPond, retailers would effectively have to sell their broadband plans to customers at below cost price.

In a few lengthy posts on broadband enthusiast site Whirlpool yesterday, Hackett said that while the company was sad to lose customers to BigPond while it waited for Telstra to bring its wholesale price into line, he wasn't prepared to go broke by offering plans below the ISP's current cost price.

"Right now, we've adjusted our TW-based port pricing ... plans to be as good as it can be, given our current underlying costs from TW. Any lower and we'd be losing money on every new sale (and inward plan change) concerned, right now," he said. "We'll be in a position to revise our Telstra port-based plan pricing once TW provide a commercially acceptable revision to their source costs — something we continue to work with them toward them doing so, on a daily basis."

"In the meantime, if you feel that Internode value has got unacceptably worse on TW ports just because BigPond are temporarily 'better' and if you feel you must support the people responsible for creating this problem instead of Internode in this interim period ... that is entirely up to you, it's not up to us.

"We'll be sad that you leave, but we'll also completely understand — and we'll look forward to competing for your business more effectively again once the price squeeze is over," he added.

Hackett said Telstra had indicated that the wholesale price may be revised "soon", but there was no specific timetable given.

"We've been promised a commercially acceptable offer by TW 'next week' for the last several weeks. I'm personally optimistic that one of these 'next weeks' soon will be the one where that actually happens," he said.

For Hackett, there was only one way to avoid this situation in the future.

"An NBN [National Broadband Network], implemented properly (and without weakening the promised 'wholesale only, level playing field' aspect of it) holds out some hope for ultimately addressing that situation," he said.

Telstra spokesperson Craig Middleton told ZDNet Australia that the company was in negotiations with Internode, but was not interested in a public battle on what is a private and confidential negotiation.

"Broadband is a very competitive market and Telstra Wholesale is committed to making sure that its commercial offers are attractive to wholesale customers and competitive to the market," he added.

Topics: Telcos, Broadband, Telstra

About

Armed with a degree in Computer Science and a Masters in Journalism, Josh keeps a close eye on the telecommunications industry, the National Broadband Network, and all the goings on in government IT.

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12 comments
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  • Why the ACCC does not give this a higher priority than the witch hunt against an Optus advert is beyond me.
    cashcow-69705
  • Another reason why Telstra should be disqualified from any involvement with the NBN.

    And as cashcow said, the ACCC should be more focused on matters like this.
    mikesheen
  • Internode can be just as ruthless at telstra. They could've offered better extreme plans a long time ago, but only have now due to competition from telstra. So regardless of telstra whoelsale pricing, their own Agile pricing as been over priced for years too.
    Mashspud
  • I am going to churn to Bigpond the people responsible for this. I prefer the money goes into my pocket than Node's.
    kanavel
  • If Internode does not like Telstra Wholesale ADSL2+ pricing then go to another wholesaler, oh that's right they do they use Optus, and Optus have stopped their DSLAM rollout, so Internode are ever more dependent on Telstra for the exchange spread.

    Perhaps they need to pressure their 'wholesale partner' to start up their DSLAM rollout again, not likely as Optus is keeping its hands in its pockets waiting to resell taxpayer funded NBN, so that's Telstra's fault?

    Even so there are other ADSL2+ wholesalers other than Optus Internode could use, I see the iiNet wholesale spread is very good!
    advocate-d95d7
  • @ advocate +1

    I fully aggree with your arugument, why is everyone going Telstra is sticking it to us, when Australias 2nd largest ISP (iiNet) has there own Wholesale ports that Internode could use?
    amckern-b0f83
  • One wonders why anyone would even bother to report on anything that is said by this tiny little ISP. Let's put this in perspective, Internode is struggling to get 250,000 customers, Telstra has more than 4 million! Therefore the retail arm of Telstra is generating at least 16 times the revenue, compared to this tiny little ISP. Of course Telstra retail's buy price should be lower than Internode. Volume based pricing has always been the case in the "real" business world.

    Internode, as usual, are simply whinging that they don't know how to compete and typically want a totally regulated industry where ALL ISP's pay the same costs regardless of customer base.

    To suggest that Telstra is somehow "price squeezing" them is just laughable, why would Telstra even care about this tiny ISP? It never will or could compete against Telstra and naturally it will disappear come the NBN as it simply will not be able to compete.
    Internobody
  • TW pricing is an obvious underhanded ploy by Telstra at a mass customer grab with their new plans. I am very reluctant to go with such a company on these grounds, unfortunately not all customers have any idea how this market works and thus would blindly switch to Telstra.

    The ACCC investigation is indeed dragging which ultimately allows the Telstra customer base to grow, it is an act of true monopolistic genius and alas the damage is already done, the ACCC outcome is irrelevant in this case. – This fact also needs to be taken into consideration by the ACCC which I highly doubt would happen.

    A customer on a TW only port getting ripped via Helstra for the best part of a decade.
    AzzX
  • "TW pricing is an obvious underhanded ploy by Telstra at a mass customer grab with their new plans."

    You mean BigPond pricing not TW pricing, and have you read the conditions on the so called cheap BigPond plans before you can buy them, it's called the BigPond Multiple Product benefit, a 24 month contract, a Telstra Homeline phone plan connected to your residence, one other service like FoxTel or a Telstra mobile post pay plan with a combined monthly spend of $89. ouch!

    Internode for obvious reasons doesn't mention them, I am sure the ACCC will take them into account though.

    BigPond are trying to do something because they are bleeding fixed line customers to other competitors like Internode at end of contract, I am sure Internode would like the honeymoon to continue, they have had 13 years of it, but BigPond and Telstra Management don't see it that way, it's called competition and retaining your customer base.

    Also have you ever asked yourself why no competitors were interested in you for the last 10 years so you can get off your so called 'ripped off' Telstra port?
    advocate-d95d7
  • Some people just don't get it.

    Telstra Wholesale are selling ports at the exchange to Bigpond at a far cheaper rate than is available to other wholesale customers (ISPs).

    The issue here is that those wholesale customers can no longer effectively compete on those ports, because Telstra & Bigpond have engaged in a monopolistic and you could argue, predatory market move. Telstra were handed what was basically a monoply position when it was privatised, hence the need to protect the competitors in the market.

    Internobody - it is because of ISPs like Internode that we even have a slightly competitive marketplace. It was Internode and IInet who took the first steps in rolling out DSLAMs for ADSL2+. Why do you think Telstra has so many customers? Because they were the monopoloy provided for many many years, most people don't know any different. Another silly point.

    Oh, and why would Telstra care about "such a small ISP", well maybe it's because Inernode and IInet are the 3rd and 4th biggest ISPs in Australia. Hence, this predatory move is aimed directly impacting the customer base of these ISPs (among others).

    To those who say "buy IInet wholesale ports", well their ADSL2+ footprint is nowhere near the scope of the Telstra's footprint. It's a silly argument.
    jdf81
  • "Telstra Wholesale are selling ports at the exchange to Bigpond at a far cheaper rate than is available to other wholesale customers (ISPs)."

    You know this how?

    "because Telstra & Bigpond have engaged in a monopolistic and you could argue, predatory market move."

    Wholesale ADSL2+ is not a monopoly, Telstra Wholesale have the most ports but when your nearest competitor SingTel/Optus STOPS its rollout at the end of 2009 it is always going to be like that, but that's not Telstra fault that Optus has made a commercial decision it doesn't want to compete anymore.

    "Hence, this predatory move is aimed directly impacting the customer base of these ISPs (among others)"

    No it's a move to try and stop BigPond losing customers to other ISP's better value plans, some ISP's don't like it, they love poaching BigPond customers because there are so many of them.
    Now that BigPond are playing them at their own game and are closer to matching their plan value they don't like it.
    You also conveniently ignored the other conditions BigPond place on their best value plans before you can buy them, but I understand why you want that one to go through to the keeper, so does Internode.

    I noticed you use the emotive term 'predatory' a lot, when ISP's poach customers from BigPond it's called competition, when BigPond tries to stop the exodus it's called 'predatory', that is one of best examples of hypocrisy I have seen.

    Internode could buy iiNet ports but iiNet is their direct competitor it won't happen, more of face saving exercise than anything else.
    advocate-d95d7
  • "Some people just don't get it."

    No you sure don't!!

    "Telstra Wholesale are selling ports at the exchange to Bigpond at a far cheaper rate than is available to other wholesale customers (ISPs)."

    Telstra wholesale don't have anything to do with BigPond. But even if they did, why wouldn't their "port buy price" be way below Internode? Internode, including its own ADSL2+ base, is only around 5% of BigPond market share. As in any wholesale/retail agreement, the bigger the spend....the cheaper the price.

    "The issue here is that those wholesale customers can no longer effectively compete on those ports, because Telstra & Bigpond have engaged in a monopolistic and you could argue, predatory market move."

    Not at all and here is the rub, Internode is such a small ISP that it has no justification for getting cheap ports. There are plenty of other wholesalers out there and Internode already use one of them, so it can't be a monopoly by definition.

    "Telstra were handed what was basically a monoply position when it was privatised, hence the need to protect the competitors in the market."

    No the Telstra shareholders paid tens of billions for a vertically integrated business.

    " It was Internode and IInet who took the first steps in rolling out DSLAMs for ADSL2+. "

    Yes they sure did and cherry picked the areas they would install them in, while Telstra was installing DSLAMS throughout Australia attempting to provide connectivity to a much larger market.

    "Why do you think Telstra has so many customers? Because they were the monopoloy provided for many many years, most people don't know any different. Another silly point."

    It is a really silly point, I'm glad we agree. You do realise that the market has been deregulated for many years? Nothing to prevent the world's largest telcos from entering the market, but they know that the return on investment is crap.

    "Oh, and why would Telstra care about "such a small ISP", well maybe it's because Inernode and IInet are the 3rd and 4th biggest ISPs in Australia. Hence, this predatory move is aimed directly impacting the customer base of these ISPs (among others)."

    Yet even if you combine their broadband customers, they still only represent just over 21% of Telsra's broadband market share. Even more significantly combined they have about 10% of the total market. They are niche players and Telstra wouldn't look twice at them.
    Internobody