Telstra blamed for iiNet regional decline

Telstra blamed for iiNet regional decline

Summary: iiNet has blamed expensive Telstra port prices in regional and rural Australia for a portion of the 43,000 off-net broadband customers that it lost in the last financial year.

TOPICS: Telcos

iiNet has blamed expensive Telstra port prices in regional and rural Australia for a portion of the 43,000 off-net broadband customers that it lost in the last financial year.


Michael Malone
(Credit: iiNet)

The company added around 8000 new customers, excluding AAPT customers brought on by the acquisition in September last year, but iiNet CEO Michael Malone told journalists during a results briefing yesterday that customer gains in suburban Australia were offset by the losses in regional Australia.

"We've actually grown about 51,000 during the year in on-net customers, which is suburbia, whereas off-net, we've actually decreased by about 43,000," he said.

"Some of that has been from us migrating customers onto our own infrastructure, but a lot of that is real loss of market share in those areas we are purchasing wholesale services from Telstra, and Telstra is charging more for the ADSL2+ port than they are charging retail themselves. So we're actually doing it pretty tough in regional Australia."

Telstra's price squeeze in areas where internet service providers (ISPs) have not built out their own ADSL2+ infrastructure has been a major issue for Telstra's competitors over the last few years, with Internode founder Simon Hackett raising the issue on several occasions. Most recently, he blamed the price squeeze for a rise in Internode's plan pricing.

Also a concern for Malone was Telstra's upgrade of the South Brisbane exchange to fibre. He said that iiNet is not pleased with the prices that Telstra intends to charge when it moves its wholesale customers over to fibre, or the products it will allow retailers to offer.

"We're looking at all options. We largely have a gun to our head on this one. Telstra's saying, 'we're going to be switching off this network shortly, do you want to sign this contract?'," he said.

"We have a lot of customers on there now, so we've got to give them something. We're signing onto the Telstra agreement so customers can get a continuing service, but we're not particularly happy with the pricing or the feature set, so we're exploring whatever options we can there."

The company's fetchtv product, for example, would not be able to be offered via multi-cast, as Telstra does not allow it.

As part of Telstra's agreement to structurally separate and move customers onto the National Broadband Network (NBN) over the next 10 years, it has submitted an undertaking to the competition regulator to outline how the Telstra wholesale arm will operate in the time until the NBN is fully rolled out. Although this is aimed at addressing some of Telstra's rivals' concerns about pricing, Malone said that the undertaking was "completely inadequate".

"There's a lot of work to be done on it; it's a first cut. We look at some of the things in there, such as the supposedly independent party is appointed by Telstra, which seems odd," he said. "There's a ream of things in there we think are inadequate."

NBN pricing

Malone said that iiNet would imminently release pricing for commercial services on the NBN "within weeks". He said that based on the company's calculations, he expected to be able to offer similarly priced services on the NBN as he does on ADSL2+ today, and that there would be "a big healthy drop" in the prices for regional areas.

"In a perfect world, of course, I would want the top-line price to be pretty exactly the same, because then most customers would get a better product for about the same price that they're paying per month now. We're still modelling up exactly how to do that best, though," he said.


In the last financial results, iiNet predicted that the acquisition of AAPT would give the telco roughly 650,000 broadband customers. This year, however, the ISP reported a total customer base of 641,000. iiNet's chief financial officer David Buckingham said that although iiNet had slowed AAPT's churn rate, it was still losing customers rapidly at the time of acquisition.

"The 650 to 640 is primarily driven by the fact that we bought AAPT, and that's a declining business," he said. "The core business of iiNet is growing strongly, but the drop-off in AAPT is bigger than the iiNet increase."

Malone said that he plans to "retire" the AAPT and Netspace brands. He said that like previous company acquisitions like Ozemail, iiNet would continue to support the names but wouldn't advertise them.

"We're not advertising it any longer. We'll obviously support it ongoing, so from the customer's point of view, nothing will change. We don't intend to invest any further in the Netspace brand. Likewise AAPT," he said. "The iiNet brand has more equity and momentum."

Topic: Telcos


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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  • I could go on about the problems all ISP's face when dealing with Telstra, but what's the point. Until the ACCC & Senator Conroy stop **** footing around with the Monopolistic behavior of the greedy closed shop operated by Telstra, nothing will change. Their efforts to convince the public they do not operate that way, is laughable.
    All ISP's face the same problems & difficulties when attempting to provide a competitive service to country & urban users. It's not just the pricing disadvantage. It's not much use being able to provide competitively priced DSLAM ports if you can't install them! To add insult to injury, even if you get the space, is the problem when Telstra has the only backhaul, but won't upgrade it to support the user load & allow them to achieve full ADSL2+ speeds.
    Even around Melbourne in new urban areas, this problem surfaces all the time & Telstra will not upgrade their backhaul. At peak periods a user is faced with a service which will invariably be running way below ADSL1 speeds & that includes Telstra's own users! .. worse than dial up in fact! Trying to view a video is out of the question. Large software packages & updating is a pain in the butt! which is why many just don't bother, so security protection never gets installed.
    Malcolm Turnbull should get out of his office & see just how bad the ADSL service performance really is for these users in country & urban areas.

    So yes, the CEO of iiNet, Internode & in fact all the ISP's who try to compete with Telstra are fighting a battle they cannot win without the help of the ACCC & Senator Conroy' s office. The Telstra wholesale & retail separation is far from complete or successful at this point in time. It should have been completed years ago!
  • Interesting comment about the Netspace brand name. I always thought it was odd iiNet chose to retain the iiNet brand-name over Ozemail. The Ozemail brand had way more "equity and momentum" than iiNet has. Probably still does. Better name too.

    As for regional pricing, what is the ACCC waiting for? Action is overdue.
  • acccc should look into iinet anti competitve behaviour , they brought out westnet,nestcape and other ocmpetitors ,

    iinet only complaint is like with internode not for cusotmers but for thier own profits

    the accc should have guts and refuse to be a go to for profits
    syd. l
  • the accc should have guts and refuse to be a go to for profits