Telstra holding customers back from higher speeds, ISPs claim

According to Internode managing director Simon Hackett, "Telstra's national ADSL infrastructure can run at 8Mbit/s today, but they consistently made a business decision not to run it at high speed. One of the main reasons that you're seeing people like us building alternative DSLAM rollouts is sheer frustration with not being able to turn up the volume."

Hackett says his company has been requesting higher ADSL speeds from Telstra for 4-5 years, ever since ADSL became available in Australia. Most recently, Internode asked Telstra for higher speeds "about a month or two ago". Telstra, according to Hackett, consistently claims there's no demand for higher speeds.

And Stuart Marburg, who is managing director of competing ISP Netspace, completely agrees with Hackett. Marburg told ZDNet Australia  this week that: "We've asked for higher speeds and we've been very vocal in that for the last few years. Telstra in the past has been non-committal when or if they'll give us the high speeds. When I hear that they're upgrading their network, that sounds great, but they can turn the high speeds on now. Let's do it."

Both managing directors said for Telstra to give consumers access to higher ADSL speeds would be a simple matter of Telstra flicking a few switches in its exchanges. Marburg said: " They'd just have to turn it on in their system - the equipment already does it," and Hackett also pointed out that "every consumer's existing box [ADSL modem] can do up to 8Mbit/s today, depending on the length of the line."

When questioned about the matter, Telstra spokesperson Craig Middleton said his company only provided speeds of up to 1.5Mbit/s "because that is what is available to all customers within the current ADSL distance limitations". He confirmed that the company limited customers to 1.5Mbit/s connections because it could guarantee all customers in Australia that base speed regardless of how far they lived away from one of Telstra's exchanges.

While Hackett admits that not all customers would live close enough to an exchange to obtain a full 8Mbit/s ADSL connection, he did say that "On most lines in Australia you can do 3-5Mbit/s quite nicely. The average line length in Australia is about 2.2 kilometres, and at that distance you're going to get 3-4 Mbit/s. The average consumer could see about double what their speed is now."

Telstra's Middleton also went on to say that "less than 10 percent of our customers are after that higher speed at the moment," and added that the primary driver for the consumer was price. Furthermore, he said, "Entry-level speed is where the demand is."

This is a conclusion that Hackett, for one, disagrees with. "They claim there's no demand," said Hackett, "which is ridiculous. We're rapidly seeing that it [speed] is becoming the selection criteria. If they [customers] have the choice to go with someone who has the higher speed or not, they'll go with the higher speed. Obviously the demand exists. With Telstra, the official reason is not the real reason."

That real reason, according to Hackett, is because Telstra is afraid that if it provides higher ADSL speeds, the ADSL option will destroy Telstra's existing market for "AU$2,000-a-month megalink services".

"The presumed real reason is the same reason that Telstra delayed the introduction of ADSL in this country by a few years compared to the United States. They are very sensitive to avoiding the cannibalisation of higher-priced data products. For instance, the introduction of ADSL was slowed down to avoid the cannibalisation of ISDN for as long as possible, and the same thing's happening again," said Hackett.

Hackett said the same cannibalisation problem had been experienced globally, but that the situation was fast changing. "Last October in France, all of the major ADSL providers switched over to ADSL2+. In Europe generally you can get 1, 2 and 3Mbit/s ADSL. So that dam is breaking globally, and it's just Telstra making a business decision to hold back over a million customers from making the switch today," he said.

Demand for higher speeds is also driving Netspace to do deals with ADSL carriers other than Telstra. Marburg told ZDNet Australia  that his company is "investigating other options than Telstra," and that "We're keen to provide our customers with the best service we can. If that means, to get higher speeds than 1.5Mbit/s that we will have to go to other providers, well we are." Netspace is also implementing its own DSLAMs in Melbourne on a research and development basis.

While Marburg would not be drawn on which carriers his company was negotiating with, the field is somewhat limited. iiNet, Internode, iPrimus, Optus, Adam Internet in Adelaide and Telstra itself are known to be implementing higher speed ADSL DSLAM rollouts. iiNet recently launched ADSL plans which run at up to 8Mbit/s speeds using existing ADSL technology.

The comments from Hackett came amidst news that his company would implement video-on-demand over ADSL services in the Australian market early in 2006. In addition, consumers can expect a Voice over Internet Protocol (VoIP) offering from Internode in April of this year.

Telstra recently announced that its ADSL infrastructure will be upgraded to the ADSL2+ standard by 2006. The upgrade will allow the carrier to offer up to 24Mbit/s speeds over ADSL connections nationwide.