Competition regime will drive broadband success: analyst

Australia's top two telecommunications players have loudly touted broadband milestones this week -- but a telecommunications analyst has warned growth in the sector may be curtailed unless an appropriate competition regime is maintained.Optus followed Telstra's declaration that it had exceeded one million broadband customers by announcing it had passed a "major milestone" by signing up over 250,000 retail broadband subscribers.

Australia's top two telecommunications players have loudly touted broadband milestones this week -- but a telecommunications analyst has warned growth in the sector may be curtailed unless an appropriate competition regime is maintained.

Optus followed Telstra's declaration that it had exceeded one million broadband customers by announcing it had passed a "major milestone" by signing up over 250,000 retail broadband subscribers.

However, outspoken telecommunications analyst Paul Budde said that without proper regulation, competition in the market would not last.

Optus said the result was achieved after a "record breaking" growth spurt over the past three months, in which the company signed up over 50,000 new broadband subscribers.

Acting managing director of Optus consumer and multimedia, Scott Lorson, said "OptusNet DSL has fuelled competition driving prices down, awareness up, and consumers into action".

"After an initial launch phase aimed at increasing awareness, we are now focused on capturing market share. On the back of an aggressive tactical campaign, we saw sales records shattered in August and again in September, up more than 500 per cent from the same time last year," said Lorson. "These results are particularly encouraging as we look to finalise our plans for a future network deployment."

Yet, Budde said it was "surprising that resellers are hanging on, especially after Telstra's assault on wholesalers".

"I think the results are excellent, that broadband is really taking off in this country now," he said. "But, it's critical that the ACCC [Australian Competition and Consumer Commission] improves the wholesaler regime so many of them don't go under in a few years time because of the unsustainable margins when the growth period is over."

According to Budde, the ACCC "need to create an environment where the resellers aren't so dependent on Telstra". He said this could be achieved by unbundling the local loop.

"France and the UK are leaders in unbundling and they have had massive growth in broadband competition, we need to unleash these sorts of capabilities in the market," he said. "If you create the right regime you can create competition."

However, Budde said Telstra will delay unbundling for at least another two years "to hold off the competition".

"Unbundling the local loop started in 2000, but Telstra will keep delaying it for as long as possible. By 2008 they might give in. It seems the regulators don't have the hours to push it along," said Budde.

Budde adds that in light of the recent talk over the sale of Telstra's publicly owned shares, it will be "very interesting" to see how the ACCC's competition notice on the telecommunications company's anti-competitive wholesale prices pans out.

"If the ACCC doesn't win this battle then clearly Telstra is not ready for privatisation, because that means they are so dominant they can do whatever they want and ignore everything the ACCC says," Budde said.

He added that "Telstra will have to behave itself if they want to push through privatisation".

Yet, according to the ACCC report issued today, Telstra has been doing just that.

The report is the fourth under the "enhanced accounting separation regime" that applies to Telstra, which it said is designed to "reveal whether there is a sufficient margin between Telstra's retail prices and the prices it charges other service providers to use the core services (plus related costs) to allow efficient firms to compete at the retail level".

The report found that there was "sufficient margins" for domestic and international long-distance calls and fixed-to-mobile calls, however not for local call services (line rental and local calls combined).

Yet the ACCC said it "does not necessarily regard the insufficient margins for local call services to be a competition concern, primarily due to the common bundling of local call services with other telephony services".

The second part of the report also revealed that there was no "systematic discrimination against Telstra's wholesale customers" in terms of service provision.

Telstra spokesperson Rod Bruem called on "critics" of Telstra to "now apologise and withdraw".

"It's a bit like Iraq's Weapons of Mass Destruction hunt. The inspectors have gone in, spent 12 months looking for evidence and come up with absolutely nothing. In fact it proves Telstra runs a highly efficient wholesale business," he said.

"It demonstrates that those who call for Telstra to be broken up are really only pursing their own financial or regulatory agendas and not really acting in consumers interests as they would have the public believe."