iiNet's bush departure just the first: Telstra

"You can expect iiNet's withdrawal to be followed by every company other than Telstra," Rod Bruem, a spokesperson for the telecommunications giant, told ZDNet Australia this afternoon following the announcement by Australia's third-largest ISP it had suspended the sale of new broadband services to customers in regional and rural areas due to Telstra's approach to wholesale pricing.

iiNet claims it can't secure the "realistic pricing" it needs from Telstra's wholesale division to justify reselling the heavyweight's ADSL broadband to areas outside the larger cities.

However while iiNet pointed the finger at Telstra, the nation's largest telco shifted the blame onto the Australian Competition and Consumer Commission (ACCC), claiming the regulator's policies were to blame for forcing ISPs out of rural and regional Australia.

"The ACCC's policies will effectively kill competition, because there'll be intense competition in metropolitan areas, but nothing in rural and regional Australia," said Bruem.

The regulator is embroiled in a war of words with Telstra over the cost of allowing competitors access to the so-called unconditioned local loop (ULL) phone line services they need to deliver voice and data bundled packages over their own network infrastructure.

Bruem claimed if the ACCC's 'de-averaged' pricing structure was implemented, it could see wholesale prices rise ten times as high in rural and regional areas as in metropolitan areas.

"That's the inevitable consequences of their de-average pricing proposal," he said.

Telstra's own pricing model -- which would see averaged pricing implemented across both metropolitan and regional areas -- was rejected by the ACCC back in August.

Profit margins
The Telstra spokesperson also took aim at iiNet and other competitors, who have thus far primarily rolled out their own broadband infrastructure in metropolitan areas.

"Most of our competitors fully back the ACCC because they're not interested in rural and regional Australia," he said. "They're quite happy to base their businesses in the big, lucrative metropolitan markets.

"iiNet's decision here should be seen for what it is, and that's a business decision to concentrate on the more lucrative city markets."

He added if iiNet was serious about providing services to the bush, the ISP would add its voice to Telstra's concerns about the ACCC's pricing determinations.

Bruem also denied iiNet's stated 'guess' that its inability to lock in "realistic" wholesale pricing was related to the imminent release of Telstra's company-wide strategic review, being carried out by new chief executive Solomon Trujillo and due this month.

"No, that's not true," he said. "I think iiNet is struggling for excuses to concentrate on lucrative city markets."

Ultimately, according to Bruem, the ACCC's pricing model would leave Telstra out of pocket.

"If we're left to carry the can in the bush, while there's intense competition in the city, and we're left to carry the more expensive areas, it's just not a viable business model for Telstra," he said.