iiNet's bush retreat a solo ploy ... for now

iiNet has temporarily stopped selling broadband services in regional and rural areas where it doesn't have its own infrastructure in protest against what it says is an inability to get "realistic pricing" from Telstra's wholesale division.

But three of iiNet's strongest competitors told ZDNet Australia today they would continue to sell broadband in regional areas.

"We've got no intention of pulling out of the regional and non-metropolitan markets as such," said Netspace managing director Stuart Marburg.

"I've got no immediate plans for us to follow suit in suspending regional services. In fact, quite the opposite, we're barrelling along doing it," stated Simon Hackett, Marburg's equivalent at Internode. The executive also heads up broadband wholesaler Agile Communications.

"We are not going to pull out of the regional areas. We are quite strong in regional Australia, and we will continue with our commitment to those areas," added Alex Chagoubatov, marketing manager for Perth-based Westnet.

"There is no reason for us to change our strategy of providing broadband to regional Australia."

Optus, which also resells Telstra's DSL in some areas, declined to comment for this story.

Pricing still a worry
However several ISPs remain concerned about Telstra's wholesale pricing strategy.

Adelaide-based Adam Internet's managing director Scott Hicks said while his own company wasn't about to announce that it was following iiNet, it was reviewing its agreements with Telstra.

"The costs involved are fairly hefty at the moment," he said, noting he would come to a decision in "another week or two".

And both Internode's Hackett and Netspace's Marburg backed the need for iiNet to be able to make a profit from its regional operations.

"It's important for consumers that they're dealing with Internet providers that are selling things above cost," said Marburg.

"If they don't, it's not sustainable in the medium to long term, and that's bad for everybody. Consumers won't be provided with the service they want."

Hackett noted while Internode wasn't treading the same strategic path as iiNet in dealing with Telstra, "it doesn't make their strategy wrong".

"We're both trying to solve the same problem," he said, adding the main issue in regional areas was the cost of accessing Telstra's 'backhaul' links (which pipe data back to Internet backbones located in metropolitan areas) as well as the copper phone lines that lead to people's doorsteps.

Hackett suspects the pricing issue is more urgent for iiNet as the company is "on the verge" of migrating its customers to a service delivered primarily over its own infrastructure.

iiNet owns a significant amount of broadband infrastructure around the nation, although it's primarily concentrated in city areas, where competition has brought the cost of backhaul down and there is a high population density.

The cost of access to Telstra's copper lines, known as the Unbundled Local Loop (ULL) -- part of the carrier's infrastructure that must still be used by rivals using largely their own equipment to deliver bundled voice and data services -- is currently the subject of heated debate between the Australian Competition and Consumer Commission and Telstra.

Internode, iiNet and Telstra all support a similar pricing scheme, which would see averaged pricing implemented across both metropolitan and regional areas.

However the regulator knocked back Telstra's proposal in August in favour of a 'de-averaged' pricing structure, which Telstra claims could see wholesale prices rise 10 times as high in rural and regional areas as in the cities.

"I think this is one case where the ACCC needs to go back and check with the industry that they're trying to help," said Hackett.

According to the Internode chief, the maximum that could be charged for ULL per month would be the cost of a standard phone line plus the cost of sharing spectrum.

"Whatever the drive is for $100 plus in the bush, that dog doesn't hunt," he concluded.

"I actually think on an averaged basis a fair number is probably around AU$18 a month for the ULLS circuit, instead of being AU$13 in the city and over AU$100 in the bush."