Optus fights Telstra broadband 'parole'

Telecommunications companies are calling on the competition watchdog not to give Telstra a get out of jail free card by lifting a potentially financially damaging legal notice over its broadband pricing.

Telecommunications companies are calling on the competition watchdog not to give Telstra a get out of jail free card by lifting a potentially financially damaging legal notice over its broadband pricing.

The number two telecommunications company, Optus, said Telstra's behaviour on broadband pricing did not warrant "parole," while a group of second-tier carriers has urged the Australian Competition and Consumer Commission to make its judgement in light of a welter of outstanding regulatory issues. The ACCC is presently considering submissions from the industry on whether it should lift the so-called Part A competition notice imposed on the carrier almost a year ago.

The watchdog is expected to finalise its decision on the notice -- which could cost Telstra tens of millions of dollars in court-ordered fines and legal action from rivals -- within the next few weeks, with the industry generally expecting it to be lifted. The ACCC originally issued the competition notice in March last year, claiming Telstra had engaged in anti-competitive conduct when it cut retail broadband prices to levels similar to or below the wholesale prices it charged rival Internet providers. ACCC chairman Graeme Samuel said earlier this month Telstra had asked for the notice to be lifted after the carrier had made some additional revisions to its wholesale broadband pricing structure. The review would not, Samuel stressed at the time, focus on Telstra's behaviour during the period in which the competition notice was in force.

Late last week, a spokesperson for Optus, confirmed the carrier had made a submission to the ACCC on the matter and added: "We do not believe there have been any substantial changes that would justify the lifting of the competition notice.

"On the contrary, we are looking forward to the ACCC pursuing the matter to a satisfactory and appropriate conclusion.

"When you apply for parole, you need to demonstrate good behaviour and we haven't seen any of this yet".

The executive director of the Competitive Carriers' Coalition (CCC) -- whose members include AAPT, Hutchison, Macquarie Telecom, PowerTel and Primus -- David Forman, declined to comment on the specifics of the grouping's submission to the ACCC.

However, he said that while the wholesale prices now being offered by Telstra were "more realistic" than previously, "a whole set of other problems had emerged".

The retail price cuts had exacerbated disparities associated with unbundled local loop (ULL) pricing, a deeply sensitive area as it lies at the heart of moves by rivals to break free from Telstra's wholesale broadband services.

The tier-two carriers believe that Telstra is charging too much for the key component of a ULL service -- acquisition of copper wire from the customer to the nearest telephone exchange -- relative to a full wholesale broadband service, whose components generally include access to the copper wire, Telstra DSL access multiplexer and administration charges. The effect of the charging structure is, they believe, to dissuade rival carriers from implementing ULL services, which see them renting space in exchanges and installing their own DSL access multiplexers. This, they believe, limits facilities-based competition, which the competition watchdog has identified as crucial to a competitive telecommunications environment.

Telstra is understood to want its rivals to pay AU$22 per connection per month for access to the ULL -- believed to be within a dollar or two of the wholesale broadband services price, which is itself just a few dollars below the lowest retail BigPond broadband price of AU$29.95.

Telstra and the ACCC are still believed to be negotiating over ULL pricing.

The CCC is also arguing against alleged "loss-leading" and cross-subsidisation between Telstra products. Forman cited the AU$29.95 low-end retail broadband price set in February last year -- which some carriers claimed was extremely close to the price they were being charged for wholesale services -- as a key example.

For its part, Telstra believes the broadband price cuts last year have sparked an unprecedented surge of takeup, although it has conceded that the processes by which it informed the regulator and its rivals of its pricing move needed fine-tuning.