We give wholesalers a better deal: Telstra

A report outlining the cost of wholesaling services from Telstra's fixed line business has claimed that companies like iiNet, Optus and TPG are getting a better deal from Telstra Wholesale than what Telstra Retail is getting.

As first spotted by Communications Day, the Telstra Economic Model report (PDF) was recently submitted to the Australian Competition and Consumer Commission (ACCC). It outlined costs charged to Telstra retailers and wholesalers for the second half of the 2012 financial year for fixed line products, including Public Switched Telephone Network (PSTN), Unconditioned Local Loop Services (ULLS), Local Sharing Services (LLS) and wholesale line rental.

The report stated that, where internet service providers (ISPs) have to wholesale an entire service from Telstra, such as a voice line or voice and ADSL, it tends to be more expensive, up to 36 percent more expensive between the two quarters. But ULLS, where carriers can use their own equipment in a Telstra exchange, the rates are much lower than what Telstra charges its retail units, with ISPs charged between 28.6 percent and 24.3 percent less than Telstra. LLS has an even better deal, with carriers paying approximately 79 percent less in the half year.

"Overall, Telstra is treating wholesale customers more favourably than Telstra's own retail business units. While Telstra's retail business units are treated more favourably for most resale services, wholesale customers are treated much more favourably for PSTN OTA, ULLS and LSS," the report stated.

The report goes on to state that, because iiNet's services are mostly LLS and ULLS — making up 65 percent of its services — charging iiNet more for wholesale ADSL is offset.

"While their public reporting does not distinguish whether LSS or ULLS are employed to provide the on-net services, either would more than offset any perceived unfavourable terms for the [wholesale ADSL] services."

Telstra's price differences for wholesale ADSL, which is generally only taken up by ISPs in areas where it is not affordable or they cannot deploy DSLAM equipment, has long been a sticking point for iiNet. CEO Michael Malone last year said a decline in the number of subscribers in regional Australia was the direct result of Telstra wholesale charging more to ISPs than BigPond charges to retail customers in those areas.

For all the howls of protest, for now, off-net is here to stay. As the National Broadband Network (NBN) rolls out, it is becoming much tougher for ISPs to decide whether it is worthwhile to roll-out DSLAM equipment that will become redundant once the NBN is in place, meaning that they will still need to wholesale services direct from Telstra in those areas.