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ISPs cry foul over Telstra 'price squeeze'

Following a Telstra revamp of its retail DSL pricing, competitors are considering lodging complaints with the Australian Competition and Consumer Commission (ACCC) over an alleged "price squeeze" between the company's wholesale and retail margins.
Written by Ben Grubb, Contributor

Following a Telstra revamp of its retail DSL pricing, competitors are considering lodging complaints with the Australian Competition and Consumer Commission (ACCC) over an alleged "price squeeze" between the company's wholesale and retail margins.

Telcos have argued in the past that it is very difficult to compete with Telstra if it offers a service at a lower price through its retail company BigPond than it offers through its wholesale arm.

Companies Internode and iiNet confirmed that they were looking at lodging a complaint.

iiNet chief regulatory officer Steve Dalby said the company was "starting to see a price squeeze at the moment with Telstra's new DSL pricing plans, which are lower than wholesale pricing". He said iiNet, with Internode's help, was in the process of lodging a complaint with the ACCC.

Internode carrier relations manager John Lindsay said the alleged price squeeze was like "2004 all over again", when Telstra began retailing DSL services for less than the wholesale price.

Back then, the ACCC served a competition notice on Telstra, which ultimately saw it lower its wholesale price for certain services.

Optus' general manager of regulatory affairs Andrew Sheridan said "watch this space" when asked whether the telco would be taking action against Telstra through the ACCC.

"There have been a number of retail pricing initiatives by Telstra in the broadband space of late and they have raised some quite acute concerns as to whether there's a price squeeze going on in the market yet again," he said. "If that's the case, we've been here at least twice before and I guess the bottom line is that Telstra has improved its retail prices. But guess what? Nothing has happened at the wholesale level.

"There is one or two retail price points, I would say, [that] are probably at or in line with the wholesale price or even a little bit below," he said. "And there's a few of the retail plans that are just a little bit above in the order of no more than 10 per cent or so."

Telstra said in a statement that its Wholesale division regularly reviewed its prices and was committed to negotiating commercial agreements with customers.

The statement did, however, also criticise the direct comparison of wholesale and retail prices.

"Comparing the wholesale price for [Telstra Wholesale] DSL — which is an input into an overall broadband offer — to the Telstra Retail price, is like comparing apples and oranges. They are two different products," the statement said.

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