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Telstra needs to offer wholesale naked DSL: Rivals

Telstra's competitors have called for the competition regulator to force Telstra's wholesale arm to offer naked DSL products, which Optus claims will save customers at least AU$6 per month.
Written by Josh Taylor, Contributor on

Optus has claimed that Australian consumers stand to be AU$6 per month better off if the Australian Competition and Consumer Commission (ACCC) forces Telstra to unbundle its wholesale DSL product from the monthly line rental, and offer naked DSL services.

The claim came in a submission (PDF) in response to the Australian Competition and Consumer Commission's recent draft decision on wholesale DSL pricing.

Optus argued that the ACCC should not accept Telstra's claim that it would be too cost prohibitive to unbundle the wholesale DSL service from the line rental.

"It is unreasonable to accept without challenge the costs put forward by the monopoly provider of a service for the purpose of defending existing monopoly rents," Optus said.

"Optus maintains its position that Telstra's refusal to offer its retail or wholesale residential customers unbundled DSL services is made for purely commercial reasons."

Optus said that the cost of renting the line with the wholesale DSL service is AU$46, versus AU$40 without, and that because Telstra is able to offer unbundled broadband over its cable network, it is quite capable of supporting a broadband-only service.

Macquarie Telecom said (PDF) that unbundling the services would give retailers better flexibility in the services they can offer to customers.

AAPT said that Telstra should be required to provide naked DSL to promote competition, and that Telstra not needing to maintain the phone line would also offer savings to Telstra.

Herbert Geer, representing iiNet, said in its submission (PDF) that the ACCC in neglecting to require Telstra to offer wholesale naked DSL has not examined the positive factors that unbundling the wholesale service would bring, and only the cost that Telstra would incur.

Telstra argued in its own submission (PDF) that the phone services are a function of Telstra's network architecture, and separating them out to only offer wholesale DSL without the line rental would require "significant systems development and process changes".

The price that Telstra estimates as the cost to make these changes has been kept confidential.

Telstra also said that naked DSL would lead to a greater number of line faults.

"The presence of wetting current PSTN equipment mitigates the effects of oxidisation build-up that can lead to line faults. Telstra has observed that in the absence of an active PTSN service, the number of line faults increases."

A number of the telcos also objected to the capacity charge of AU$36 per Mbps, stating that this is well above the controversial capacity charge proposed by NBN Co — at AU$20 per Mbps — despite the fact that NBN Co leases Telstra's pits and ducts in order to provide that service.

"The proposed AGVC [aggregating virtual circuit] is significantly in excess of what competitive carriers can offer service," Optus said in its submission. "Should the AGVC reflect actual Telstra costs, it demonstrates that Telstra is much more inefficient than competitive carriers."

Optus suggested that if that were the case, the wholesale DSL product should be unbundled from backhaul to allow for better competition in the backhaul market.

Optus also found that comparing the cost of Telstra's competitors offering similar ADSL services to regional areas using Telstra's wholesale broadband product would lead to customers paying AU$17.97 more with a Telstra competitor for a 5GB, 24-month plan, while for a 500GB plan, the difference over 24 months is a massive AU$5,589.74. These estimates assume that the customers use all of their monthly data allowance.

"The inability of access seekers to use the wholesale ADSL service to replicate Telstra offerings, even if access seekers adopted a lower quality of service, undermines the claim made by the ACCC that access seekers could use wholesale ADSL to expand their competitive footprint," Optus said.

Macquarie Telecom accused the ACCC of adopting a "quick fix" approach without providing detailed information on how the AGVC charge was determined. AAPT said that the AGVC charge is higher than the cost of provisioning its own DSL ports and backhaul services. iiNet said it is "difficult to accept" that Telstra's price is so high, considering its own cost to offer such a service is lower.

Telstra itself was disappointed with the ACCC's draft decision, but for a different reason. Telstra argued that the price needs to take into account the congestion on the ADSL network, which Telstra said "continues to be a problem as traffic grows". This argument had been rejected by the ACCC in its draft decision.

Telstra also argued that the prices are at a level that would encourage people to move across to the NBN.

The ACCC is expected to make its final decision before August 2013.

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