ISPs Complain About Australia's ILEC

Australia's ILEC is raising in-country long distance rates just as it receives a $150 million contract from the government to provide service to rural areas. The local regulator has failed to act on complaints from ISPs.

by Craig Liddell of australia.internet.com [June 19, 2001]

After several months, the Australian Competition and Consumer Commission (ACCC) has failed to respond to a number of official complaints claiming Telstra has engaged in anti-competitive practices.

Echoing the sentiments of many ISPs, one manager suggests the recent introduction of Telstra's MegaPop deals, combined with the associated withdrawal of a call diversion service, and the forthcoming increase in on-ramp charges and IDSN fees, are a "calculated effort by Telstra to drive ISPs serving the rural markets out of business."

The complaints also claim Telstra's retail pricing is effectively higher than the wholesale prices delivered to ISPs.

The complaints continue
One ISP has lodged a complaint with the ACCC regarding Telstra's Mega Pop deals. The manager has sent three emails to the ACCC but has only received one response when the initial complaint was lodged. A query for an update of the investigation has not been addressed.

In a letter titled 'Telstra Predatory and Unfair Practices', the managing director of another ISP says Telstra recently informed ISPs the CDNO call diversion service will cease on the 30th June this year and that a new service called MegaPop would become available as a replacement service.

The ISP has clients outside the local call area of the metro area who, to log in to the ISP's server, dial a number local to their call zone which is then diverted by Telstra to the ISP's normal number range. "These clients pay a slight premium for this service as the ISP picks up the cost of the call diversion," the manager details in the ACCC complaint.

However, the cost of establishing the MegaPop service is "such that there is no way that the ISP can compete with Telstra Big Pond's pricing for Internet access." Telstra is advertising the retail Big Pond service for $24.95 (including GST) in all areas in Australia including non-metropolitan areas," the manager says.

The MegaPop costs $190 per port, the manager says, which means that the ILEC's charges "per customer just for the phone line access is in the order of $27.50 per customer (based on an accepted industry standard user-modem ratio of 7:1) not including the service establishment costs that are in themselves prohibitive. It should also be noted that this cost does not include the cost of data transmitted to the client."

Other than the usual acknowledgement of receipt, the manager has received no response from the ACCC.

Rhonda Griffin, Public Affairs Manager of Telstra Country Wide, says CDNO was developed as a voice system and Telstra is trying, as much as possible, to develop products to take calls of the PSTN network and "MegaPop is one means of doing that." She continues, "ISPs were advised to the changes and use of CDNO and were given until June 30 or when an alternative product is offered and MegaPop National is one alternative."

Griffin adds that Telstra is aware of ISPs' concerns and the telco is "looking at other packaging options."

However, a manager of a metro-based ISP believes that the ILEC is simply trying to crack down on ISPs using the service.

Griffins challenges the assertion that Telstra is engaging in anti-competitive practices. "MegaPop is a national service and Big Pond also uses MegaPop for local end users. The service is available to all ISPs including Big Pond." She reiterates, "we are aware of the concerns of smaller ISPs and have been telling them Telstra is working on other MegaPop national packages which we hope to announce soon."

For the manger of a metro-based ISP, this makes little difference. It's simply one division of Telstra paying another division, so it's the same pool of revenue.

Telstra promoted the service last year, but not this year
One ISP says they were unaware of CDNO until they "were given maps by Telstra, illustrating exchange boundaries, so as to make the optimum choice of point of presence, to maximise local exchange coverage utilising CNDO's."

"We pay a call charge, the customer paid a charge, and everyone is happy," the manager adds.

Despite vigorously promoting CDNOs to the ISP community, the manager was advised last year that Telstra were going to be replacing the CDNO's with a new product, not specified.

"We made the investment because the CDNO's were promoted to us as a product that would make our investment viable [but] there was no indication of the form of the new product." The manager believed it would be a respecified equivalent of CDNO with fewer simultaneous calls at a slightly higher price.

Subsequently, the ISP has been "in effect pushed to take up MegaPop ports, and to have to abandon the installations we'd made in rural errors because of non profitability after the withdrawal of CDNO's."

In the ACCC complaint, the WA-based ISP claimed has engaged in anti-competitive practices and unconscionable conduct by discontinuing the call diversion service, which it had been allowing previously for several years with full knowledge as to how it was being used by ISPs.

As a result, the manager says Telstra have forced ISPs to "migrate to a much-increased cost service and then advertising Internet access at a price below the cost of providing that service."

Telstra wins untimed local calls tender
In a final twist of irony, Telstra recently won a government tender worth $150 million to provide untimed local calls throughout Australia. "Users of the 40,000 services in 'extended zones' in remote Australia covering 80 percent of the country will finally be able to contact their neighbours for the cost of a local call," the Department of Communications, Information Technology and the Arts revealed.

In their unanswered ACCC complaint, the Victorian ISP questions why, "if Big Pond can offer a local call anywhere in Australia to the general public, then why can't they do the same for rural ISP's, offer us local call access to our providers, so that we can lower our prices for our customers?"

"Access to communications is crucial for regional communities and from 31 July 2001, all Australians will have access to untimed local calls," Senator Richard Alston said.

Another ISP, who also wishes to remain anonymous, explains, "'remote' customers will have local call access to at least one ISP," which the manager suggests would be Big Pond. The manager adds, for "residents in Community Service Towns (CSTs) it will become cheaper but the preferential rate won't be replaced until the period July 31, 2002 and April 15, 2003." In the meantime, "Telstra gives itself a huge advantage with its monopoly of providing local calls to Big Pond only."

Telstra's Rhonda Griffin dismisses the suggestion Telstra should not be both a retailer and a wholesaler, saying "Telstra is a full-service company and broadly, Telstra has a commitment to rural and regional end users and I suppose we have made available the BigPond pricing across the country—but I point out—the local call dialing is available on the MegaPop platform."

The wheels of government
In a comment made immediately after publication of this story to the journalist, Lin Enright of the ACCC has confirmed that it has received complaints from small ISPs, and said, "The ACCC has received a small number of complaints from smaller ISPs and is currently investigating them to see if there is any breach of the Trade Practices Act 1974. At this stage it is not possible to predict the outcome of these inquiries. In the normal course of an investigation we would discuss the complaint with the complainant, approach the parties complained of for their response, gather any additional information required to allow the ACCC to form a view of there may be a breach. If a breach is suspected, legal advice may be sought, further information sought and a decision made whether or not to proceed. Once a decision is made, the parties are informed."

NOTE:

As many of the ISPs contacted wished to remain anonymous for fear of repercussions, australia.internet.com chose to simply refer to every source as either an ISP or a manager of an ISP.

—End