Australia's ILEC Cuts DSL Prices

Telstra has dropped wholesale ADSL prices by around thirty percent under pressure from Australia's competition watchdog, the ACCC, but the ACCC is still worried about the ILEC's anti-competitive practices.

by Craig Liddell of australia.internet.com [December 4, 2001]

Telstra, Australia's ILEC, has dropped wholesale ADSL prices by around thirty percent as a result of a competition notice issued in September by the national competition watchdog, the Australian Competition and Consumer Commission (ACCC).

However, the ACCC remains concerned that the changes "may not yet go far enough to allay concerns of anti-competitive conduct."

The consumer watchdog will keep the notice in place and seek advice from the industry to ensure "more widely available price reductions are implemented to overcome the price squeeze between Telstra's wholesale and retail prices and ensure planned network upgrades are delivered."

According to Graeme Salt, Group Public Affairs Manager, Telstra Wholesale, three existing customers have signed on to the new pricing plans, Agile Communications, InterNex Australia and NetSpace Online Systems.

"Prior to the ACCC taking action, most small businesses and residential users had little prospect of choice of who provided their high speed Internet access", says ACCC Chairman, Professor Allan Fels. "The ACCC believed this lack of choice was due to Telstra's anti-competitive conduct."

As a result, Fels adds, "Telstra was put on notice about these concerns and is now in the process of negotiating significant wholesale price reductions. Telstra has also committed to further network changes which, if delivered on time, will see more diverse wholesale product offerings early next year."

"First of all," Salt responds, "we had twenty-one wholesale customers before the competition notice all competing with the BigPond product. In addition to the new pricing, Telstra is trialing a layer two tunnelling protocol (L2TP) which allows [those customers] to further differentiate from Telstra's retail DSL offering." He also notes, "Telstra is bringing online a new product called Broadband Express, developed over the past couple of years, which is a dedicated layer two DSL product."

Although Telstra did not formally respond when the competition notice was initially handed down, Telstra Wholesale's Managing Director, Rosemary Howard told ABC Radio the decision would result in an increase of the consumer price of the ADSL service as they are selling the wholesale service at close to cost.

As consumer is a separate division, Salt can't comment on whether retail prices may increase as a result of the decision, adding the telco has carefully examined the entire price structure of DSL services "to give customers get a cheaper, simpler deal."

Telstra has until mid March to bring about further promised pricing and network changes.

The competition notice, issued in September, gave Telstra twelve weeks to change their conduct relating to the "supply, structure, and configuration of its ADSL wholesale services in order to allow other Internet service providers to effectively compete with its retail BigPond Internet service."

Fels concludes, "these likely price cuts are encouraging, as are the further changes that Telstra has committed to. However, the full impact of these changes on the level of competition amongst high-speed Internet service providers will take some time to play out. Accordingly, the ACCC has decided not to revoke the notice but rather extend the time available for Telstra to amend its conduct before it is potentially exposed to significant penalties".

— End