March 2004 updates

Australian telecommunications giant Telstra accused of anti-competitive practice
By Lelia Green in Mount Lawley, Australia. March 2004

The Australian telecommunications giant Telstra has been accused of anti-competitive practice after a mid-February announcement that it is lowering it entry-level BigPond ADSL domestic subscriber broadband service to A$29.95 per month (about US$22.50). The problem lies in the fact that Telstra charges ISP wholesalers more than this to buy broadband capacity for reselling to their consumers. The Australian Competition and Consumer Commission (ACCC) has become involved and has asked Telstra to explain how its pricing policy is not predatory and is not anti-competitive. Telstra's announcement was made just before major competitor Optus was planning to announce a reduction in its own broadband tariffs, and this is unlikely to be coincidental.

Until its monopoly was broken by legislative changes in the 1990s, Telstra as Telecom Australia owned all telecommunications infrastructure in Australia. When the market was re-regulated to allow competition, Telstra was ordered to make capacity available for wholesalers to offer new products to the public. The prices set are supposed to reflect actual costs to Telstra, but there are long-standing concerns that the wholesale price paid by ISP competitors gives Telstra a continuing advantage at the expense of the consumer, and of telecommunications competitors especially major rival (SingTel) Optus.

Commentators are concerned that this might be a re-run of 2001 history where Telstra dropped its broadband consumer prices by 30 percent, heralding a growth spurt for the previously tiny broadband market. At that time it took some months for the regulator to force Telstra to change wholesale prices to reflect the reduction in retail costs. The concern is that a failure by the ACCC watchdog to persuade Telstra to respond promptly makes it even harder for competitors to claw back a competitive advantage.

What is clear, however, is that the consumer price drop is likely to herald an aggressive expansion of the ADSL market in Australia.