A sign prices 'wholesale' retail squeeze.
Telstra Wholesale has raised the ire of some of its internet service provider customers with a new ADSL2+ port price proposal that some fear might "cement" the actual incumbent's price squeeze upon retail competitors.
In the submission [pdf] towards the competition guard dog this 7 days, Telstra exposed plans to charge a reference cost of $31 a month excluding GST with regard to metropolitan plug-ins on its off-net at wholesale prices ADSL2+ product and $38 a month for ports in external metropolitan and regional places.
In addition, leasing Telstra backhaul to some extent of presence in the nearby capital city (known since the aggregated digital circuit or even AGVC) will be charged at $65 the megabit - three times the planned cost associated with similar online connectivity to be offered by NBN Co.
Telstra justified the AGVC price as accounting for the data transfer it predict its personal retail customers would use over long term.
This component price might fall "as Telstra's retail customer usage increases", it said.
The spokesperson for Telstra Wholesale told iTnews how the AGVC charge from Telstra used "different constructs, cost components and inclusions" compared to those included within the NBN's CVC.
The reference prices represented the first time Telstra experienced publicly stated its cost intentions with regard to wholesale ADSL providers, which needed to date already been unregulated through the Australian Competitors and Customer Commission.
Wholesale prices for these ports were often governed by bespoke agreements between Telstra and wholesale customers, with marketing campaign results kept private.
As a part of its architectural separation undertaking to the ACCC, Telstra pledged to submit the research rate card as an easy method of increasing transparency around equivalent prices between Telstra's BigPond retail arm and it is wholesale clients.
Telstra provides regular financial model reviews to the watchdog to substantiate if the internal and wholesale prices was kept within a five % margin.
Prices would be updated each and every six months where a big change of more than three % to the reference price, or more than five percent to Telstra's retail pricing, had been required.
The rate card in general was due for review every three years upon beginning.
The costs, however, continued to be subject to approval by the ACCC included in the separation task, which the watchdog remained concerned more than.
Should the new construct be approved, wholesale clients would meet the requirements to spend the reference prices with regard to off-net providers once their own respective contracts with Telstra expired, most of which could still be years' aside.
The telephone company suggested towards the watchdog which wholesale customers continue to be able to form unique agreements.
Price discrimination complaints would be handled by an independent adjudicator, below Telstra's suggested undertaking.
Large resellers shed out
While the actual reference prices would likely provide relief for smaller providers, others had already negotiated less expensive rates along with Telstra straight.
Industry sources told iTnews that the indicative prices would continue to make it a hardship on many Internet service providers to contend with BigPond retail, particularly within outer metropolitan and regional areas exactly where competitors didn't often install their personal ADSL-serving gear.
When inclusive of the wholesale line rental required to offer a service to an end-user - charged at $22.84 per 30 days - they argued the suggested pricing construct would effectively "cement" the price squeeze a few providers possess claimed the telco offers placed upon its rivals through it's monopoly possession of infrastructure.
They also suggested Telstra's retail arm will have to boost its end-user prices to consume the increased wholesale costs along with the rest of the, or run at a loss.
"Subject to the SSU popularity, any future reductions to Telstra’s retail ADSL prices will end up being passed to lower at wholesale prices ADSL prices, so just about all wholesale customers will benefit from this later on," a spokesperson said.
Analysts did not really believe Telstra would increase retail prices however maintained Telstra was likely to make use of its present prices as a way of restricting the prices its competitors could help to make on off-net services.
"Telstra ADSL 2+ wholesale started the actual downward trend in 07, long prior to Telstra obtained aggressive along with ADSL retail," Telsyte telecoms analyst Chris Coughlan stated.
ACCC data showed the amount of Telstra's total DSL retail and at wholesale prices ADSL customers had fallen 7.4 percent in between March 2008 and 03 2011, whilst end-users about the unlimited nearby loop support had increased by more than two times over exactly the same period, specifically in metropolitan places.
Gartner telecommunications analyst Geoff Johnson identified the proposed pricing construct and economic model as the next step in what would ultimately become a heavily controlled environment.
"The regulation will probably be much more heavy-handed than it has developed in the past because you've got this open access national broadband network," he or she told iTnews.
"You're not going to move from the present environment towards the wholesale atmosphere that's prepared and the actual structural separation without a few unintended outcomes or results like that one."
Competing telcos, he explained would need to be a "bush lawyer" - effectively on top of both legislation and economics - in order to follow any resulting pricing constructs.
"There is going to be a really interesting structure in this wholesale economy," he said.
