Telstra’s been squeezing prices to its wholesale customers for almost a year now — and the national competition regulator’s taken zero action in response, according to Internode managing director Simon Hackett.
After unveiling a substantial revamp of his company’s broadband plans yesterday, Hackett posted a lengthy blog post detailing some of the background behind the changes. A number of customers have already begun debating online whether the new Internode plans which use Telstra’s wholesale infrastructure actually represent better value for customers.
“Why have these changes happened?” asked Hackett. “Since mid-2010, a powerful monopoly service supplier has been engaging in a ‘price squeeze’ that has been described in previous blog posts on this site.”
The Internode chief said during past price squeezes, the Australian Competition and Consumer Commission, which keeps a close eye on the wholesaler concerned, Telstra, had ultimatedly acted to remind the telco of its obligation to “play nicely”, with the result that “positive and appropriate” changes had been made to wholesale access costs.
“Unfortunately, for this current price squeeze, no ACCC enforcement action has yet been undertaken and so (not surprisingly) the price squeeze remains in place (indeed, it has in fact become more intense in the last few months),” said Hackett.
Telstra and the ACCC have been invited to respond to Hackett’s comments, but had not done so by the time of publication.
Hackett last complained publicly about Telstra’s prices in September 2010. At the time, the Internode supremo speculated that Telstra’s wholesale division was giving some retail ISPs better deals because they hadn’t build out their competitive broadband infrastructure as some like Internode, iiNet and TPG had.
In response to Hackett’s complaints, Telstra chief executive David Thodey said the Internode CEO had not contacted him directly about the matter. “We will continue to be absolutely vigilant in being fair and equitable in that wholesale environment,” he said at the time.
But yesterday, Hackett said Internode’s most recent wholesale pricing negotiations had failed to yield “any effective improvement” in its access costs. “In fact our effective wholesale access costs have actually risen in some geographic areas despite movement in the opposite direction in applicable retail pricing conditions,” he said, noting Internode’s Telstra-based broadband plans had changed as a result.
Ultimately, the buildout of the National Broadband Network is slated to resolve Internode’s complaints in the long-term, with NBN Co committed to providing services to each competing ISP on an equal basis. However, Hackett noted that he hoped the ACCC decided to take action on the alleged price squeeze eventually — especially in rural and regional areas.
“These services are ultimately to be replaced by (far better) broadband services based on the National Broadband Network (NBN),” he said. “However the NBN is a ten year project, so it is clearly important that the ACCC does take some action to encourage appropriate market behaviour in monopoly areas in the meantime!”
Image credit: Internode
I really feel for Simon on this one – as Telstra have been getting away with this kind of rubbish for years, and the ACCC doesn’t do enough, even though they’ve made a few piecemeal attempts to lessen it.
I’ve seen smaller ISPs charged up to $24.95pcm wholesale for DSL tails, while all the time offering retail plans for as little as $15.00pcm through BigPond.
Undoubtedly Telstra was/are selling those at a loss, and made/make their money on those ones via excess download fees, but the average punter on the street sees the smaller guys charging $49.95 for their base packages, and BigPond charging $14.95 for theirs, and there’s no prizes for guessing which looks better to a non-educated user.
That’s exerting your monopoly influence to distort the market.
On countless occasions, I’ve also seen Telstra Wholesale reject DSL port applications – (either for “no available ports” or “too far from exchange”) – therefore seeing the customer lost, and when that same customer goes to BigPond, suddenly there are ports available and the premises are suddenly close enough to the exchange.
I’m quite sure the buildings didn’t move between applications.
I’m not sure if Simon has seen that behaviour also, but I’ve seen it on many occasions.
This is why the structural separation of Telstra – (with or without the NBN) – is so important. So this kind of anti-competitive crap can stop. Finally.
Yeah, I’ve had friends who’ve been told there’s “not ports available” in their exchange when they go through another ISP but when they go through BigPond, it goes through just fine.
In fact, I know of people who have taken the BigPond port and then immediately churned to a different ISP, taking the hit on the cancellation fee.
Yes, I’ve seen that done.
This has a major impact on the latest Internodes’ plan changes how?
Because we are talking about exchanges where Internode does not have its own gear, and is wholesaling ports from Telstra Wholesale, and because we are talking about the anti-competitive behaviour Telstra has been responsible for for many years.
So once again with feeling, ACCC set pricing causing a ‘price squeeze’ at Internode is determined by the so called ‘lack of ports’ exchange problem how?
NEWSFLASH:
Internode is not the sole supplier of retail BB services in Australia, if you don’t find value anymore from the latest round of plan changes at Internode choose a ISP where there are no plan changes at all on resold Telstra products.
You missed the point. The point is Telstra are not treating all customers equally.
Internode have had to change their plans because Telstra has adjusted their wholesale pricing. If – as you suggest – other ISPs haven’t had to change their plans because Telstra hasn’t changed their pricing deal(s), there is a clearly some kind of bias from within Telstra Wholesale against Internode.
Hackett is simply calling for a fairer approach.
“there is a clearly some kind of bias from within Telstra Wholesale against Internode”
Sorry that’s not ‘clear’ at all, that’s your opinion of what MIGHT be happening, anything beyond that in the absence of official comment from both parties to the deal, and you won’t get that outside the closed doors of a ACCC hearing on such a complaint is pure speculation.
Simon is basically saying it, and I’m agreeing with him because I’ve seen it in my experience in the industry over many years. He has to be careful what he says publicly, and isn’t going to come straight out and say: “Telstra are screwing us over”.
Read between the lines.
Basically, I’m just stating that I’ve seen much of what he’s describing happen within other ISPs – so I find it quite easy to believe.
But you have not really explained why one ISP is changing it’s plans because of the so called Telstra ‘price squeeze’ but other ISP’s many of whom have much bigger DSLAM rollout’s that Internode have not?
That really doesn’t support this allegation from the article above at all.
“Internode supremo speculated that Telstra’s wholesale division was giving some retail ISPs better deals because they hadn’t build out their competitive broadband infrastructure as some like Internode, iiNet and TPG had.”
If that was the case the likes of iiNet and TPG specifically mentioned by Hackett in with his own company would be increasing their prices by more than Internode has, but that is not the case, their plan pricing is static and has been for quite a while.
Huh?
If Internode are being squeezed in such a fashion that they have to adjust their plans to continue to make a reasonable ARPU to meet their own business plans/goals, and others are not having to do so, surely that suggests they are almost certainly being “squeezed” more than those that are not having to change their plans?
It might also suggest that those other ISPs are expecting higher ARPU than Internode, and therefore have more room to move.
@Micheal Wyres
I appreciate your zeal to support Internode no matter what, but you conveniently turn a blind eye to other ISP’s that offer better value plans than Internode, as if Internode is some sort of ‘unique’ ISP that somehow has a different business model to any other ISP so therefore it should be treated differently when evaluating value in their plans, or even in the way they deal with Telstra Wholesale.
The problem is I think Internode may be feeling the crunch as customers move away to other ISP’s, or stay with the two biggies BigPond and Optus at end of contract.
Once upon a time it was easy to get BigPond customers out of contract but BigPond have woken up to the bleed of their customer base to other ISP’s (it took a while!) and are providing better value, so the honeymoon period of easy poaching from the biggest ISP in Australia is virtually over.
The simple fact is if you don’t find value anymore in Internode plan’s there are 196 other ISP’s in Australia that will happily take you on as a customer.
I have no desire to support Internode “at all costs”. I am not with them. I have never been with them. I’ve never worked for them. I have no financial interest in them.
All I’ve said is that I have seen the EXACT behaviour that Simon is describing, elsewhere. You’re the one making a fuss out of my statement that I agree with him.
Once again, you just see my name, and want to make some noise.
All this so called ‘exact same behavior’ which after all is all about TW pricing across zones etc is set by the ACCC after they have evaluated all the facts in submissions from ISP’s that care to bother, so in reality it’s NOT a Telstra price squeeze it’s a ACCC price squeeze.
It would be interesting to have it explained why the ACCC feels it is necessary to do this only to Internode?
Oh, buddah.
The ACCC has set the ULL price at $16.00 – that’s just access to the copper in the ground. We are talking about DSLAM port access on top of the ULL price.
Please try and keep up.
If the DSLAM port is not Telstra’s which it won’t be because Telstra Wholesale don’t offer Naked DSL as a product like Optus Wholesale does for example, where do we go from here in the Telstra blame game where the only Telstra bit in the Naked DSL equation is out of the control of Telstra anyway and price set by the ACCC?
ZOMG.
We are talking about exchanges where Internode doesn’t have its own equipment, and it uses the Telstra gear. Where they are using – (or attempting to use) – Telstra DSLAM ports.
You really don’t even know what you’re arguing about, do you?
@Micheal Wyres
Oh I see it’s time to try and move the famous MW goal posts because you are being backed into that corner again.
This is what were talking about, your words:
“We are talking about DSLAM port access on top of the ULL price.”
ULL is all about Naked DSL the ULL owned by Telstra is price set by the ACCC, the DSLAM port access on top of that is NOT provided by Telstra because Telstra do no sell Naked DSL either wholesale or retail.
“We are talking about exchanges where Internode doesn’t have its own equipment,”
No we weren’t, we are talking about both, Internode offers BB products from all three exchange enabled options, their own Agile owned DSLAM’s , Optus owned DSLAM’s and Telstra owned DSLAM’s.
The Naked DSL product is only available from Agile and Optus exchange DSLAM’s incorporating ACCC price set Telstra ULL because Telstra don’t sell wholesale or retail Naked DSL.
If there is now a perceived problem with Naked DSL value look to the ACCC, Agile or Optus for the so called ‘price squeeze’.
Ahh, the standard protocol of a FUDster shown to be wrong. Jump up and down and claim the person who showed them to wrong is the one who is wrong – just in case someone else who doesn’t understand comes along to read the thread.
Well done. Hilarious.
For everyone else, here’s a puzzle.
Try and find the word “naked” anywhere in the article, and decide for yourself who is misdirecting this thread.
Hehe
*resists subversive urge to insert the word ‘naked’ into article*
Dammit. Being responsible is so boring :)
So what BB product is the ULL used for again if not Naked DSL? – and remember it was you who emphasised its importance in this discussion quoting the ACCC set price of $16, that was you was it not?
Your soft shoe shuffle is wondrous in its consistency across many blogs in Delimiter over many months, if nothing else.
The ULL – (the Unsigned Local Loop) – is not much more than an addressing concept for a single copper loop from the exchange to a premise.
It’s Unconditioned Local Loop actually, and I do know how it works, and….?
…and, you’re still directing debate away from the point article, which is about Telstra’s market position being used to squeeze pricing.
…as for “unsigned” – apologies, my iPhone auto-corrected against that…
Oh you have decided to drop ULL discussion for the moment I see, and do a complete U(LL)-turn to something else altogether, I can almost smell the smoking tyres.
:)
The only thing I can smell is your constant bullshit.
much preferable to constipation ;)
alain, how is Michael’s comment any different to how you behave with Telstra constantly?
huh what? please elaborate.
*Telstra’s been squeezing prices to its wholesale customers for almost a year now — and the national competition regulator’s taken zero action in response, according to Internode managing director Simon Hackett.*
so, Telstra has been increasing quotas across the board…. to maintain the relative attractiveness of their competing plans, smaller ISPs have to do the same. if wholesale pricing doesn’t drop, this results in a margin squeeze for Telstra’s wholesale customers.
at the end of the day, the drop in retail pricing (in terms of $/GB) driven by Telstra’s aggressive move to regain market share benefits consumers. this is probably why the ACCC is staying quiet. a bunch of ISPs fighting over market share and gross margins is a secondary concern to what prices consumers are actually paying.
*At the time, the Internode supremo speculated that Telstra’s wholesale division was giving some retail ISPs better deals because they hadn’t build out their competitive broadband infrastructure as some like Internode, iiNet and TPG had.*
that’s because if, say, half your revenue comes from reselling TW and half from your own DSLAM infrastructure, then you’re in a better competitive position with better average margins than retail ISPs which are solely reselling TW. it’s actually very fair for Telstra to offer better wholesale deals to these smaller ISPs which don’t have the capital to roll-out their own DSLAM infrastructure – otherwise, their market share would get gobbled up by the bigger players like Internode or TPG that do.
of course, by doing so, Telstra also benefits because wholesale margins are higher than ULL and they have every incentive to stem the loss of wholesale customers to ULL. but the end result is the consumer gains from lower prices all-round.
Reason why i quit internode
i got sick of it when the isp puts the blame on someone else
i advise people to think carefully about internode because most of the time when i had problems its not their fault , even on its own network , they blame telstra or optus.
Yet if the internet is going along nicely they say its all their doing , when the internet is having problems its not thier doing its the wholesalers
But that actually makes sense.
If there’s improvements or repairs to be made on the network, they have to do it themselves. Telstra aren’t going to come in and improve or repair Internode’s own network.
Conversely, if a problem with an upstream provider is affecting the Internode network, it’s not up to Internode to fix it. It’s that upstream provider’s responsibility.
I’m quite sure Internode don’t go around deliberately breaking their own network.
Yes but internode say they have access to their own network agile why if you can go on their network, so they would not be completely blameless alot of times.
Other ISPs never have the same issues?
at least other isps what i have used taken the blame about 60% of the time, internode rarely did in my experience with them
1. blame your supplier
2. blame the ACCC/Government
3. blame your customer
4. goto 1.
5. blame yourself
Don’t forget the NBN will fix all of that overnight, they might as well disband the Communications Dept at the ACCC because all ISP’s will be deliriously happy post NBN. (well the few that are left might be).
:)
In my experience (Bigpond, Netspace, iiNet, Internode – over an 11 year period) Internode has fewer faults – so if they have procedures in place to mitigate faults caused by equipment under their control, logically it makes sense that they would have a higher % of faults caused by third parties.
the other reason why the ACCC may be disinclined to act is that, for the consumer, the $10 drop in WLR cushions the rise in provisioning costs for ISPs. hence, Internode plan prices are actually unchanged on a “bundled basis”. Internode’s margins may suffer, but the consumer is undoubtedly better off – same bundled price, higher quota allowance.
Here is one way to Help – report price-squeezing wholesale providers:
https://www.scamwatch.gov.au/content/index.phtml/tag/reportascam/
Enough of them might get the ACCC’a attention
Problem with that is the ACCC already have the facts before them, which is more than you or I have, because they set the Telstra monopoly pricing in the first place, and have recently made some rulings on prices, you are getting the ACCC’s attention (again) because why?
LOL
I thought I would leave this post for a bit and see if there was any other industry comment on the Internode labelled ‘Telstra price squeeze’.
Other ISPs – no.
ACCC – no.
Competitive Carriers Coalition ( lobby group representing most non-Telstra ISP’s) – no.
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