news A group of major Australian telcos have issued a fiery statement damning Malcolm Turnbull’s Department of Communications for its “extraordinary” attempt to support Telstra’s profitability and keep telecommunications prices from dropping.
In late June, the ACCC made a draft determination on pricing for a certain number of fixed-line telecommunications services, revealing that it had decided Telstra would need to issue a 9.6 percent drop in prices to its wholesale customers. This could mean that broadband providers such as Optus, iiNet and TPG could cut their prices substantially.
This week it was revealed that Turnbull’s Department of Communications had written to the ACCC arguing that the decision was flawed.
The Department argued that customers would not switch to the NBN when the new infrastructure is rolled out in their area because they will be paying higher prices than they were on the old infrastructure. It also arguied that broadband providers themselves might delay migrating their customers as they could obtain higher margins through keeping customers on the old legacy copper infrastructure. Telstra agreed with this line.
In a statement issued yesterday, the Competitive Carriers Coalition, a group representing Vodafone, iiNet, Macquarie Telecom, Nextgen Networks and Mynetphone, came down heavily on the department’s letter, labelling it as “extraordinary, unwelcome, unwarranted” and setting a “dangerous precedent”.
“For a Government department to be calling for higher prices for ordinary consumers, and against the interests of competition, is surely a first at the Federal level [and] raises serious question marks about their ability to maximise the opportunities of the digital revolution,” the group said.
“For it to be doing so in the context of fixed line communications services, where Australia has the national disgrace of the highest prices in the developed world, beggars belief. Yet here is a Government Department intervening to tell an independent pricing agency to throw out the result of a two year inquiry because it does not want prices to fall.”
“It instead wants to see millions of dollars transferred from the pockets of Australian consumers to Telstra, one of the most profitable telecommunications companies in the world.”
The CCC said the department’s arguments that Telstra needed to be compensated for the NBN have been examined and rejected under a two year exhaustive independent ACCC inquiry.
“Will this be followed by the Department of Finance telling the RBA it is wrong on interest rates? Or the Treasury telling APRA not to regulate the banks so harshly?” the CCC asked. “These are not policy matters and the independence of the ACCC must be respected. The Minister must realise that this was a mistake and instruct the Department to withdraw its submission.”
opinion/analysis
I agree with the CCC’s view on this matter. As I wrote yesterday:
Wow. With the greatest of respect, we’re really seeing some premium Grade A questionable arguments being made here. A Coalition Government — normally in favour of letting free markets determine pricing — is arguing that the ACCC’s role should be to ensure “pricing stability” and not encourage lower prices for Australian broadband users. Wow. That sure sounds a bit too socialist for me.
Meanwhile, Telstra — yes, the same telco which just posted a 22.4 percent jump in half-year profits to $2.1 billion and is about to be paid $11 billion by the Government to migrate its customers off its copper network, probably picking up some construction work from nbn along the way — is complaining that it’s in terms of the historically expensive prices it charges competitors for access to its wholesale network.
My opinion is that the ACCC should do its job, advocate on behalf of competition and consumers, and reject the arguments that Telstra and the Government are making.
Firstly, there is no reasonable prospect that broadband providers and consumers are going to delay shifting onto the NBN for a few dollars a month — most consumers are dying to get onto the NBN at any cost, and competition for NBN customers is so fierce that I can’t see ISPs charging more for their NBN plans than they do for their existing ADSL broadband plans.
If Telstra was worried about cost recovery, it should have made this a higher focus in its NBN deal with the Government. And I suspect if you spoke to most non-Telstra players in the industry, you’d find that they have felt they have been getting fleeced on wholesale prices from Telstra over the past two decades. I’m not familiar with the extreme financial details — and I’m happy to be corrected, but I suspect Telstra is well able to take this one on the chin.
#LibLabLast #rebootau
NBN is full of ex Telstra cronies, all appointed by none other than Turnbull. Now Turnbull is arguing for Telstra to be able to charge consumers more? Coincidence????
NBNco is actually full of ex Optus and Kordia blow ins.
Don’t forget all those Telstra shares to board owns
“most consumers are dying to get onto the NBN”
oops a typo there, should read “most consumers will die before they get the NBN”
Are you surprised really? Turnbull has had a hard-on for Telstra since he became Comms Minister. Some serious conflicts of interest amongst Turnbull and NBN Co. This is right up there with Telstra’s exclusivity stipulation while NBN Co upgrades HFC.
+1
I just don’t get the LNP and in this case Turnbull. We hear about how open markets are the best way to achieve outcomes in society but when you look over their history I don’t see any of it and that is genuinely trying to think over their achievements.
The coalition are happy to let the market dictate the running of the economy (with accompanying disastrous results) until it interferes with their own personal self interests, at which stage they are happy to interfere on behalf of their commercial masters (as paid lobbyists) or their own wallets… carpetbagging pigs of the highest order…
It’s very simple Sam, this is Neo-Liberal Crony Capitalism at its worst!!!
You can see the pattern of this gov when you look at their blatant support for other legacy industries such as Mining and dirty power generation – the NBN is just another disruption that they are doing their best to eliminate at our expense!
“My opinion is that the ACCC should do its job, advocate on behalf of competition and consumers, and reject the arguments that Telstra and the Government are making”.
Unfortunately the ACCC has a conflict of interest as it is also the access pricing regulator. Everyone loves a price cut as long as it benefits them. The price regulation function may be better placed with a more independent body like the Productivity Commission. This may just happen now, given the unusual timing and quantum of this latest ACCC draft access pricing determination.
The journalist seems more than a little confused as to where free markets exist. In this case, it’s not the free market setting wholesale access pricing, its the ACCC. He seems to favour a regulated access pricing regime (very socialist) rather than promoting competitive access networks.
Unfortunately, due to the government not structurally separating Telstra, it created a monopoly.
A monopoly distorts the price mechanism of a free market, thus requiring a regulator to ensure that as demand increases, prices will go down.
The crazy set wholesale price that Telstra charges other ISP’s to use their network is a large inhibitor to this price mechanism occurring and has resulted in ridiculously high prices for Australian consumers.
A free market is all well and good in theory, but Telstra is a case where price regulation is necessary.
NBNCo’s expensive CVC charges are also a problem that needs to be addressed. With the introduction of Netflix the landscape has changed, and a new pricing method needs to be introduced.
But telecoms infrastructure is a natural monopoly, much like electricity, water and gas. That is unavoidable. The ‘market’ in a monopoly sets the price as high as possible until it becomes unaffordable for most people, so a regulator is necessary.
Your lack of demonstrated knowledge in this area shows that you either don’t know what you’re talking about, or you’re being deliberately misleading.
Sorry, ‘UninvitedGuest’, you’ve just demonstrated you don’t have the faintest, foggiest idea of what’s really going on between the Liberal govt, Telstra, and Fox/News Corp for that matter, in stealing the election, crippling the nation’s infrastructure, and maintaining profits for certain players over others.
@ Solomon
The ACCC has no conflict of interest it is their job. Seems the journalist (Renai) isn’t the one confused here.
We are accessing a natural monopoly, copper network, which is owned by Telstra but was vested to Telstra with strict (wholesale) access laws…as such it needs an independent adjudicator.
As a side issue, remember with the previous FttP NBN, this would all have been avoided, as the copper in disputation would have been shut down and Telstra brought back to the pack, as just another RSP… but of course that was also decried as a big bad Socialist plan too (so damned if you do/don’t, eh), anyway…
The present government would love nothing more than to bypass the ACCC (as advised by their advisors the IPA). But consumers (read: us) need such a body to ensure fairness.
Why? Because contrary to your strange thoughts that competition will work (in fixed) where it hasn’t for 20 years and all parties no matter how much sabre rattling and promises of “we’ll invest in FttN”… it didn’t happen”!
In 2005/06 Telstra said we’ll invest. but then they withdrew from negotiations at the last minute. Telstra then had another opportunity in 2008 via the RFP to build the NBN (which even included governmental money) but they intentionally submitted a non-compliant bid.
Then we had the facade called G9, who also were “gunna”… but inevitably, they didn’t even have the balls to submit a non-compliant bid let alone a compliant bid.
So investment via competitive forces never eventuated and would never eventuate simply because… they were all happy with the status quo (Telstra $B’s in profit p.a. via copper and the others, handy profits via access to Telstra’s network, meaning they didn’t need to invest). All were happy, regardless of the suggestions by any of them, otherwise.
It’s actually quite obvious and quite pitiful.
This is why we needed an NBN – yes a proper FttP NBN to omit the problematic (not to mention dated and obsolete) copper, not this mish mash MTM BS … But more importantly since this backward, living in the 50’s thinking government have decided to abandon FttP and go with MTM (yes primarily the same FttN plan they referred to as fraudband in 2007 + some very kind upgrades to HFC to aid Telstra and Fox as well) … now more than ever, with these latest revelations of Ministerial (shall I call them) stand over tactics, we need an independent and aggressive ACCC.
hi there,
I’m basing my views here on Delimiter Principle 11:
Principle 11: Commercial service providers should respond to their customers’ needs and communicate openly with them
Many of the issues that have arisen in the global technology industry over the past several decades relate to a situation where a vendor stops directly responding to the needs of their customers, in terms of changing their products or services or the terms and conditions or pricing associated with such services.
This principle reflects the idea that vendors should seek to meet their customers’ needs, rather than fighting them. This can be a delicate balance at times, but there is no doubt that the Delimiter community comes down on the side of the customer.
In extreme cases where monopoly conditions exist, governments must carefully regulate commercial service providers to ensure they do not abuse their position.
With respect to Telstra, it is clearly in a conflict of interest position and in a monopoly position. It needs to seek to maximise revenues both from its retail customers, and from its wholesale customers, who are trying to win over those retail customers.
I would have a problem with the ACCC regulating retail prices in Australia’s broadband market, because that market is not a monopoly. But in the wholesale market, monopoly conditions exist and therefore should be carefully regulated.
In my experience, the only organisation with the clout and the objectivity to sensitively and fairly regulate Telstra’s wholesale prices is the ACCC. I don’t see a conflict of interest for the ACCC here, and I think the Productivity Commission wouldn’t have the teeth or the knowledge to get the job done.
Renai
It seems like “Treasurer for sale” was wrong and it should have been Communication Minister for sale
He’s not for sale, he’s bought and paid for.
Given Renai worked for Senator Dudlam of the Greens, Renai is well aware of socialism. Probably too well aware, sadly.
argumentum ad hominem
+1
I was actually laughing at the mention of Dudlam, which IMO is up there with Conjob and Mr Rabbit in the wow, how intelligent am I stakes.
*shrugs*
The Department of Communications has a woeful record of enforcing its role as a regulator. Repeat breaches of consumer codes remain unpunished, and phoenix companies are rampant within the industry. The TIO has been reduced to a school crossing supervisor role – no real power and the Board – Telstra, Optus, Vodafone, iinet, ex Optus, – just take the Board salary and ensure the TIO does not report non compliance with consumer codes. The heralds mobile premium services code have now been watered down…so sad when the Liberals get control.
I’ve been meaning to post for a few days…
I think the ACCC would be better off, or at least in addition to current proceedings, in setting better minimum standards for the NBN.
I see that the FCC in the US has recently raised the minimum broadband speed to 25/3 Mbps – this needs to happen in Australia ASAP!
http://blog.chron.com/techblog/2015/01/fcc-raises-minimum-broadband-speed-to-25-mbps/
It’s ridiculous that, when you switch over to the NBN, you can actually chose a slower speed than you get over ADSL2 (I’m currently getting up to 12-13 Mbps downloads on ADSL2). It’s a false economy that providers can offer so many tiers of speed and download limits. Off course you are going to see people choosing the 12/1 Mbps option because they are making a simple value equation.
Next up the minimum download amount needs to be set to at least 100 GB, given how fast you can download stuff and how much just updating even operating systems chews your data, let alone streaming multimedia. Less than 100 GB is ridiculous.
I’m currently getting unlimited ADSL 2, with speeds up to 13/1 MBs, for $70 a month on iPrimus. When I make the switch to the NBN (which is hopefully a few months away) I can either get: slower downloads (which is incredulous) on the 12/1 Mbps tier and 300 GB (with peak and off peak split – which I don’t currently have) or a slightly faster connection (up to 25/5 Mbps – but who’s saying you will get the 25 Mbps all the time) and 200 GB for the same price. Where is the value in that? Given the infrastructure is being paid for by the government, there is no excuse to get less of a service for the same price.
I’ve seriously been mulling over starting a campaign for the ACCC to follow suit, with the US, in setting a 25/5 Mbps (slightly better on the uploads but that shows how progressive we are) and at least 100 GB per month (up from the current 40 GB) minimum data allowance. This could solve the ACCC’s, not to mention the LNP’s, issues with directing pricing as, if better minimum standards are set, we would surely see a more competitive bottom tier offering flow through.
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