The retail broadband price cuts announced by Telstra have triggered a furious backlash from Primus echoed by a host of other wholesale customers, with the drastic reductions compounding existing fears of ‘margin squeeze’ if there are no corresponding changes to wholesale pricing.

Primus CEO Ravi Bhatia warned that the cuts could see competitors forced out of the market and effectively destroy the NBN project – and called for the Australian Competition and Consumer Commission to be replaced by a new regulator if it does not take urgent action in response.

The cuts see Telstra’s existing retail broadband prices slashed by as much as 50% at the top end, with the 200GB BigPond Elite plan dropping from A$179.95 to A$89.95. At the other end of the scale, the BigPond Turbo 2GB package will go from A$39.95 to A$29.95. Customers bundling a BigPond wireless modem with an additional wireless broadband, Foxtel, or post-paid mobile service on a 24-month plan can also receive a A$20 monthly discount, and the firm has waived additional usage fees (although it will still shape excess usage).

A Telstra spokesperson said that the firm was “in discussion with our wholesale customers about the pricing.” But Bhatia fears that, while there might be a minor wholesale price adjustment, the outcome for wholesale customers looks bleak. “If you look at the retail prices and the wholesale prices, the wholesale prices now are double the retail prices,” he told CommsDay. “We might as well kiss NBN goodbye, because with this price squeeze, competitors will have no customers left! Telstra will get A$3,000 per service that they migrate to NBN, and that is what is driving this.”

The Primus CEO levelled a barrage of criticism at the ACCC for its “dismal” record in dealing with the issue to date – and called for the regulator to be replaced if it did not take action this time.  “If this goes on, as is most likely, the ACCC will do nothing. In fact the ACCC has never done anything regarding price squeezes by Telstra. And I can say that with some authority, because I’ve been in this position longer than the chair of ACCC,” he said.  “Our experience has proved that either the ACCC does not understand telecommunications, or it is too complex a topic for them because of all their other responsibilities. And therefore, we need a change in regime… the right way to handle the future is to take away regulation of telecoms out of the hands of the ACCC into [those of] a new telco regulator.”

The problem for Primus and other complainants is that both the ACCC and government have affirmed that Telstra’s wholesale ADSL services should remain “undeclared” and, thus, unregulated in preference for access seekers using ULL and LSS instead. The ACCC last year attempted to expand the coverage area for headline Band 2 ULL to another one million premises but competitive carriers resisted this because it would be accompanied by a price rise.

IINET, INTERNODE ALARM: Meanwhile, iiNet and Internode – both of whom have raised strong concerns around similar Telstra retail price changes in the last few weeks – were preparing to lodge fresh complaints with the ACCC.

“We raised this a couple of weeks ago with the Commission and with Telstra, and our response to the latest price squeeze is that we have amended our ACCC price squeeze complaint… and we await a response,” Internode carrier relations manager John Lindsay told CommsDay.

“I’ve got a meeting with the ACCC on Wednesday, so we’ll probably talk about it at that time,” said iiNet chief regulatory officer Steve Dalby. “But since our arguments are very much identical to Internode’s, it’s very likely that we’d look at those new prices and include them in our complaint.”

“We’ve approached [Telstra] – they’re not interested in dropping the wholesale prices. So in I guess we’ll continue with our complaint.”

Optus and the Competitive Carriers’ Coalition also voiced their alarm. “The prices changes, announced by Telstra Retail yesterday, to its broadband plans will exacerbate industry concerns about a broadband price squeeze,” said Optus GM for regulatory affairs Andrew Sheridan. “Telstra has been acting in ways that are clearly provocative,” agreed a CCC spokesman. “These are actions that Telstra would be unable to engage in if the Competition and Consumer Safeguards legislation had not been stalled in the Senate….the Senate has a lot to answer for with regard to the failure to pass these crucial reforms, leaving competitors and consumers exposed to continued exploitation of market power by Telstra.”

“However, in the absence of a long term solution, it is incumbent on the ACCC to step in and use its powers under Part XIB of the Trade Practices Act to protect competition.”

TPG UNDAUNTED: TPG, however, reacted with a notable lack of agitation. “As the leader for fixed broadband in Australia, TPG has shaken off any possible impact of the recent pricing adjustment,” it said.

“It is nice to see the incumbent finally realising that it needs to get a move on but, in reality, all the new BigPond plans are miles behind what TPG offers,” expanded marketing and sales GM Craig Levy. “Are we concerned that the Bigpond price change will affect our business? Not really.”

Petroc Wilton