New home buyers fight Telstra lock-in

By Ry Crozier on Jul 28, 2009 2:58 PM
Filed under Telco/ISP

Calls for legislative solution to housing estate lock-in.

Politicians, ISPs and analysts are calling on the Federal Government to legislate against exclusive deals that lock homeowners in new housing estates into Telstra's broadband and phone services.

The deals are being reviewed by the Federal Government and - iTnews understands - also by Telstra.

A Telstra spokesperson was unable to comment at the time of publication.

The arrangements were highlighted by South Australian parliamentarian and member for Fisher, Bob Such, in a brief submission to the Senate Select Committee on the national broadband network last week.

"I query those contractual arrangements between housing estate developers and telecommunication companies that prohibit new home owners from using an internet provider of choice," Such stated.

"The only internet provider that may be used is stipulated in the development [or] purchase agreements."

Such was referring to Telstra's Velocity fibre-to-the-home network, which was being rolled out in "smart communities" - essentially new housing estates - nationwide.

Traditionally, developers engaged with Telstra to deploy copper lines within new estates. This infrastructure was, by law, open for access to other service providers to enable them to offer retail services to those homebuyers.

But next-generation networks, including Telstra's Velocity and NextG, are not subject to the same access framework set out in the Trade Practices Act.

Telstra has been able to shut its retail competitors out of new housing estates across Australia by entering into exclusive arrangements with developers in return for rolling out fibre in their estates.

The retail service exclusivity is set out in clauses in the terms and conditions [PDF] of Telstra's Velocity product.

"Telstra shall own the network infrastructure," the terms and conditions state.

"The developer must not use, or permit anyone else to use, the network infrastructure."

However, some home buyers claim to have been unaware these terms would restrict them to Telstra services when they bought into the estate.

Home buyers were provided with a credit of between $1,500 and $2,000 for the first 12 months.

Developers, politicians and Internet forums are receiving complaints from buyers stung by the incumbent's fees for Velocity services.

"Had we known we were going to be at Telstra's mercy forever we would not have brought where we did," said one user of the homeone forums, ‘misscrow'.

Such told iTnews his Senate Committee submission and an earlier letter to Communications Minister Stephen Conroy were sourced from a resident that also did not realise the ramifications of buying into a Telstra smart community.

"I'd have thought the arrangement with Telstra would border on being a restrictive trade practice," Such said.

At least one developer who spoke to iTnews on condition of anonymity said there had been "a little bit" of backlash from residents over the lock-in arrangements with Telstra.

"Generally they get over it," the developer said. "At the end of the day they're buying the location, not the [communications] service."

In its consultation paper on greenfields estates, the Federal Government provided its strongest yet indication that exclusive arrangements in Velocity estates could be dismantled.

"The Australian Government does not consider that developers or FTTP service providers should be able to insist on exclusive wholesale or retail arrangements in Greenfield developments which restrict entry of alternative providers," the paper stated.

"To facilitate service-based competition, at a minimum, carriers providing FTTP services in [estates] would be subject to the access framework set out in Part XIC of the Trade Practices Act".

Managing director of Adelaide-based ISP Internode, Simon Hackett, believed legislation was the key to unstitching the exclusive deals.

"Internode has regularly sought wholesale access to Telstra Velocity deployments from Telstra Wholesale and its requests have regularly been denied," Hackett said.

"It seems that it will indeed require changes to the law before the Gorilla will play nicely in FTTH terms."

Telecommunications analyst Paul Budde speculated that Telstra had already initiated moves to ready Velocity for open access.

"Velocity is steeped in the thinking that came out of the Sol Trujillo era. It was all about monopolies and not giving customers any choice," Budde said.

"I wouldn't be surprised if Telstra had changed its mind because if they don't change it, there will be regulations created that overrule the [arrangements]."

Other industry sources said rumours had been swirling of a change in thinking at Telstra.

But, according to one source, it could take Telstra twelve months to ready their internal Velocity systems, procedures and processes for open accessibility.

Telstra recently reported "over 3,100" homes on its Velocity network.

It is unknown how many more are "under contract" to be constructed.

Are you in a Telstra Velocity-based housing estate? Did you understand the terms and conditions before purchasing your house and/or land?

28 comments in this discussion

"Perhaps the answer is the government puts in the infrastructure then any provider can supply? mmmm, but we have all seen what happens with prices when the government gets involved! Group Purchase ..."

By gpoau

Tags

telstra, budde, open, access, exclusive, deal, developer, housing, estates, greenfields, broadband, internode

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Comments: 28

anonymous Jul 28, 2009 6:03 PM	@Telstra lock-in: As this article reveals, I understand Telstra has a department which was created to seek and enforce good ol' monopoly access to new housing estates. Who says they have learnt nothing since they were a government department? More seriously, only some clear use of mandatory regulation will give residents caught in this situation the right to access competitive services and pricing.
Anders Jul 28, 2009 10:11 PM	I have been in a "Smart Community" for 12 months. Previous provider gave me 21Gb for $50 (Downloads only). Telstra gives me 12Gb for $100 (Downloading AND uploading). Internet Speed of FTTH - No faster than ADSL. So, almost half the downloads for twice the cash. Massive amount of dropouts, including me having to reboot the external hardware once a fortnight due to a total loss of service. Thanks to the Telstra service guy for showing me how to do it - it took Telstra 3 days to get someone to my door for something that takes 1 minute to do. Open the estates up and I guarantee NO ONE will stay with Telstra. Already people are leaving and using wireless broadband. Telstra is too stupid to be able to keep its customers.
topper Jul 29, 2009 12:29 AM	Developers for these "greenfield estates" should look at wholesale-only FTTH providers, like Opticomm. Customers can then get access to the network from a variety of ISPs/retailers on a competitive basis.
Ghat Jul 29, 2009 10:21 AM	Before this gets to a Telstra bashing exercise, let us look at this from a business perspective (BTW: I am not a Telstra customer or employed by Telstra or a Telstra affiliate). Telstra has to (by law) provide other companies with access to most of their infrastructure. This means Telstra have to sell access at a rate cheap enough that those other companies can compete with regard to rates etc. This also means that those other companies are able to make a profit. For Telstra who have to outlay the infrastructure costs, this means that if they are unable to sell their service to the consumers (where the profit is) they then make less money for their shareholders. Scenario: Telstra cuts their prices to get consumers: They are being anti-competitive and get into trouble. Telstra wholesales their infrastructure: They make less profit – share holders get angry and again they are in trouble. Telstra signs people up to a contract in a ‘smart’ community trying to recoup the cost of out laying the infrastructure: - again they get into trouble. Telstra no longer puts funds into infrastructure because they do not make any money: people get angry and demand the government do something (can anyone say NBN?). Let’s see all of the other ISP’s, VoIP providers and telephone companies invest in more domestic infrastructure. An NBN joint partnership alliance… why not? Major civil infrastructure companies can do it. Let us see Government legislation to force all provides to contribute to the cost of infrastructure. This way everyone is on a level playing field. No companies can then blame Telstra for not providing service to an area. And the consumer gets their choice of provider regardless of location.
peterniss Jul 29, 2009 10:39 AM	Nobody should be stuck with a property that can only be serviced by one ISP PERIOD. That is referred to commonly as a monopoly. The easiest thing for the government (who is in charge of rectifying this) is to mandate that no one ISP/Telco can be the sole supplier to a development unless a equal and fair agreement is made for competitors to use and share the infrastructure. This really is a no brainer. It is the pure definition of a monopoly. The sooner these people protest to the government, the sooner legislation can be introduced to keep this kind of nastiness from happening.
tommy Jul 29, 2009 11:18 AM	@Ghat, If you read the article and understand what is happening, your argument for a reasonable profit return from installing infrastructure only applies if your not being paid by the contractor to do the work. Telstra are being PAID BY THE CONTRACTOR to install the fibre, they offer the install at a reduced fee in return for locking the customers in for eternity. This means that Telstra are exactly up to their old tricks, using their power to buy a new monopoly and locking the customer in, at a price no other competitor could afford to install for but then selling at prices no consumer should have to pay. So lets not do as you say and not hate on Telstra, lets do exactly that and realise that Telstra will do and say anything to lock in customers without competition no matter the cost, hate on them, they are as dodgy as a $2 watch and we should not have to put up with it. Split Telstra now and make them play on a level playing field, wholesale/infrastructure and retail should never be able to talk to each other and should be made to wait like every other competitor, that would stop these sorts of rorts overnight.
sydneyla Jul 29, 2009 1:20 PM	Why would any business install infrastructure where that service could be claimed, without cost, by an opponent?
tommy Jul 29, 2009 2:36 PM	I am not sure what you are saying, the business is not doing it for free so they already have their opportunity make a profit, and any competitor will still have to pay whomever owns the lines, in this case Telstra if they want to use it. The only question is how much profit does Telstra expect to get with competition compared to how much it could get with a new monopoly. So would you like to see a future where every company that has enough clout could control what you are allowed to do, lets say Energy Australia put in a super cheap bid to install all the wiring in new homes but in return you had to use them for power supply but they charged twice the price and you had no choice. Say Holden paid to seal the road in the new estate, they bid half the normal price for bitumen and everyone had to buy a new Holden Cruze in order to drive into the estate, any other vehicles have to park outside. But instead of the RRP$20,990 you paid $40,990 and had to take Holden GM finance @ 29.7%. Lets not stop there, the water service is installed on the cheap by Coca-Cola Amatil and you only receive Pump water through your taps at $2 litre and you cant install a water tank. That may sound ridiculous, but thats exactly what Telstra are doing, because so many things can work on or are dependant on telephone lines do we treat it different, or is it just because its Telstra and so many Australian were tricked into buying their shares in the belief that they should and would be protected from any real competition? Lets get serious, the developers pay for this infrastructure to be installed, Telstra are buying the monopoly by under quoting and trying to lock customers in, if they want to make a profit, they should compete at a fair level, undercutting other line installers should cost them money, not guarantee them a return by locking in users at a higher price. Thats how every other business works, sell your shares, Australia and Australians wont put up with it for ever and unless Telstra change their business model they will continue to loose revenue.
sydneyla Jul 29, 2009 4:14 PM	Tommy thank you for your lecture to which I will respond as concisely as possible. What if a company invested money by installing cable (expecting to recoup the investment from the customers) but once the cable was installed those customers all decided to use other service providers. My point is who would invest in the roll-out when blood suckers and parasites are waiting in the wings.
anonymous Jul 29, 2009 6:10 PM	It seems that the blood suckers and parasites aka the incumbent monopolist are already on centre stage rather than waiting in the wings. tommy has described exactly what has been happening. It seems that Ghat and our old mate "sydneyla" (la-la?) are very happy for users to be locked into monopoly extortion because developers have secretly done some sort of side deal to allow that to happen. Anyway, it's good to see you back "sydney" (Telstra). Every circus needs a clown.
ap Jul 29, 2009 6:52 PM	"...who would invest in the roll-out when blood suckers and parasites are waiting in the wings" Who would buy one of these new houses knowing that the blood suckers and parasites are already at the front door :)
sydneyla Jul 30, 2009 7:31 AM	Anonymous every circus does need a clown and you by your efforts have that crown firmly placed.
Ghat Jul 30, 2009 9:55 AM	@Tommy Please provide us all with the name of another tel-coms provider who constructs (implements) their own infrastructure. I don’t even believe (please correct me if I am wrong) that Singtel – Optus do domestic line (other than node to home). The reason no-one else does this because by law, Telstra HAVE to have open access. As the government no longer wholly owns Telstra and it is a company responsible to shareholders, why should there be different set of rules? I agree with what you are saying that the contractor paid Telstra to install the line at SUBSIDISED rate. Having a monopoly in an area is wrong, but when you have to open up sections of your business and share (at a reduced rate) just to because someone else wants to sell the same product as you, you would also try to contractually obligate to make money back for your shareholders. If Telstra (or anyone capable – does anyone know who else actually does that other than Telstra?) was to charge the going rate to install infrastructure and then this cost was passed back by the developer to the home owner (which it would be). The extra cost would then either A: make the homes un-attractive due to the extra cost, or B: People would demand that the government/ council/ anyone (but them) pay for it. Everyone is in business to make money. This is exactly the same as a civil contractor building a new road and charging a toll on it to recoup costs. This is called a BOOT contact (Build-Own- Operate- Transfer) without having a completely socialist style of government or raising taxes even more there is no other way to build new estates or ANY other infrastructure. Unfortunately we live in a user-pays society and without an alliance between all providers or government intervention (the NBN concept) we will always have contention between businesses.
cyberknutt Jul 30, 2009 11:23 AM	@Ghat Your road toll analogy is flawed. The equivalent to Telstra's infrastructure being shared would see one car manufacturer building the road and then charging cars made by other manufacturers the toll to use that road. Conversely, having the telecommunications infrastructure built by an independent contractor and then made available to all users on equal terms is the only way to avoid the appearance of a monopoly or bias.
anonymous Jul 30, 2009 5:13 PM	@cyberknutt, it may actually be much worse than you have suggested. The direct comparison would see one car manufacturer building the road, charging a king's ransom for the compulsory use of it by owners of that brand - and then using the muscle of a huge legal department to prevent any other makes of car from using the road. @sydneylala - you seem to be losing your pnw now that your idols have scuttled back to the land of the free. After giving us all lol for so long, we've come to expect much more spectacularly silly wtf from you. . .
Orpheous Aug 28, 2009 3:52 AM	Just wondering if sydneyla or ghat live in a Tel$tra $mart Community? I'd doubt very much thta they would have the same opinion, that is, unless they work for the "Gorilla" itself and live there with staff discounts on services. My wife and I live in a Smart Community in Far North Queensland, we're renting while we're saving for our own bricks & mortar. At no point prior to signing the lease were we informed that we would be stuck with Telstra. It wasn't until we moved in and started talking with the neighbours that we discovered just how screwed we were. I made the dreaded call to Telstra. We were given a $1500 credit to our account, which was apparently part of the deal with the community developers. That didn't sound so bad, until the salesman continued. The connection fee was around $200+, the internet connection fee was $300+, $99.95/month for 12Gb downloads (uploads are also counted), $29.95/month for line rental. They sent us a "complimentary setup package" consisting of the crappiest outdated SpeedStream modem I've ever seen. I'm positive it's a factory second, the wifi signal is flat out transmitting 2m from its limp little antenna in direct line of sight. I'm paying $130 a month for less than I used to get with my previous telco for less than half of that! To top that off, Telstra has tried to overcharge our account by a total of $775 on three seperate occasions due to their substandard billing systems. I've spent hours fighting them to remove the overcharged amounts, only to have them overcharge again. Their initial offer made me laugh (nearly cry with rage), they offered to waive the charge if I agreed to go up to the 25Gb plan at $160/month (15c/Mb excess!). We consider ourselves lucky, as we have neighbours and friends in the area who didn't find out about this whole Telstra scam until they'd built their homes here. @Ghat There is nothing civil about this contractor. We have no other choice ie. we can't drive on a different road & The toll that we are being charged is double that of every other toll road in our city. Being in FNQ mobile broadband is extremely limited, and as expensive as what we're currently paying for the usage. I understand and accept that we live in a user pays society, what I don't understand is why we have to pay double for what is effectively the same as what everyone else gets.
Bob Sep 1, 2009 10:46 AM	Very brave, anonymous. Actually it a basic commercial decision. Who is going to invest money in infrastructure if competitors get it for free? (It must be the same mythical company that is going to invest into a minority shareholding in the NBN.) Everyone who bought into the area knew what they were doing. If they don't want Telstra they can always get satellite or wireless broadband off someone else. The reality is that Telstra is better off to just walk away and provide Next G USO telephones than to build free infrastructure for parasites. Lets see how many new areas get any services if they do. Optus now after 15 years have cabled "selected areas of Brisbane, Sydney and Melbourne". Try them.
anonymous Sep 1, 2009 12:04 PM	@Bob - in referring to "parasites", you appear to reveal a strange view of the needs (and rights) of end-users. Quite clearly NO telco should have monopoly control over the right of consumers to choose their supplier. Developers are responsible for providing all other service infrastructure within their new estates, and network capability should simply be added to the list so that purchasers can peacefully select their supplier without any references to "parasites". And it would be interesting to discuss with you the role of Telstra in relation to the Optus cable rollout that you mention.
Bob Sep 2, 2009 9:41 AM	@anonymous - parasite (n) lives in a close relationship with another organism, its host, and is dependent on its host for its life functions. The only monopoly at work here is one of capability. Australia is a deregulated environment. Any organisation can buy a carrier licence and can run cables anywhere it likes. Unfortunately none of them choose to because it is cheaper to buy everything off Telstra at a subsidised rate. If you want to compete in Singapore you have to pay Singtel a "Partner Settlement" or tax on your sale price (not profit). That brings money into the country and builds its infrastructure. Here the incumbant who has to provide universal service has to subsidise the competitor who can choose to only provide service in profitable areas and the money goes overseas. What Optus cable rollout? It must have been for show (everyone can see it) but it doesn't seem to actually do much.
anonymous Sep 2, 2009 2:11 PM	@Bob - always interesting to hear from you how the monopolist mindset works, though it gets a bit monotonous. So a parasite is dependent on its host - who would have thought it?? Sounds like that might be a pretty good definition of what Telstra does to the end-users. And I'm sure it's only an oversight, but it seems you have not addressed any of the end-user issues raised in most of the posts in this thread.
RDEFCON1 Sep 2, 2009 3:44 PM	@ Ghat;Cyberknutt; anonymous Nah, you've all got it wrong. To take the car analogy, it would be like this: 1. Holden invest upfront in both the roads AND the cars - sometimes with a subsidy but usually without it. 2. Ford, Mazda, Toyota, Mitsubishi, and a number of 'car companies' (in this scenario they are NOT manufacturers) don't invest a single dollar in anything. 3. The government, via the ACCC, decides because only Holden has roads and cars, that they're a monopoly - and that they should allow the other car companies to buy 'roads and cars' at cost to encourage competition. 4. For every two cars Holden builds, the other car companies get the profits from one. For every two meters of road Holden build, the other car companies get the profits from one. 5. Holden stops building new roads and cars because they get no advantage from doing so. The roads and cars get old and fall behind in terms of technology. Everyone complains that Holden is hopeless. 6. The other car companies don't invest in roads and cars because they are getting a free ride on Holden. After all, why invest $1 for 25c profit when you can invest $0 for 25c profit? 7. Holden is asked to build more roads and cars for a new development, but insists on making all the profits because they are taking the commercial risk. Their competitors complain that they should get half the profit for doing nothing, and everyone agrees that's fair. What if I want to open a supermarket next to Safeway or Coles and insist on the right to use their supply-chain at cost. They can deliver groceries to me in the same trucks they use for themselves - I won't have any capital expenses or have to worry about maintenance or supplier management, and I'll just sell everything a bit cheaper than they do. I reckon that would be a good business. Who's in?
Hmmm - OK Sep 3, 2009 5:42 PM	Who in this discussion lives in a smart community? - I do in Perth - I live in a house of our design in a beautiful area of our choice on a plot thats just the right size and position - and I HAVE to use velocity - every silver lining has a cloud I suppose. Who here would like to drive on roads that were built by the government - then privatised and handed to Holden to run - who then only allow one model of car of their manufacturing to use them. That car would cost the same as a Rolls Royce, with the build quality of a 1970's Hyundai, and the roads would be tolled at twice the rate of any private ones? Not many volunteers for that one I would guess? If you want a phone/internet/tv in a "smart" community you have to : pay for the cable to the house - pay for the boxes on the wall, pay for connection - pay for a battery back up so you can use the phone in case of a power failure - pay for a Telstra approved installer to put in Telstra approved smart wiring - then pay each and every month from there on. (And telstra think $1500 - $2000 in hush money is generous!) What it comes down to is those of us who live in a "smart" community HAVE NO CHOICE. I don't have a problem with a dictatorship (oops sorry a monopoly) if the provider has the best interest of the comsumers at heart, but Telstra doesn't! Why should Telstra care if they send out expensive crappy router? why should they care their service is twice the price and half the speed of their competitors? Why should they care if their customer service is laughable? Its got estates full of victims who can't go any where else and have no choice. Thats the essence of the worst of a monopoly (dictatorship)and why they are illegal in most 1st world countries.
anonymous Sep 3, 2009 6:03 PM	@RDEFCON1, Bob, Sydneylala and the rest of the Tel$tra cafeteria: As Hmmm - OK and others above rightly demonstrate, you T fanbois just ain't paying attention. The issue is not Tel$tra being "asked" to impose a dictatorial and extortionate grab on estate dwellers. The issue is the very basic right of consumers to choose their network suppliers, a right which the compulsory locked-in estate contracts deny them. NOTHING can justify consumers being forced to acquire vital communications services in a compulsory regime of extortionate charges and bloody awful service levels. Do you Tel$tra mouthpieces have any idea about the fact that consumers should have some basic, inalienable rights in this potentially one-sided scenario?
anonymous Apr 28, 2011 9:02 PM	Rack off, faker fakhir, there have already been more than enough broken-down marketing trolls pushing their discredited monopoly guff on this thread. :-(
HubertCumberdale Apr 29, 2011 12:02 AM	Admins of this site should employ a few mods to delete this junk. I nominate me. I promise to clean up the spam in a timely manner and rule the whole forum with my iron fist. I am trustworthy.
Ace Apr 29, 2011 2:59 AM	Unfortunately @Bob, you're assumption is not correct. Carriers cannot just 'run cables where ever they like'. Where a site has signed up with one carrier, other carriers are typically locked out or charged a premium for access via the incumbents infrastructure. The residents (often 100s per site) of these sites have no say in it. Furthermore, strata arrangements can and do ban external fittings like dishes (they're 'unsightly').
Pilotyoda May 5, 2011 11:39 AM	The Telstra monopoly in these estates could have only come about by developers seeking higher profits. There has to be a kickback, or they wouldn't have such a system. I bet there is nothing on the front page of buyer contracts stating the lock-in to Telstra. It would be buried in the fine print. When building an estate the developer gets contractors or employees to install wiring, gas driveways, etc. The also do the same with the footpaths, roads, kerbs, stormwater, powerpoles, etc. Normally they select 3rd party contractors based on price. Those contractors must provide this infrastructure and comply with all relevant specifications, laws and regulations at all levels of government. In some cases, the supplier may be highly specialised, such as a power company approved pole installer or a comms specialist for the phone lines. However, either way, the contract is for installation of the infrastructure, not for end user retail. The contractor gets paid and walks away and starts their next job. In any case, the developer pays for this infrastructure and divides the total cost of the estate between the number of blocks, allows for their profit, and sets the retail price. You may use the developer to build your house, or another builder. You could get your own architect and builder if you so choose. Just like you could sign up with a different power retailer. Obviously Telstra is providing the infrastructure at a discount to the developer under a special deal, not noted in the final home/land sale contracts, with the knowledge that it will recoup the discounted price via the consumer. This means more profits for the developer with the consumer paying twice. You are free to buy your gas and power from any retailer, but it would seem not for your comms. This practice should be stopped by legislation, or use the NBN laws regarding installer of last choice.
gpoau May 12, 2011 7:20 AM	Perhaps the answer is the government puts in the infrastructure then any provider can supply? mmmm, but we have all seen what happens with prices when the government gets involved! Group Purchase Online