Telcos line up for broadband price war

A new consumer broadband access price war has erupted among Australia's largest internet services companies: Telstra and Optus.

Telstra BigPond yesterday fired the first shot, indicating it would start charging customers $29.95 per month for 256Kb/s cable and ADSL services -- the same price as a dial-up service. However, users would only be able to download 200MB of data under this plan.

The BigPond price cuts came just one day before its main competitor Optus launched its own ADSL service. Optus was charging customers $49.95 for up to 300MB of data at a download speed of 512Kb/s, twice as fast as Telstra's service.

Telstra also dropped the price of its unlimited access offer to $59.95 per month, which was $20 cheaper than Optus. BigPond managing director Justin Milne, said in a statement that the new pricing plans would let dial-up users economically migrate to broadband.

“The value of our new entry-level plan may be even greater for some dial-up customers when they factor in the cost of local calls required each time they dial up to connect.”

Milne claimed that after dial-up customers had switched to broadband they “will enjoy speeds up to 25 times faster than they're used to, they'll always be online and they can use their internet and telephone service at the same time.”

Telstra wanted to bump its broadband subscriber base from around 300,000 today up to one million by 2005. It currently had around two million dial-up internet customers.

A spokesperson for Optus said: 'We built our plans and campaign to ensure maximum flexibility in a competitive market. We will consider these changes to determine if any changes are required.

The spokesperson said all of Optus' plans are 512Kb/s are all 'flat rate.'

Commenting on the pricing changes, Michael Malone, managing director at Perth-based ISP, iiNet, said Telstra's new $29.95 price brought internet services down to a price/point where mass market take-up of broadband was possible.

However, smaller ISPs would find it difficult to compete in the next round of broadband growth as $29.95 was “well below” the wholesale per port price for other ISPs. “Just to buy the port from Telstra is well over $30”, he said. “We're all a bit gobsmacked [by the changes],” he said.

He said that the wholesale prices would have to come down to $20 or less before the broadband market would start to “explode”.

iiNet charges customers $39.95 per month for a 256Kb/s connection with 6GB of data. “200MB isn't an awful lot of downloads,” he said.

He said that while Telstra's new pricing plan wouldn't affect the ISP's current growth, there's a danger that it “won't be able to participate in the next round of growth,” he said.

In the meantime, service provider AAPT said Monday it had launched a new version of its SHDSL (symmetric high-bit rate DSL) service for business customers.

The company said unlike asymmetric DSL, used for residential broadband users where more bandwidth was delivered downstream, SHDSL offered up to 2Mb/s in both directions. “There are many business customers out there who can't find an internet service right for them because they don't fit into the small business or large business categories serviced by the incumbent carriers,” said Jennifer Tejada, chief marketing officer at AAPT.

“These middle businesses -- smaller companies with big growth ambitions and medium-sized corporates are left frustrated because their internet service is either too limited, or it requires an investment in a managed network which is too expensive an option for them,” Tejada said.

AAPT claimed that since the launch of the first version of its SHDSL service in August 2003, more than 24,000 businesses had signed on for the service as an alternative to installing a larger frame relay or IP VPN network.