Telstra warned over broadband pricing

The Australian Competition and Consumer Commission (ACCC) has issued a warning to Telstra over its controversial retail broadband pricing strategy, which angered competing ISPs who buy wholesale ADSL bandwidth from the big telco.

In mid-February, Telstra BigPond unveiled a cut-price $29.95 broadband access deal for consumers, a move which riled up wholesale customers who claimed they couldn't match the price.

The ACCC said it had received several complaints that this price was below Telstra's wholesale rates for the same services and has issued an "advisory notice" to Telstra.

In a statement, the ACCC said it was "expediting the investigation of whether Telstra's pricing amounts to anti-competitive conduct in breach of the telecommunications specific provisions in the Trade Practices Act."

"The ACCC is very concerned that Telstra's price drop for its retail price was not matched by a similar reduction in its wholesale price for similar services," said Graeme Samuel, chairman at ACCC.

"Competitors of Telstra's BigPond broadband service, who buy wholesale broadband services from Telstra, complained to the ACCC that without a reduction in Telstra's wholesale rate, it was impossible to match Telstra's new low price on a sustained basis.

"The inability to compete, especially at the important entry level end of the market may also ultimately foreclose more sustainable access-based competition at a vital stage of broadband growth in Australia," he said.

The ACCC said it was advised of the price cuts shortly before they were made public. It would continue to investigate whether Telstra had breached section 151AK of the Act "with the aim of preventing the irreparable damage to competition that anti-competitive conduct may inflict."

Section 151AK provides that a carrier or a carriage service provider must not engage in anti-competitive conduct.

"The notice is a strong warning to Telstra to change its conduct so as to avoid any contravention of the competition rule. A reduction in Telstra's wholesale prices will facilitate increased competition among broadband providers with an end goal of being lower prices and better deals for consumers in the long term," Samuel said.

The ACCC said it was also concerned about the impact on consumers of megabyte (MB) usage limits. Under the $29.95 access plan, consumers can download 220MB per month and must pay 15 cents per additional MB.

"Consumers should be aware of the substantial additional costs they could face for usage of their broadband service or for exiting the plan early before they sign-up on a long-term broadband plan," Samuel said.