Eftel keeps and writes off DSL network

Internet service provider Eftel has reversed a year-old decision to sell off its DSL infrastructure in a bid to grow its on-net customer base.

CEO Scott Stavretis told iTnews the company had decided late last year to keep the assets, despite spending the last 12 months trying to off-load its equipment.

It instead wrote off the value of the routers, which were estimated at $3.93 million.

The impairment, along with redundancy costs associated with the ClubTelco merger, led to a net loss of $3.1 million over the six months to December 2011 for the provider, despite doubling revenues and increasing earnings five-fold.

“We wanted to see what we could to get new customers on that network which has so far been successful,” he said.

Though declining to provide customer figures, he said the network was more than one-third full and would continue to grow as Eftel moved ClubTelco customers onto the infrastructure.

“We though we might as well rapidly depreciate the entire thing so we didn’t have it sitting on our books for years to come,” he said.

The company rolled out equipment in 70 Telstra exchanges in 2009, adding to the more than 300 partner exchanges it leases from carriers Nextep and others as part of its on-net network.

It had chosen Huawei-built Multi Service Access Node (MSAN) equipment over DSLAMs usually used in ISP-run networks in hopes of upgrading its network to the faster VDSL2 fibre-to-the-node offering, should it become available.

Stavretis acknowledged retaining what is now effectively worthless DSL infrastructure was risky but hinted it would help shield the provider from political uncertainty surround the National Broadband Network.

Despite commitments from larger telcos iiNet and Internode that there is still room for more third-party infrastructure in Telstra exchanges, Stavretis said the recent regulation of wholesale DSL services reduced the need for further expansion of Eftel’s network.

Regulatory squeeze

Stavretis said Eftel is months away from being able to re-negotiate contracts with Telstra for wholesale DSL service, which the competition watchdog recently regulated and set an interim wholesale access price for.

However, he warned the regulation may not lead to significant pricing drops for Eftel’s regional customers.

“I don’t really see a big drop happening in those regional areas in the marketplace at all,” he said.

“It’s not always about renegotiating both prices; we have more customers in metro areas so for us we will be trying to renegotiate metro price harder than our regional prices so we can get the most profits from our wholesale agreement.

“How we change in the market really depends on our competition.”

Eftel subsidiary ClubTelco culled its national pricing scheme - which provided flat pricing for both metro and regional subscribers - last month, introducing a $20 premium for those customers in Telstra’s ‘zone 2’ or regional and rural exchange areas.

Stavretis attributed the price rises at the time to an “increase in usage and the higher regional cost from our supplier”.

This week, he said a renegotiated contract under the newly regulated pricing could possibly lead to the scheme’s re-introduction but made no promises.

“If it’s close enough, we’ll go back to that price before,” he said.

Wholesale amalgamation

Eftel is also set to amalgamate its own wholesale subsidiary with Platform Networks, which it acquired in August.

The new division will be led by operations general manager Rick Swancott and comes as Eftel prepares to finalise wholesale services over the NBN, which it has been trialing with Dodo.

It is expected the wholesale product will provide a single point of interconnect to the national network in Sydney for smaller internet service providers.

The merger coincides with the departure of Platform founder and former managing director David Hooton, who is set to leave next month.