iiNet hits wall dismantling Telstra's ADSL costs

iiNet is pressing the competition watchdog for a private briefing on how draft wholesale prices for ADSL have been put together.

The Perth-based ISP, via its law firm Herbert Geer, raised concerns (pdf) that the level of confidential input into the models used to calculate draft prices made it difficult for anyone other than Telstra to assess the ACCC's draft decision, handed down last month.

iiNet said it got hold of some confidential data directly from Telstra, though "redacted", and subjected it to an economic assessment by consultancy CEG Asia Pacific, but it proved too little "to provide the transparency that is needed to evaluate the ACCC's preliminary views".

A further request lodged with Telstra was rejected on the grounds that disclosure "would allow parties to examine [Telstra's] cost structure to such an extent that they would gain a substantial competitive advantage", the Herbert Geer document alleged.

iiNet is focusing on the make-up of the regulatory asset base (RAB), a key input into the cost-based pricing model the ACCC used to come up with new draft wholesale prices.

The RAB is the valuation of Telstra's network assets used to supply the wholesale ADSL service. Such assets are said to include 'data equipment', 'pair gain systems' and 'switching equipment — local'.

iiNet — and other ISPs — want to understand exactly what assets were included, and how they were valued, to work out whether the regulated wholesale prices they will pay Telstra reflect the real cost of Telstra supplying that wholesale service.

"It is impossible for access seekers that are directly affected by pricing decisions that flow from the modelling to understand if the ACCC's model produces reasonable results," iiNet said in a separate submission (pdf).

Having hit a dead-end with Telstra, iiNet is pinning its hopes on the ACCC approving a private briefing where Telstra would be compelled to hand over confidential data to "approved iiNet persons", themselves the subject of confidentiality agreements.

The ACCC is considering whether to entertain iiNet's request, though did not provide a firm timeframe on when it will formally respond. (pdf)

Price fight

The draft wholesale ADSL prices have received plenty of attention from other ISPs.

The ACCC is hoping to set metropolitan ADSL port prices at $24.56, while ports in regional and rural areas will cost $29.81. Both are about $1 less than the interim wholesale prices used today.

More controversially, the ACCC is proposing a $2.43 per Mbps rise in the cost of transmission backhaul that comes bundled with ADSL ports.

ISPs already object to having to buy backhaul from Telstra, and the proposed hike caught many off-guard, as such costs have typically trended downwards over the past couple of years.

AAPT believes port prices should be around $20 to $21, and that backhaul prices should be "around $25" per Mbps. (pdf)

Optus has argued for even lower port prices between $16.05 and $19.48, with bundled backhaul charged at $13.96 per Mbps. (pdf)

A final decision is expected sometime in the middle of this year.