Telstra's ADSL2+ rollout raises broadband competition concerns

Several ISPs are threatening regulatory action if Telstra fails to open up wholesale access to its new ADSL2+ network.

Last week, Telstra announced it will activate 900 telephone exchanges for ADSL2+ broadband, covering 2.4 million users nationally. The high-speed service offers access speeds of 8Mbps to 20Mbps.

Telstra CEO, Sol Trujillo, said the telco switched on ADSL2+ services after being assured by the new Labor Federal Government that it would not regulate third-party access. Telstra had been seeking reassurance that this would be the case for at least one year.

Telstra claims this assurance was delivered in a letter from minister for broadband, communications and the digital economy, Stephen Conroy. In it, Conroy referred to comments made by the Australian Competition and Consumer Commission (ACCC) chairman, Graeme Samuel, that no compelling case had been made for declaring and regulating third-party access to a wholesale xDSL service.

While wider ADSL2+ access is welcome news for Australian consumers and businesses, ISPs worry the government's decision not to regulate third-party wholesale network access will produce uncompetitive market conditions. Several providers, including Primus and Internode, have already sent letters to the ACCC demanding Telstra's ADSL2+ service be regulated.

Many of these providers have also invested millions into launching their own ADSL2+ services in select areas of Australia. Primus managing director, Ravi Bhatia, said Telstra had denied competitors access to exchanges to deploy ADSL2+, stymieing the development of facilities-based competition.

He also called for guidelines forcing the telco giant to open up access to ADSL2+ wholesale in exchanges where competitors have been unable to install their own networks.

Netspace regulatory affairs manager, Ben Dunscombe, pointed out the industry hadn't needed to declare wholesale broadband services in the past.

"Telstra was dragged to the table with ADSL1+, but it has never been a declared service. There's no logic in Telstra continuing to wholesale ADSL1+ but not ADSL 2+," he said. "Telstra's justification is we [ISPs] can build our own networks and that other people are wholesaling on ADSL1+. But no one has the ability to switch on the number of exchanges Telstra has done."

For Dunscombe, Telstra's decision to turn on ADSL2+ now is "just spin".

"They're spinning Senator Conroy's letter as holy writ, but nothing of substance changed last week as compared to six months ago," he said.

Dunscombe's comments were echoed by Internode managing director, Simon Hackett, who stressed industry regulation was in the hands of the ACCC, not government ministers.

"This [Telstra's decision] underscores that nothing in legal or regulatory terms has changed at all - just that Telstra finally ran out of excuses to intentionally withhold a speed boost that costs them nothing to provide, on existing equipment already deployed, and that can be turned on in 48 hours," he said.

Internode has already challenged the ACCC to consider whether Telstra is acting anti-competitively by not offering ADSL2+ wholesale.

Although it hasn't yet approached the ACCC, Netspace's Dunscombe said other ISPs couldn't afford to give Telstra too much of a head start with ADSL2+. "Telstra has not yet said it will withhold wholesale access. What we are saying to them is that it needs to happen. In the case it doesn't, we'll go to the ACCC ... and we won't wait long," he said.

ISPs also claim Telstra's monopoly on retail ADSL2+ services in certain exchanges could create disparities between consumer pricing.

"In effect, regional customers have finally got ADSL2+, but they have got it late, expensive, and most importantly at costs substantially higher than the retail benchmarks for ADSL2+ pricing set by Internode and others," Hackett said. Dunscombe agreed having highspeed broadband access would be good for everyone, but only if access was affordable.

"With interest rates and inflation going up, we must initiate competition to ensure people can afford what is being put on the table," he said. "In an ideal world we'd like Telstra to take its responsibility seriously and treat ADSL 2+ as it does ADSL1+."

Independent telco analyst, Paul Budde, said the bigger issue was the regulatory environment established by the former Liberal Government. "There are a couple of issues here.

One is that Australia is 3-5 years behind the rest of the world in broadband adoption. If the government wants to drive take-up, it has to operate in the current regulatory regime," Budde said. "It isn't a good regime but you can't change it overnight."

The Federal Government's next generation fibre broadband network and $4.7 billion infrastructure fund, however, will be a powerful tool in how the telco regulatory environment is shaped in future, Budde said.

Telstra has already reiterated its commitment to investing $4.1 billion into a fibre-to-the-node broadband service.

"With the new infrastructure the government can request that Telstra provides access on an open network and treat everyone accessing that network equally," Budde said. "Telstra might have won this battle, but it won't win the war."