Updated - Internode and iiNet: Further Telstra price cuts will make things worse

The telco giant flags another round of price cuts to broadband plans but has still yet to make appropriate cuts to wholesale plans

Further reduction to Telstra's retail broadband price will compound woes for the telco's wholesale customers, according to Internode and iiNet.

Telstra CEO, David Thodey, has flagged price cuts for several mobile phone and broadband products, according to The Advertiser newspaper. The telco is moving to create value to customers through bundle deals as well.

The news may disturb some of Telstra’s wholesale customers that are still reeling from the telco’s last round of price cuts to its broadband plans.

Internode, iiNet and iPrimus have publicly condemned Telstra’s price cuts to several ADSL2+ BigPond broadband plans without making appropriate price reductions for its wholesale customers, leading to unfair competition.

Internode and iiNet have both lodged complaints to the Australian Competition and Consumers Commission (ACCC).

Internode carrier affairs manager, John Lindsay, is wary of Telstra’s planned price cuts and said the telco giant will have a lot of explaining to do.

“How low is too low? I can’t really say, but if Telstra were to sell at cost price to provide services, then that is a misuse of market power,” he said. “It feels like a bit of a race to the bottom and at the end of the day it will be hard for Telstra to explain to their shareholders if their revenue falls and but customer base increases.”

Internode is currently in discussions with Telstra over wholesale prices but Lindsay could not comment on the progress. “It is not feasible or sensible for us to match Telstra’s retail prices when wholesale costs are more than Telstra’s retail prices,” he said.

iiNet said further reduction will exacerbate pressure on Telstra’s wholesale customers.

“We still haven’t seen any reduction in wholesale pricing so we continue to work with the ACCC on that complain in respect of the price squeeze,” iiNet chief regulatory officer, Steve Dalby, said. “It’s not going to change the situation at all; it’s just making it worse.”

Clarification: A Telstra's spokesperson said The Advertiser may have misinterpreted Thodey's statements made at Investor Day recently in reference to what Telstra has been doing rather than being any specific price cuts about to be announced. But Telstra has not ruled out further price cuts to its retail plans.