The Australian Competition and Consumer Commission has told Telstra that it regards reciprocal peering agreements as essential to the continued well-being and robustness of competition in the Australian Internet industry.
The Commission has been investigating complaints from Internet service providers (ISPs) that they were being prevented from offering viable alternative services to Telstras Big Pond suite of products.
It was alleged that Telstra has been:
refusing to enter into reciprocal peering (or interconnection) arrangements with other backbone service providers; bundling its price of 19 cents per megabyte for download of both domestic and international Internet traffic.
Under present arrangements Telstra charges everyone 19c per megabyte for the traffic they take from the Big Pond backbone. Where Big Pond takes traffic from anywhere else, Telstra refuses to pay anything.
During the Commission investigation Telstra submitted that it would consider entering reciprocal arrangements, but only if the party seeking such an arrangement has reached equivalence in size, geographic coverage, network link speed, technical capabilities, content volume and service levels.
The Commission has noted that recent changes in the Internet industry appear to have resulted in one or more of Telstras competitors now meeting those criteria.
The market has seen the entry of Optus in direct competition with market leaders Telstra and connect.com.au, at unbundled prices below those of Telstra. At the same time Access One has withdrawn from providing backbone services to other ISPs, before being taken over by Ozemail.
This example of the competitive process, however, is under threat from Telstras attitude to negotiating reciprocal peering arrangements.
ACCC Commissioner for telecommunications Mr Rod Shogren said, The Commission is extremely concerned that these recent and continuing advances by the industry are at risk if Telstra continues to refuse to accept that there is a value associated with anyones internet backbone but their own.
In light of these developments the Commission expects that Telstra will now come to the table.
Commissioner Shogren stressed that a refusal by Telstra to enter into reciprocal peering arrangements would likely be regarded as relevant in deciding whether Telstra is using market power.
We will continue to watch developments in this market closely, and if there is any sign of damage to the industry we will explore further enforcement options.
Another alternative the ACCC is closely considering is to conduct a public inquiry into possible declaration of a service involving backbone carriage of Internet traffic.
The Commission has observed significant advances in the quality of backbone services since commencing its investigation.
The market has responded to Telstras bundled pricing by developing some world first innovations in the methods for accounting for customer traffic. Telstras competitors can now differentiate their customers traffic and bill according to where the traffic has originated either domestically, internationally, or on their own backbone network.
Given that there have been considerable recent advances in both competition and service in the Internet access market recently, the Commission decided there had not been a breach of the law in relation to this bundling allegation. However, there clearly needs to be more competition in this market and the ACCC will be closely monitoring its progress.
For further information about this media release: Commissioner Rod Shogren (03) 9290 1800 Alana Woods, Acting Director Public Relations (02) 6243 1108
