ACCC believes Telstra holding back competition for high speed internet to the home

Telstra is engaging in anti-competitive conduct in the provision of broadband ADSL services to competitors, the Australian Competition and Consumer Commission alleges in a Competition Notice issued today. The Competition Notice gives Telstra 12 weeks to change its conduct, failing which it will be exposed to the possibility of large penalties.

"Telstra is failing to provide a true wholesale broadband service that would allow service providers to compete with Telstra’s own BigPond ADSL highspeed Internet services", ACCC Chairman, Professor Allan Fels, said today. "This conduct denies competitors the ability to differentiate the performance and functionality of their services from the Telstra retail service and to compete fairly with Telstra's retail prices".

The ACCC has taken this action as it believes that Telstra:

• supplies its wholesale ADSL highspeed Internet services at prices whereby competitors buying the wholesale service are unable to compete with Telstra's own BigPond retail prices;
• refuses to structure the wholesale ADSL service in a manner that would allow its competitors to offer services substantially different from those Telstra offers its residential and small business customers. These new services could include video on demand and voice telephony over the Internet; and
• refuses to configure its wholesale ADSL service so as to allow for a high speed Internet service to be provided to a residential customer at a different quality of service from what Telstra BigPond offers.

"Telstra has unrivalled access to Australian consumers by virtue of its ownership of the customer access network. It is the ACCC's view that Telstra is taking advantage of this ownership in not offering a true wholesale ADSL service but merely 're-badging' its BigPond products and then selling them to competitors at uncompetitive prices. The ACCC's investigations of numerous complaints from Telstra's competitors indicates that Telstra's actions are having the effect of restricting the choice of service provider in residential areas to only one service provider – Telstra. This effectively limits the choices that residential customers have in accessing broadband".

Once the Competition Notice comes into effect it will allow parties such as ISPs and carriers to take court actions to seek damages against Telstra. The ACCC may also rely on the Competition Notice to seek potential penalties of up to $10 million and a further $1 million for each day that the conduct continues.

ADSL is a technology that allows data to be sent and received by using the copper wire that connects virtually all Australian households and businesses to the telephone network. Although this is the same copper wire used for ordinary telephone calls and dial-up Internet access, ADSL allows for speeds many times faster than dial-up.

The issue of the Competition Notice is only one avenue that the ACCC is pursuing to improve competition for broadband services to residential and small business users. Further pricing determinations on access to the raw copper will be made shortly and it is likely that the ACCC will also hold a public inquiry into whether the long term interests of consumers will be benefited by changes in the method of regulating Telstra's copper network.

Background

Part XIB of the Trade Practices Act 1974

Part XIB of the Act establishes a regime for regulating anti-competitive conduct in the telecommunications industry. Section 151AK states that a carrier or carriage service provider must not engage in anti-competitive conduct, known as the 'competition rule'. Section 151AJ defines the term 'engage in anti-competitive conduct'. Where the Commission has reason to believe that a carrier or carriage service provider has engaged or is engaging in anti-competitive conduct, it may issue a Competition Notice under section 151AKA.

ADSL stands for Asymmetrical Digital Subscriber Line. It is a technology that uses the copper wire network to enable a broadband service to be delivered via a dedicated line from the customer home to a telephone exchange. ADSL is a high bandwidth downstream service, coupled with a lower bandwidth upstream service. Typically, such asymmetric services are well suited to Internet access and services like Interactive TV where more data is going to the customer than is being sent by the customer.