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Australia's dominant telco, Telstra, came a step closer to being slapped with a AUS$10m (£4m) fine, after a consumer watchdog claimed its pricing for wholesale broadband services was anti-competitive.

In a ruling published today, the Australian Competition and Consumer Commission (ACCC) decided that Telstra is engaged in anti-competitive conduct concerning the pricing of its wholesale broadband product.

The competition notice refers to Telstra's decision to slash the price of its retail broadband service to AUS$29.95 (£12.25) - lower than its own wholesale price for the broadband service.

Rival ISPs were outraged by the move and the ACCC agreed to investigate. Its competition notice gives the green light for ISPs and rival operators to take legal action and seek compensation for Telstra's anti-competitive behaviour.

It also paves the way for the ACCC to press ahead with its own legal action against Telstra. If the Federal Court agrees with the ACCC, Telstra could be fined AUS$10m and a further $1m (£400,000) for each day it continues with its anti-competitive behaviour

Before issuing today's "Part A Competition Notice", the ACCC has to believe that the operator has engaged, or is engaging, in anti-competitive conduct.

ACCC chairman Graeme Samuel confirmed this: "The ACCC believes that Telstra has engaged, or is engaging, in anti-competitive conduct in relation to Telstra's wholesale pricing of high speed internet services in light of its retail offerings."

"The ACCC is aware that negotiations between Telstra and its wholesale customers have been under way since the ACCC issued a consultation notice to Telstra.

"The ACCC expects these negotiations to take place as a matter of urgency. Telstra needs to reach agreement as to this competitive wholesale rate structure quickly with its wholesale customers.

"In further assessing Telstra's conduct, the ACCC will be examining any new pricing offers".

"Whether or not further action is appropriate will be guided by the results of the continuing investigation and the progress of negotiations between Telstra and wholesale access seekers."

Telstra, though, has dug-in its heels and shows no sign of backing down. In an escalation of tension between the telco and regulator, Telstra remains confident that the prices it charges wholesale competitors for broadband "create a competitive market environment".

It said a "minority of wholesale competitors have refused to negotiate" before accusing them of embarking on a "highly politicised approach calculated to spark regulatory intervention and prejudice the benefits consumers are enjoying."

Senior Telstra exec Bill Scales,said: "Telstra believes that the ACCC's intervention in this very competitive market is unnecessary and could hinder the swift resolution of outstanding commercial negotiations.

"The ACCC's decision to issue a Competition Notice is not a finding of guilt, nor does it imply the matter will automatically be adjudicated by a court.

"However, Telstra would be prepared to strongly defend its position should it be challenged." ®

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