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ISPs under a wholesale price squeeze, says Hackett

Internode forced to rejig plans

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Internode founder Simon Hackett has accused “a powerful monopoly service provider” of engaging in a price squeeze that has forced the ISP to downgrade some of its plans.

In this blog post, Hackett has written that it’s become necessary to increase the effective price-per-gigabyte of the company’s “EasyReach” class of plans. The 200 GB EasyReach plan has been downgraded to 100 GB (although the company has also introduced a new 250 GB plan); and bundling discounts have been withdrawn outside the reach of the 550 Telstra “Zone 1” exchanges.

Those outside Zone 1 can be broadly described as rural and regional exchanges, which are far less likely to be home to DSL infrastructure owned by Telstra’s competitors.

Acknowledging that some customers may be upset by the change, the company has removed the minimum 12 month commitment when changing plans, and has removed the AU$29 fee it applied to customers looking for a plan downgrade.

The combination of the plan changes, the footprint of the changes (outside Telstra Zone 1), and the identification of “a” monopoly service provider, it seems clear that Hackett is identifying Telstra as his target.

Wherever ISPs have not yet deployed their own DSLAMs, they have to purchase customer access via wholesale products on Telstra DSLAMs.

“Our effective wholesale access costs have actually risen in some geographic areas despite movement in the opposite direction in applicable retail pricing conditions,” Hackett writes.

The post complains that Australia’s competition regulator, the Australian Competition and Consumer Commission (ACCC), has yet to act on this “price squeeze”. In the absence of ACCC action – and while awaiting the deployment of Australia’s National Broadband Network in these regional areas – he says the plan changes are required so that Internode can “operate on a financially sustainable basis”.

Noting that for all new plans, the unbundled price has had to rise, Hackett writes that “the new world really is ‘all about bundling’.” He also notes that the pricing announced for connection to the NBN will also drive much more focus on bundled, rather than unbundled, broadband plans. ®

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