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Has the ACCC tripped up in its ADSL declaration?

Virtual circuits for ADSL are way too expensive: The Register tallies up the numbers

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Australian Competition and Consumer Commission (ACCC) declarations are always news, and with good reason: The ACCC's regulated prices set the floor underneath a host of retail services – mobile, broadband, telephony, business data and so on.

New declarations are always accompanied by lobbying, both in media outlets and in the more formal channels of submissions to ACCC inquiries. Access seekers have an eye to their balance sheets, the ACCC has an eye to avoiding the extraction of monopoly rents, and Telstra wants to protect its margins.

So it was no surprise that when the ACCC announced its new ADSL regulated prices – covering ports and backhaul, with different rates for metro and regional areas – it was no surprise that there was plenty of comment, much of it from access seekers disappointed that the prices were so high.

The short of the pricing announcement is that ADSL ports will cost $AU24.56 in metropolitan areas and $AU29.81 in regional areas, while the circuits that ship data from a retailer's DSLAM back to capital cities (AGVCs – aggregating virtual circuits) cost $AU36.08 per megabit per second, per month.

That second charge, the AGVC, inspired a tipster to suggest an analytical exercise to Vulture South, and the results are … surprising.

You see, AGVCs aren't the only regulated wholesale data service the ACCC has set a price for. There's also a lesser-known service, the Domestic Transmission Capacity Service or DTCS. It's much more flexible than the wholesale AGVC, since it's distance-based, but the ACCC helpfully publishes a price calculator here.

The quick result is easy to state: it's cheaper for access seekers to skip the AVGC service and buy DTCS at its regulated prices as a substitute. But this needs a little more justification.

It's a fairly complex service, involving tail prices at each end of a link, along with transmission prices between the tails, and all based on distance. However, in comparing the AVGC to the DTCS, there's no need for tails, since the service starts and ends in a Telstra exchange. So the only difficult question is that of distance.

For a first pass, The Register assumed the following spread of connections:

  • Metro exchanges average 5 Km from the capital – 10 percent of customers
  • Metro exchanges average 21 Km from the capital – 50 percent of customers
  • Metro exchanges average 30 Km from the capital – 20 percent of customers
  • Regional exchanges average 75 Km from the capital – 15 percent of customers
  • Regional exchanges average 150 Km from the capital – 5 percent of customers

The outcome of this exercise is that DTCS would be cheaper than the AVGC – quite a lot cheaper, at an average $AU27 per customer.

Hang on, that can't be right can it?

It certainly can. Since there's mapping software handy – Grass-GIS, the powerhouse of open source geographical analysis – since the ADSL-enabled exchange list is published by Telstra, and since exchange locations can be discovered and mapped, the refinement wasn't too difficult.

So, state-by-state, The Register then calculated the distances from ADSL-enabled exchanges to their relevant capital cities, set an arbitrary 30 Km boundary between metro and regional locations, and worked out the average DTCS prices for metro and regional exchanges.

From here, there was only one blind assumption made, that the metro-regional subscriber split is 80:20 – 80 percent in cities, 20 percent in regional areas.

The average DTCS price an access-seeker would pay is well below the ACCC's $36.08 for wholesale ADSL AGVCs: $AU28.87. Even if you take an extreme – and wrong – case that the metro-regional split is 50:50, the DTCS is still the cheaper option at $AU35.50 per megabit per second, per month.

Which suggests that there's been a slip somewhere: either because the ACCC's Chinese walls were too effective, or because someone simply worked in a bit of a bubble and didn't check the AGVC price against existing prices.

Now, the usual question: did The Register ask the ACCC about this? Not yet, because we'll almost certainly get a boilerplate response. Let's see how they respond! ®

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