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ACCC hopes to SLASH rural backhaul prices

Cities get a trim, rural links to take a haircut

In a move that Vulture South's crystal ball suggests will be hotly resisted by Telstra, the Australian Competition and Consumer Commission is proposing that rural backhaul costs be slashed.

Backhaul – in ACCC parlance, the Domestic Transmission Capacity Service, or DCTS – has long been a thorn in the side for anyone wanting to connect rural customers. It's often cheaper to send a megabit from Sydney to Melbourne than a far shorter distance out in the sticks.

In a draft determination issued today, the competition regulator proposes significant cuts to both metropolitan and rural DCTS prices, but it's the rural cut that will bite deepest.

Instead of nearly AU$160,000 per year to buy 100 Mbps to somewhere 400 km away from a city, the ACCC proposes to set a price more in the region of $40,000.

Here's a chart the ACCC provided with its determination:

ACCC Rural transmission prices

Tamworth is closer to Sydney than Melbourne, so why should backhaul cost more?

The implications of such a change are profound. Users in towns that have a bit of broadband competition could see their speeds improve, since the retailers will be able to buy more backhaul at a lower price than today.

The change will also have an impact on how retailers make decisions about the National Broadband Network, since a retailer has to buy backhaul from NBN points of interconnect back to their own networks.

Retail services in places like Wagga Wagga, Bendigo, Tamworth, Nowra, Grafton, Cairns and the like will become more attractive to smaller retailers with cheaper backhaul.

ACCC chair Rod Sims explained that the regulator used prices on contested routes (such as Sydney-Melbourne, served by Telstra, Optus, Nextgen Networks and TPG) as benchmarks for routes lacking in competition.

“The ACCC’s draft decision will see prices for regulated routes, on average, follow the downward trend we have seen on more competitive routes”, he said.

The lower price for declared services will also put to rest speculation that nbnTM might build its own PoI backhaul in competition to existing long-haul fibre.

Unless, of course, the whole idea gets swept up in Turnbullnomics and spiked, on the basis that lower prices are bad for consumers. ®

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