ACCC slaps competition notice on Telstra

The Australian Competition and Consumer Commission has issued Telstra with a competition notice, opening up the opportunity for the telco’s wholesale partners to seek damages and compensation from the company.

Telstra’s wholesale partners have indicated so far, however, that they would rather see the problem solved through negotiation than have to resort to seeking damages in a courtroom.

The ACCC has been investigating Telstra’s pricing strategy since mid-February when the telco announced aggressive retail broadband plans starting at $29.95 per month. Telstra set new retail prices across the board at levels that its wholesale partners claim they cannot compete with.

“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," said ACCC chairman Graeme Samuel.

The ACCC expects Telstra will urgently seek negotiations with its wholesale partners to adjust pricing and reach a competitive wholesale rate structure. “In further assessing Telstra’s conduct, the ACCC will be examining any new pricing offers,” Samuel said. “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.”

The serving of the competition notice allows ISPs affected by the anti-competitive behaviour to seek damages and compensation while the notice is in force, the ACCC said. The ACCC is also able to seek penalties from Telstra through action in the Federal Court. The maximum penalties for contraventions of the competition rule includes $10 million for each contravention and $1 million for each day the anticompetitive practice continues.

Yet despite the official notice, iiNet managing director, Michael Malone, said the ISP had no intention of taking legal action against Telstra for damages.

"Our immediate objective will be to revisit the wholesale pricing for ADSL, in light of this notice," he said. "I have not yet seen the text, but from what I understand, it's a little vague on detail. We'll be back talking with Telstra again, but until I see the notice, I'm not sure what the guidelines will be."

Malone said iiNet's current objective "will be for Telstra to restore the same sort of gap between their retail price and wholesale cost that existed prior" to the introduction of its $29.95 retail price point.

WestNet managing director Peter Brown said the Perth-based ISP was also against taking legal action "at this stage" due to its "positive working relationship" with Telstra Wholesale.

Managing director of ISP NetSpace, Stuart Marburg, said he hoped to reach a satisfactory outcome with Telstra Wholesale before considering damages claims.

“We are quite encouraged by the ACCC acting so swiftly – it’s a pity Telstra needed the regulator to step in,” he said. “We just hope that we don’t have to go to the courts to get a satisfactory outcome.”

If no satisfactory outcome could be reached, Marburg said the next step would be for the ISP to try and quantify the damage caused by Telstra’s anti-competitive behaviour. It would take some time, he said, to work out what affect Telstra’s behaviour has had on the ISP.

Pacific Internet managing director, Dennis Muscat, is also cagey about taking action against Telstra.

“We would have to take a good look at the notice,” he said. “We have always had the policy that it is better to negotiate in good faith with your suppliers than take action. I sympathise with Telstra Wholesale – they have done a good job of creating a viable business for ISPs and they have been stymied by whoever it is at BigPond that makes these decisions without considering the wholesale business.”

Muscat said he was more concerned about bringing parity back to the market than seeking damages.

“Whether we lost money or not is not the fundamental issue,” he said. “If we have to go to court to get equity, this industry is in a bad state. It is symbolic of the dysfunctional family that is Telstra.”

As well as changing the current pricing structure, Muscat recommended that Telstra Wholesale be separated legally from the retail business (at the moment it is separated only in terms of accounting).

“We have one person – currently Bruce Ackhurst – in charge of both businesses,” he said. “How can there be any objective decision-making?”

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