ISP lashes out against Telstra's $6.5m fine

Melbourne-based ISP, Primus Telecom, has slammed the Australian Competition and Consumer Commission's decision to drop its anti-competitive notice against Telstra, claiming the alternative $6.5 million fine will not stop the telco from re-committing the offence.

Earlier this week, the ACCC opted to abandon court action against the telco, ruling that its latest broaband pricing amendments were enough to ensure rival ISPs could compete on a level playing field. The decision followed 12 months of investigations into its wholesale and retail rate cards.

The competition notice was issued last March after the telco slashed entry-level retail broadband plan to $29.95 a month.

According to the industry watchdog, ADSL wholesale prices were lowered by at least 30 per cent in the past year. It had also introduced metropolitan prices to regional areas.

Instead of going to court, Telstra will now repay its wholesale customers $6.5 million in compensation. This figure lies in stark contrast to penalties under the competition notice, which ranged up to $10 million for each contravention and $1 million per day while anticompetitive practices continued.

Primus regulatory affairs manager, Ian Slattery, hit out against the figure, claiming it was the equivalent of a "parking fine".

"Given the damage that Telstra's conduct caused the industry as it reaped outstanding benefits, the $6.5 million it now has to pay could be characterised as an excellent investment," he said. "This barely covers our cost in providing information to the commission. It's nowhere near the damage caused to the industry."

Telstra's head of regulatory affairs, Bill Scales, agreed the rebate was a small price to pay, but insisted it had never tried to act in an anti-competitive way.

Slattery said Telstra should have been taken to court and penalised.

"It is clear to us that these deterrents to the current regime are ineffective in dealing with this conduct," he said. "What is that figure compared to $2.4 billion in half-yearly profit?"

Furthermore, he claimed only a major overhaul of the regulatory regime would be enough to ensure anti-competitive behaviour stopped.

"It took them a year to get to an acceptable price," Slattery said. "They had a 12 month head start on competition - the industry can't be sustained on this."

However, iiNet managing director, Michael Malone, said he found the ACCC's decision to be a positive one, and was satisfied with the outcome.

"Telstra has reduced wholesale rates over the past year and, having built our own equipment over the past year, we now have fewer customers on Telstra DSLAMs in any case," he said. "From an industry point of view, I believe the ACCC has handled this particularly issue extremely well. The prompt issuing of the competition notice last year was risky for the regulator at the time, but has been managed well and a good conclusion has been reached."

Another key factor in the ACCC's findings was its insistence that Telstra provides up to 15 days notice before changing any of its pricing structures. This safeguard would give it a reasonable amount of time to investigate any suggested changes, the commission said.

Malone agreed three weeks was a reasonable timeframe for the industry.

But Primus' Slattery said the mechanism did not prevent Telstra from going ahead with price changes even if these were considered anti-competitive.

"With a 12-month delay and a $6.5 million fine - what disincentive does Telstra have not to do this?" he said.

For Malone, the ACCC should now be focused on assisting those ISPs looking to build their own broadband networks.

"This includes the price of access to the raw copper line, but also non-price issues such as the connection and disconnection fees, the cost of transferring customers, and exchange access fees," he said.

Sandra Rossi contributed to this report.

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