Telstra, watchdog in broadband spat


Telstra CEO Ziggy Switkowski announced a $26 million broadband "stimulus package" in Adelaide last month

CNN's Geoff Hiscock
Asia business editor

SYDNEY, Australia (CNN) -- Australia's biggest telco, Telstra, is under attack for what the nation's competition watchdog claims is its "anti-competitive conduct" towards wholesale broadband customers.

The Australian Competition and Consumer Commission said Thursday it had run out of patience with Telstra and a competition notice against the carrier was now in force.

The notice exposes Telstra to damages action from its competitors and potential fines in the Federal Court.

Telstra responded with surprise, saying the notice was "unnecessary and unjustified".

Telstra is majority owned by the Australian government. Like other telcos with long-established infrastructure, it sells spare capacity on its networks to resellers.

The dispute is over Telstra's treatment of its wholesale broadband customers and their ability to offer services that compete with Telstra's BigPond products.

Broadband allows faster Internet access than a dial-up modem service over an ordinary telephone line.

Put on notice

The ACCC said it had put Telstra on notice last year that refusal to provide services to its competitors so they could compete fairly would expose the carrier to penalties under fair trading legislation.

"It is disturbing that Telstra still has not offered the particular ADSL (asymmetric digital subscriber line) broadband technology that was requested by wholesale customers more than a year ago," ACCC chairman Allan Fels said in a statement to the Australian Stock Exchange Thursday.

Fels said this was particularly the case because Telstra's retail arm was using this technology.

"Telstra seems to be favoring its own retail business while continuing to delay services needed by its wholesale customers to enable them to compete with Telstra's retail business," Fels said.

Telstra has been criticized before about the slowness of its broadband rollout.

Industry analyst Paul Budde told CNN Thursday that all the growth in the Australian broadband market was in the residential and small business sectors, where Telstra had 99 percent of the market.

Residential penetration low

He said with residential penetration of only about 1.5 percent, Australia was way behind broadband leaders such as South Korea, with 70 percent, and Hong Kong, 50 percent.

"Even countries that regard themselves as doing badly with broadband have 8 to 15 percent residential penetration," Budde said.

"Everybody in the market is fed up with the delay. But now the government has indicated this month that broadband is in the national interest, so competition will be important," he said.

Budde said there was a large gap between the ACCC and Telstra, and any steps forward would be "by instalments".

At the World IT Congress in Adelaide last month, Telstra CEO Dr Ziggy Switkowski unveiled a $26 million stimulus package which he said was designed to move the Australian broadband market into the next phase of growth.

Telstra group managing director Bruce Akhurst said Thursday the telco hoped the ACCC had not intervened "without first properly understanding the technical issues it purports to be addressing".

"Until the ACCC can tell us what it requires, we will continue to engage directly with our wholesale customers and listen to their requirements," he said.

Telstra shares closed Thursday at A$5.31, down 9 cents or 1.67 percent. The broader market was 0.9 percent lower.