ACCC drops wholesale broadband access prices, but don’t expect cheaper retail prices

The Australian Competition and Consumer Commission has lowered the price of wholesale broadband but the decision may not result in retailers lowering charges for end users, one expert has said.

The move comes as the National Broadband Network has upped its forecasts for connections this year, with another 200,000 homes expected to be connected by the end of the year.

The ACCC announced yesterday that it would provide discount wholesale fees during a one-year interim determination. That determination will be in place before a five-year declaration is made later in the year.

This determination sets the price at which retail service providers can access Telstra’s DSLAM equipment where that company has not used its own equipment.

The decision could potentially cause Telstra to lose several million dollars’ in revenue.

But Telsyte director of research consulting, Chris Coughlan, told SmartCompany this morning it’s not necessarily true that everyone will start enjoying cheaper broadband – especially as businesses have been migrating to their own equipment over the past few years.

“They probably won’t reduce prices, mainly because ISPs have been leaving Telstra left, right and centre, and migrating to their own equipment.”

“I think lowering the price just allows them to be competitive with their existing pricing, but I don’t expect it will create much lower retail prices, regardless of how much they’ve been lowering it.”

However, the ACCC did say in its statement that it decided to make the changes as “despite the deployment of competitive infrastructure in some geographic areas over the past decade, on a national basis, competition for the supply of wholesale ADSL services is not effective”.

As such, the change is likely to affect ISPs providing services in areas where Telstra remains the only provider, such as rural areas.

Telstra has criticised the decision, saying it doesn’t believe current market conditions warrant a change. Competitors, including Optus, have said it’s a good move.

“The ACCC considers that this will promote the long-term interests of end-users of fixed-line broadband internet services throughout Australia,” it said in a statement, with chairman Michael Schaper saying end-users could have greater access to competitive-fixed line offerings.

Coughlan disagrees.

“It might create a little volume in some areas, but overall I don’t think this is going to reduce any pricing much at all.”

This determination also sets out the rules for access during the next 12 months as the ACCC completes an inquiry on wholesale ADSL access. These new prices will come into effect during July, as contracts begin to expire.

The current charge is $30 per user in metro areas and $37 per user in rural areas, but this has dropped to $25.40 and $30.80 respectively.