ACCC nips at heels of the broadband barons

By PETER GRIFFIN

When Australian Communications Minister Richard Alston says Aussies are getting "screwed" when it comes to high-speed internet access, New Zealanders will know what he's talking about.

Australia's toothy competition watchdog, the Australian Competition and Consumer Commission (ACCC), has signalled it will take a closer look at Telstra's grip on the market for high-speed internet, looking in particular at the way the country's biggest internet provider manhandles its smaller competitors.

That proposed investigation and what it dredges up should be watched with interest from these shores, where Telecom's internet provider Xtra has a similar stranglehold on the market for dial-up and broadband services and smaller players struggle to resell Telecom's high-speed Jetstream product on wafer-thin margins.

In particular the ACCC will look at the issue of network "peering" - a process in which similar-sized telcos work out contra deals that generally involve them waiving fees for traffic passing on to each other's networks.

Telstra has only just joined the peering club as the internet traffic it sends around the United States comes more in balance with traffic the telcos send to Australia.

Now Alston wants the benefits of those fee reductions or waivers passed on to the entire industry through Telstra's domestic peering deals with its competitors.

On a domestic level, peering isn't such as issue for New Zealand telcos and internet providers. Our internet traffic passes from network to network, generally without money changing hands anyway.

But when we go international the economics of peering start to make an impact.

Small telcos such as CallPlus and Worldxchange may lease their own bandwidth capacity on the Southern Cross Cable, but they still have to connect to other networks as they send traffic around the world. They don't get nearly the same deals from the WorldComs and AT&Ts of this world that Telstra and even Telecom enjoy and therefore can't undercut Telecom on price at a sustainable rate.

Telecom has long maintained that our position at the bottom of the world away from the information centres is a barrier to slashing broadband pricing.

But its cost structure means it will always be the only local player that can make a buck out of selling broadband unless something revolutionary happens.

So what will lead to lower pricing? Competition. TelstraClear, which shares in the benefits of its parent's peering status, is understood to be developing its own flavour of copper line-based broadband to compete with Jetstream. With greater enthusiasm for wholesaling, it may offer the incentives to internet providers that finally kick-start broadband take-up.

Wholesaling discounts imposed by the commission or a review of local loop unbundling may throw up more would-be scenarios for making the broadband market more competitive.

One thing is clear. Baring incisors compared with our Commerce Commission's worn old molars, the ACCC is shaping up to be Australia's broadband watchdog.

And right now its gaze is firmly on Telstra.