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ACCC issues advisory notice to Telstra over Bigpond broadband plan.



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Australian Competition and Consumer Commission

Attn: Telecommunications writers

ACCC issues advisory notice to Telstra over Bigpond broadband plan "The Australian Competition and Consumer Commission has issued an Advisory Notice* to Telstra in relation to the pricing of Telstra’s broadband internet service", ACCC Chairman, Mr Graeme Samuel, said today.

The Notice follows Telstra's recent announcement of a retail price drop for its broadband plans. The ACCC has received a large number of complaints that these prices are below Telstra’s wholesale rates for the same services. The ACCC is expediting its investigation of whether Telstra's pricing amounts to anti-competitive conduct in breach of the telecommunications specific provisions in the Trade Practices Act 1974.

"The ACCC is very concerned that Telstra's price drop for its retail price was not matched by a similar reduction in its wholesale price for similar services", Mr Samuel said. "Competitors of Telstra's BigPond broadband service, who buy wholesale broadband services from Telstra, complained to the ACCC that without a reduction in Telstra's wholesale rate, it was impossible to match Telstra's new low price on a sustained basis. The inability to compete, especially at the important entry level end of the market may also ultimately foreclose more sustainable access-based competition at a vital stage of broadband growth in Australia".

The ACCC was only advised of Telstra's new retail prices very shortly before they were announced publicly, less than two weeks before they were planned to come into effect on Friday 27 February 2004. It has issued an Advisory Notice while it continues to investigate whether Telstra has breached the Act with the aim of preventing the irreparable damage to competition that anti-competitive conduct may inflict. The Advisory Notice advises Telstra of the action it should take in order to ensure its does not breach s.151AK of the Act. Section 151AK of the Act provides that a carrier or a carriage service provider must not engage in anti-competitive conduct.

In the Notice, the ACCC has advised Telstra to reduce its wholesale prices to a level below Telstra's retail prices that would allow Telstra's wholesale customers to provide retail broadband services at prices which do not substantially hinder or prevent them from competing with Telstra.

"This notice is a strong warning to Telstra to change its conduct so as to avoid any contravention of the competition rule. A reduction in Telstra's wholesale prices will facilitate increased competition among broadband providers with the end goal being lower prices and better deals for consumers in the long term. The Advisory Notice does not preclude the ACCC from issuing a competition notice or taking such further enforcement action as it considers necessary. Telstra will need to closely consider whether it implements its planned retail price reductions, or alternately reduces wholesale prices for its competitors".

The Advisory Notice is effective immediately and will apply unless revoked by the ACCC.

Apart from the competition concerns, the ACCC is also very concerned about the impact on consumers of the megabyte usage limits on many broadband plans. For instance, under Telstra's $29.95 per month plan, consumers are allowed to use up to 200

megabytes per month, and will pay 15 cents for every additional megabyte.

"The ACCC is concerned that megabyte usage limits could be reached quickly, especially by consumers who are new to using broadband service", Mr Samuel said. "Consumers should beware of the substantial additional costs they could face for usage of their broadband service or for exiting the plan early before they sign-up on a long-term broadband plan".

The ACCC urges customers, particularly those new to high speed broadband services, to regularly monitor their usage. Before signing-up for a long-term contract, consumers may wish to consider that in the event of wholesale price reductions as advised by the ACCC, an increased range of retail offerings may become available to them.

Further information please contact Mr Graeme Samuel - Canberra, Chairman, (02) 6243 1129

Mr Ed Willett - Canberra, ACCC Commissioner, (02) 6243 1128

Ms Lin Enright, Director, Public Relations, (02) 6243 1108, (0414) 613 520

Release # MR 022/04 Issued: 25th February 2004

Links Advisory notice to Telstra - Broadband pricing (February 2004) - http://www.accc.gov.au/content/index.phtml/tag/AdvisoryNoticeToTelstraBroadb andPricingFebruary2004

Background

*Under section 151AQB contained in Part XIB of the Act, the ACCC may issue a written notice to a carrier or carriage service provider advising the carrier or the provider of the action it should take, or consider taking, in order to ensure that it does not engage, or continue to engage, in anticompetitive conduct.