iiNet sparks a spectrum review
Costs associated with spectrum sharing are set to become the next battle ground between Internet service providers and Telstra with complaints on the issue already before the Australian Competition and Consumer Commission.
Spectrum sharing is the term used to describe the situation where the incumbent, Telstra, owns the voice spectrum while another company owns the broadband spectrum.
iiNet managing director Michael Malone predicts the issue of spectrum sharing will become increasingly significant as companies such as iiNet, Optus and Primus roll out their own infrastructure.
Mr Malone made the comments following iiNet’s announcement that it would roll out its own broadband infrastructure across 32 exchanges throughout Australia.
The cost of the deployment is expected to be $2.6 million initially, which will be commissioned by October. A second deployment of the same size and cost will occur later this year.
The move means iiNet will be able to offer customers speeds of up to eight megabits a second, depending on line quality and their distance from an exchange. The highest speed currently available is 1.5 megabits a second.
Mr Malone said the new DSL infrastructure would provide improved service functionality and higher speeds at lower prices.
However, he said the current pricing situation was difficult with Telstra charging similar fees to connect to a service whether or not it owns the broadband infrastructure.
“The spectrum sharing price is almost the same as regular line rental from Telstra,” Mr Malone said.
“Telstra collects the $15, in addition to the line rental of $30 from the customer. So they are double dipping.”
However, Mr Malone said the “cost of the service is a marginal cost on a single line”.
“Telstra has projected 8,000 lines by the end of the next year to be spectrum shared,” he said.
“Telstra has got to their price of $15 because they believe very few customers will be connected to other carriers using spectrum sharing.
“iiNet has announced that it will have 11,000 customers connected by the end of this year, with more to come before the end of next year.
“Based on our estimates, we put the price at $2.80.”
Mr Malone said iiNet estimated there would be one million ADSL users by the end of next year and 10 per cent of those customers would be using non-Telstra services.
“Telstra charges a set up fee of $100 to connect to their service but Telstra is also charging a $99 connection fee even though the infrastructure is ours,” he said.
“It seems perverse that where we are using Telstra’s equipment we pay a fee and then when we are not, we pay a similar fee. It’s actually a higher fee when we are not on Telstra’s equipment.
“This is one of the areas that we think is appalling.
Mr Malone said iiNet had sent submissions to the ACCC but had not yet received a reply.
Australian Competition and Consumer Commission spokes-woman Lin Enright said the consumer watchdog had received a complaint from iiNet regarding the issue of spectrum sharing and was in the process of reviewing it.
Telstra spokesman Andrew Gaspar said “the ACCC is currently considering Telstra’s spectrum sharing undertaking and at any rate, the undertaking is a rack rate price.
“While we believe that $15 is reflective of our cost in providing the service, wholesale prices are negotiated commercially on an individual basis taking into account each customer’s volume and any term commitment,” he said.
