Internode: leave us, but it's not our fault

Internode's managing director Simon Hackett has said he understands that his company will lose customers to BigPond because the internet service provider's ADSL2+ broadband plans using Telstra ports continue to be more expensive than the telco's retail prices, but added that he isn't prepared to go broke selling plans lower than Telstra Wholesale's (TW) cost price.

(Squeeze if you feel pain image by Artotem, CC2.0)

In July, Internode and fellow internet service provider (ISP) iiNet lodged a complaint with the Australian Competition and Consumer Commission (ACCC) over a recent drop in price for a number of BigPond's ADSL2+ plans causing a "price squeeze". The drop in price meant that the cost for a retailer to gain access to an ADSL2+ port from Telstra Wholesale was more than a customer would pay on the average BigPond ADSL2+ broadband plan. In order to remain competitive with BigPond, retailers would effectively have to sell their broadband plans to customers at below cost price.

In a few lengthy posts on broadband enthusiast site Whirlpool yesterday, Hackett said that while the company was sad to lose customers to BigPond while it waited for Telstra to bring its wholesale price into line, he wasn't prepared to go broke by offering plans below the ISP's current cost price.

"Right now, we've adjusted our TW-based port pricing ... plans to be as good as it can be, given our current underlying costs from TW. Any lower and we'd be losing money on every new sale (and inward plan change) concerned, right now," he said. "We'll be in a position to revise our Telstra port-based plan pricing once TW provide a commercially acceptable revision to their source costs — something we continue to work with them toward them doing so, on a daily basis."

"In the meantime, if you feel that Internode value has got unacceptably worse on TW ports just because BigPond are temporarily 'better' and if you feel you must support the people responsible for creating this problem instead of Internode in this interim period ... that is entirely up to you, it's not up to us.

"We'll be sad that you leave, but we'll also completely understand — and we'll look forward to competing for your business more effectively again once the price squeeze is over," he added.

Hackett said Telstra had indicated that the wholesale price may be revised "soon", but there was no specific timetable given.

"We've been promised a commercially acceptable offer by TW 'next week' for the last several weeks. I'm personally optimistic that one of these 'next weeks' soon will be the one where that actually happens," he said.

For Hackett, there was only one way to avoid this situation in the future.

"An NBN [National Broadband Network], implemented properly (and without weakening the promised 'wholesale only, level playing field' aspect of it) holds out some hope for ultimately addressing that situation," he said.

Telstra spokesperson Craig Middleton told ZDNet Australia that the company was in negotiations with Internode, but was not interested in a public battle on what is a private and confidential negotiation.

"Broadband is a very competitive market and Telstra Wholesale is committed to making sure that its commercial offers are attractive to wholesale customers and competitive to the market," he added.