Netspace cuts Tassie broadband plans

Internet service provider Netspace has stopped offering top-end broadband plans in Tasmania, claiming Telstra's price hike for Internet traffic haulage to the mainland was too costly.

"We launched our 8Mbps plans on Tuesday. But we haven't made them available in Tasmania, and simultaneously we've stopped selling our 1.5Mbps services down there," Netspace spokesperson Ben Dunscombe told ZDNet Australia via telephone this afternoon.

The executive claimed Netspace's move this week was the eventual result of Telstra raising its prices some six months ago for so-called "backhaul" to the mainland. Those price rises hit third-party backhaul providers who in turn passed the cost on to Netspace.

"The effective price of that backhaul has essentially gone up four-fold," Dunscombe said. "And Tasmania was already significantly more expensive than anywhere else in the country."

Netspace had swallowed the costs until now, but could no longer afford to do so. "If we were to pass on the cost to the customer, an average 512kbps plan which costs AU$35 to $40 a month now, would increase by an additional AU$80 to $90 a month," he said.

Not guilty
But Telstra spokesperson for Victoria and Tasmania Patrick O'Beirne told ZDNet Australia that Netspace was pointing the finger at the wrong telco.

"It's peculiar that Netspace is blaming Telstra for its failure in Tasmania, given it buys its transmission from another provider. In fact, Netspace has not obtained its transmission to Tasmania from Telstra for at least four years," O'Beirne said. ZDNet Australia could not contact Netspace for immediate comment.

He added Telstra was not the only wholesale backhaul provider to Tasmania. "Although we own the infrastructure, we sell capacity to a number of companies who then -- taking advantage of volume discounts -- wholesale services to others".

O'Beirne said Tasmania offered telcos particular challenges. "The costs of providing services to Tasmania are greater because it involves maintaining undersea cabling, as well as the fact that the volume of usage is law, meaning unit costs are high," he said.

Not on speaking terms
Netspace and other tier-two telcos such as iiNet and Internode have long complained about what they see as prohibitive pricing on Telstra's backhaul services.

In the Tasmanian case, moves are afoot by the state government to activate another undersea cable, increasing backhaul competition.

Earlier, Dunscombe said he interpreted Telstra's price rise as a move to drive customers to the giant telco's retail arm BigPond.

He said Netspace had been hit by the price rise first due to its claimed position as the second-largest ISP in the state behind BigPond. "The other providers are just steps away from this themselves," he said, predicting other ISPs would eventually follow Netspace and cut services to the island state.

Netspace would likely seek relief from the Australian Competition and Consumer Commission, as others such as iiNet have done on similar issues, he added.