- What Naked DSL is, and what it isn't
- How it would eat into Telstra's long term strategy
- NBN would make the conversation moot - but Telstra might contibute to a delay if they don't get their way
This week, the Australian Competition and Consumer Commission (ACCC) has started the painful process of getting Telstra to offer Naked DSL links to its wholesale customers – that is, fixed copper line connections with no standard voice service attached, at a lower price to a bundled line.
The response from the telco giant was uncharacteristically panicked, with an implied threat that the work needed to provide such a service would pull attention away from Telstra’s deep involvement with the rollout of the National Broadband Network (NBN), adding delays to the politically tenuous project.
Putting aside the knuckle biting frustration that comes with any Telstra game-playing, it’s worth going over again exactly what Naked DSL is, what it isn’t, and why Telstra might be so reluctant to engage with such a model.
Note: This is a thorough guide to a complex, frustrating product. Nutshell –Naked DSL through any provider is about the same price as a bundled phone + internet plan, and it takes longer to set up. If you just want to use a good strong ADSL2+ connection without having a phone service, most customers would get the exact same outcome from taking a bundle and never plugging in a handset.
1. Alphabet Soup
Let’s get this out of the way first.
DSL = Digital Subscriber Line. This refers to any technology using a standard copper telecoms line to provide a high speed internet connection. Asymmetric (fast downloads, slow uploads) is the most common available (ADSL, ADSL2+). Other configurations can be Symmetric DSL (SDSL), Very fast DSL (VDSL) and Naked DSL.
PSTN = Public Switch Telephone Network. Also called Plain Old Telephone System (POTS). If you don’t know, this is roughly what it looks like:
Inter Exchange Network – Exchange – Telstra Pit/Pillar – Utility Pole/Underground cable – House
CAN = Copper Access Network. Also called the ‘Last Mile’. Most of the last link to individual homes is a length of copper wire. This is all owned by Telstra (more or less).
Twisted Pair = each line is made up of two thin gauge copper wires twisted around each other, originally to provide redundancy. All DSL technologies rely on activating one of these lines with a high frequency data connection, while the other line remains active with a low-frequency voice service (ADSL) or dormant (Naked DSL) or both are activated with high frequency data signals (VDSL).
2. Understanding line rental
Every Internet Service Provider (ISP) has to buy access from Telstra to link to your home from the exchange. This is called line rental, and because your ISP isn’t providing it themselves, they have to itemize it separately on your bill. Line rental may as well be called ‘Telstra Bundled Line Rental’.
Telstra sells this access as a bundle to your ISP, carrying both the phone and internet signal, for about $24 a month. The ISP then passes this charge on to you, usually for around $30 (or a 25% retail markup).
Telstra’s back-end system was originally built with the voice service in mind. It treats the ADSL connection as an add-on to the voice service. So the voice service can be said to have hierarchy over the internet connection.
So, in short – you MUST have an active Telstra line to get an ADSL connection into your home. Telstra provide a phone service as part of this – YOU REALLY DON’T HAVE TO USE IT. Don’t mistake the ‘line’ for the ‘service’.
3. What Naked DSL is, and what it is not
Gross! I can see its insides (credit: canofworms)
In simple terms, Naked DSL is a connection along a copper landline with no associated phone service, and with no line rental to pay. That tells exactly half the story. Let’s log this definition in our heads.
A Naked DSL provider essentially buys a copper line, kit and caboodle from Telstra Wholesale. They then provision that line however they want, and that means with broadband only. The result is a slightly faster connection, thanks to the lack of electronic ‘cross talk’ from the now-dormant voice line.
So far, our original definition checks out. Copper landline? Check. No Associated phone service? Check. No line rental to pay? This is where it gets hairy.
You’re not paying for something called ‘line rental’, but you are still being charged for use of the line. The difference is that you, as a customer of your ISP, are not ‘renting’ the line. Your ISP ‘owns’ the line, and charging you directly. It’s not that there’s no line rental fees, there’s no fee called ‘line rental’. Confused? Here it is in simpler terms:
Super Happy Bundle Plan! - $50/month + $30 Telstra line rental, $80 Bundle!
Super Happy Naked DSL Plan! - $80/month!
4. Optus Wholesale
Optus Wholesale is the only real provider of Naked DSL in this way, because they came along at a time when you could actually buy copper lines off Telstra, and own them for yourself. For the likes of iiNet, Internode, iPrimus and TPG, their Naked DSL is something of a fabricated simulacra of this connection (though some of them will get their line from Optus Wholesale).
But whatever background technical chicanery is used, the end result is the same – Naked Plans eliminate ‘line rental’ in a legal sense, not a financial one. The costs remain the same. It’s mainly there to provide a solution for customers who insist on not having a telephone service – a condition it meets, even if the customer would be just as well served by getting a bundle and not plugging in a telephone handset.
Note- some customers will need the line stability and slight speed boost that comes with Naked DSL. But it can be hard to get, and for most customers the difference is negligible.
5. Telstra’s zany universe
Telstra has to stick with the fiction that a PSTN landline telephone service is still a must-have item, because a) they make a ridiculous amount of cash off it and b) see previous answer.
This leads to hilarious consequences – on both Telstra’s Cable and NBN plans, Telstra requires that you bundle in a copper telephone landline as well – even though it has nothing to do with how the connection is made! Even on their NextG/3G mobile broadband service, they punish you with steep prices if you don’t have a Telstra landline as well.
Telstra banks heavily on customer ignorance. They know that most people have little clue about the vagaries of providing a line. If a customer is told they must have a voice service, regardless of whether they’ll use it or not, they’ll eventually use it. This shows up in Telstra’s price plans – customers opting for cheaper line rental with Telstra are punished with very high call fees, making it easier to talk them into higher line rentals with free calls included.
That’s all well and good on the retail side of things, because the free market should sort that out, right? If Telstra’s plans are ridiculous, people will just go to another provider, right?
But Telstra is a wholesaler as well. They provide half the connection for everyone, and in most rural and regional areas, they provide the rest of the connection as well.
6. The problem of vertical integration
If you live in Blackheath, NSW (100km from Sydney, pictured above), you’ll quickly find that calling around for an internet connection results in the same price from everyone. TPG offers unlimited internet for just $30; but you call and get told you can get 200GB for $60. Dodo promises $40 – no bundling required! Sorry, $88, and only when bundled. At this stage, you may as well go with BigPond’s offer, which is $90.
That’s because the only wholesaler out of the Blackheath exchange is Telstra Wholesale. TPG, Dodo, iiNet, Internode, iPrimus – everyone is buying a full connection from Telstra here, and the wholesale price is roughly the same for everyone. And to make it even more galling for these other providers, the wholesale price tag is almost the same as BigPond’s retail one: making it impossible to compete on price.
You’d like to think Telstra’s Wholesale division is guided by the market, and not by the need to boost revenue for BigPond, their retail division. After all, other wholesalers can do it – notably Optus, who offer wholesale mobile access to several competitors who drastically undercut their own retail Optus Mobile plans.
But alas, Telstra Wholesale seems inexorably bound to the fortunes of Telstra Retail. If it weren’t, Telstra Wholesale would offer a Naked DSL connection as part of its wholesale offering- Australians are dropping landline phones as fast as they can, thanks to generous mobile plans. If Telstra Wholesale were independent, they’d offer a Naked broadband connection, at a cheaper price, to meet these customers.
For customers who are dead-set against paying for a landline (and not willing to reason through the need for it with a patient customer service rep), then the answer is easy- Mobile Broadband! And after languishing on Optus or Vodafone’s 3G network, where do they end up? In the loving arms of Telstra’s expensive (but definitely superior) NextG/4G network.
Long story short – if customers were allowed easy access to a Naked DSL link, anywhere in Australia, they’d take it up in droves. But Telstra would lose incidental landline calls made by lazy/confused consumers, AND the trickle of customers trying their luck with Mobile Broadband who eventually come to Telstra.
7. The regulator comes-a-knockin
Earlier this year, the ACCC declared Telstra’s wholesale price sheet, meaning that all wholesale prices had to be the same for every customer, regardless of whether that customer (like Internode, iiNet and Optus) competed for the same family market segment that Telstra does, or whether they’re a bargain ISP who pose no threat to Telstra (Dodo, TPG, Exetel). Telstra had no counter argument.
When the ACCC came this week to force Telstra’s hand to offer Naked DSL, Telstra really had no argument there either. They can’t say “this would cut into BigPond and Telstra Mobile’s bottom line’, because that’s a violation of the agreement that vertically integrated quasi-monopolies are allowed to operate under. They couldn’t argue that people didn’t want Naked DSL, because the figures are clearly against that.
So instead, Australia’s largest and supposedly most advanced tech firm said ‘we can’t do it, too hard’. When pressed, they said ‘our systems are too old and changing it would distract us from the NBN”, which is basically a coded way of saying ‘take away this from us and we’ll find a way to delay our part in the NBN just long enough for a new government to come in, declare it too expensive, and hand over the full reins to us”.
The ‘too difficult’ is also hard to swallow when you consider that every other ISP has found a way to cobble it together, even in the face of Telstra’s curvy restrictions. Somehow, Telstra is convinced that people will buy the line that Telstra is too confusing even for Telstra.
Telstra won’t budge on wholesale Naked DSL offerings. It threatens their current business model too much. They’ll delay until the NBN comes in and makes the whole discussion moot, at which time they’ll switch gears to suit their own needs.
In the meantime, the current Naked DSL offerings from Optus, Internode, TPG, Dodo et al will continue along in its hobbled state until the NBN makes that redundant as well. But at least these providers will already have a reputation for providing just the services people are asking for, and not forcing 3rd line products they’ll eventually use despite their own efforts to limit their exposure to high call costs. With any luck, these same people will remember exactly what Telstra’s all about and let them know their displeasure with these tactics, by ignoring the big T altogether.