Australia On Line Media Release 21 December 2010

"ACCC and NBN raise barriers to rural Internet."

"The ACCC has forced a redesign of the NBN that will reduce the number of Internet Service Providers that can service the bush, ring fence the market power of larger fibre asset owning ISPs and so increase the price of Internet access in the bush" said Michael Bethune, CEO of Australia On Line Pty Ltd.

"I can't imagine how the ACCC could more starkly contradict their statutory obligations to promote competition or more effectively subvert the explicit objectives of Government policy than this."

"How is it possible, that at the same time the Government is investing $30 billion plus to provide equity of access to the Internet from the bush and the city, the ACCC works to diminish the level of retail competition in non-metro areas?"

The ACCC has forced a redesign of the NBN, requiring that an ISP connect to 120 mandatory points around the country to provide national coverage rather than the originally planned 12 points .

"The ACCC has forced the NBN to increase the number of points we have to connect to by a factor of 10 just so we have to use Optus' fibre to get there, at the same time as the Government is depriving Telstra retail of their fibre assets through structural separation. Nice" exclaimed Mr. Bethune.

"This dramatically raises the investment required for an ISP to provide national coverage. It also raises the barriers to entry for rural competition. It will inevitably result in less retail competition in less populated rural areas where ISPs get less bang for their investment dollar." said Mr. Bethune.

"This is just Back to the Future. Again it will be in the financial interest of companies such as mine to service densely populated metro areas, leaving the rural areas with less competition, inevitably higher retail prices and less service. I hardly think this is what the Government wants but it is certainly what the ACCC is on track to provide."

"It's surreal that a competition regulator, would be the ones to entrench barriers to competition like this" said Mr. Bethune.

"Supposedly this policy is intended to maintain competition for fibre providers and yet in doing so the ACCC is directly contradicting the explicit objective of Government policy to enhance retail competition and provide comparable levels of competition between the city and the bush."

"I'm not sure that the ACCC properly appreciates that the primary objective of the NBN is to minimise retail cost by maximising retail competition, not maintain a place in the sun for fibre asset owners."

"Is this really what the Government and the ACCC want to achieve? Spend $30 billion plus just to maintain inequity of competition between city and the bush?" said Michael Bethune.

"Further, by increasing the benefits gained from fibre assets which are used to connect to the multiple points around the country, the NBN will entrench the advantage of vertically integrated players with infrastructure assets over those without."

"The ACCC argue that this advantaging of infrastructure players over non-infrastructure players will maintain competition in the telecommunications industry, a bizarre claim", said Michael Bethune.

"How is it that Telstra's vertical integration is seen as such an impediment to competition that Telstra is being cut in two, and yet the vertical integration of other players is being protected and the advantages of such integration is being amplified and by the regulator themselves!".

"It looks to me like the second level player in this country has done a fabulous job of convincing the ACCC that their blatant commercial interests are in fact a competition policy worthy of the ACCC's support. Breathtaking."

"In direct contravention of the ACCC's statutory obligations, it is raising barriers to entry for smaller ISPs, consequently restricting the level of retail competition and enhancing the market power of some larger players" Michael Bethune concluded.

Michael Bethune is CEO of Australia On Line/Lizzy and has operated retail Internet providers since 1993.