Telstra-OzEmail deal "bad news" says Budde

The proposed Telstra-OzEmail merger would be 'bad news' for Australian consumers says telecommunications analyst Paul Budde.

The proposed Telstra-OzEmail merger would be "bad news" for Australian consumers says telecommunications analyst Paul Budde.

In a statement yesterday Budde said the merger would reduce competition in Australia's national Internet access market to just one major player: Telstra. OzEmail and Telstra, with more than 400,000 customers each, are easily the largest ISPs in Australia - both well clear of the second tier of Optus and TPG with around 100,000 each. At the other end of the market are around 700 small ISPs, many with around 1000 customers each.

"From a competition point of view the top ten ISP companies are the ones that matter in the national access market," says Budde. "In the current situation they are all still able to expand their role and have sufficient mass to create vigorous and effective competition.

"With a merged Telstra approaching the one million subscriber mark and the next competitor with around 100,000 there is very little chance of any of the others providing sufficient competition - the gap between the merged Telstra and the rest would simply be too great."

Budde says Telstra "is not noted for vigorous competition, or for market leadership. You only have to look at its role in high-speed Internet - Telstra's cable modem service is far too expensive, its ADSL service is still a year away and its ISDN service is grossly overpriced. If this is an example of its behaviour under the present conditions - where at least a certain amount of significant competition exists - I do not hold out much hope for the prospects under the proposed merger."

Budde says MCI WorldCom, OzEmail's current owner, is now set to leave the list of "potentially strong competitors one by one leaving the Australian consumer market. AT&T was the first company which, after thorough investigation, decided not to enter it. Both British Telecom and Global One started in the market, but retreated after ongoing commercial and regulatory problems with Telstra."

Budde says the business Internet market, in which MCI WorldCom wil stay, is "far more competitive" and "can look after itself."

Budde welcomes the "quick reaction" from the Australian competition watchdog the ACCC in examining the merger proposal and expects that the ACCC will either prevent it or put stringent conditions on Telstra, including open access for ISPs to Telstra's broadband networks to deliver high-speed Internet access.

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