UPDATE | A new consumer action group called Digital Tasmania (DigiTas) has been created, whose first goal is to "Get Basslink Going!" You can visit its website here.

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Internode has become the latest ISP to reduce service offerings in Tasmania due to lack of affordable backhaul to the state.

"Currently, broadband backhaul capacity across Bass Strait is limited to a monopoly supplier, Telstra", said Internode. "As a result, it is six times more expensive for Internode to transfer data between Melbourne and Hobart than it is to move data between Melbourne and the United States."

Internode will continue to offer its high end SOHO and Business ADSL2+ plans, but will not offer Home ADSL2+ or 8Mbit/s plans to new customers in Tasmania from Tuesday. Netspace made a similar move, but eventually resumed selling high speed plans in the state. It has however placed its ADSL2+ plans on hold for Tasmania.

But the issue could have been avoided if the Basslink optical fibre cable had been lit up. The cable began carrying electricity for the national power grid in early 2006, but negotiations between involved government and commercial parties on activating the network portion of the link have not produced an outcome.

The demise of OPEL has meant a potential third link to Tasmania has been scrapped, but Netspace told Australian IT that this was a good thing. "We don’t need three links into Tasmania, we just needed one that wasn't Telstra", it said. "That's already built and that's Basslink."

But even the new Singapore owner of Basslink has doubts about the commercial viability of the link, believing Telstra could use predatory pricing. CitySpring told Australian IT that even if terms could be agreed between parties, "the incumbent operator, Telstra, may react to competition by reducing its current rates, thereby eroding the margins expected by the winning bidder. Accordingly, there is no assurance that any increased telecoms revenue from the commercialisation of Basslink’s fibre optic telecommunications cable will materialise."

Internode also fired a shot at the Federal Government's current national broadband network tender, believing that Tasmania's backhaul issue offers an example of Telstra's behaviour when it owns the only network infrastructure around. "It underscores the potential for national retail broadband prices to rise, should Telstra construct a monopoly-owned FTTN network", said Internode managing director Simon Hackett.

UPDATED | The ACCC is poised to allow Telstra to stop reselling landline phone services at set rates to competitors in certain areas.

Telstra originally requested exemption from its obligations to wholesale voice services in 371 exchange areas in July last year, as it believed sufficient infrastructure competition existed.

"These obligations date from before Telstra's competitors had their own infrastructure", said Telstra. "Now that our competitors have their own infrastructure in place, this kind of regulation is redundant.

"An exemption means that the prices for these wholesale services will be set through commercial negotiation, not through bureaucratic oversight."

But the ACCC has not given Telstra all it wanted. "The exemptions proposed by the ACCC are not as broad as that requested by Telstra", said the ACCC. "The proposed exemptions cover approximately four million of Telstra's copper lines – over half of Telstra's lines in metropolitan Australia."

The ACCC believes that competitors will instead use Unconditioned Local Loop (ULLS) to offer voice products, with the exchange areas it proposes having "14,000 or more addressable services in operation or four or more ULLS-based competitors (including Telstra)."

The exemption would be granted on the condition that ULLS continues to be available, and would be suspended if an exchange was to become "capped" due to space restraints.

But Telstra competitors attacked the proposal, saying that "a loss of competition, higher prices and poorer services would be the inevitable result". The Competitive Carriers' Coalition said that the ACCC "has produced an illogical, ideologically-driven decision that will give more market power to Telstra, already the most powerful company in any market in Australia."

The CCC specifically complained about Telstra's so-called "blocking" of access to exchanges, and didn't think they would be solved within 12 months. The CCC also said that any new equipment that telcos invest in "will be made obsolete from next year when the Government’s proposed national broadband network is rolled out.

"This means competitors are being forced to either spend money that they will have to write off at a loss, or else withdraw services from some customers. If they don’t, Telstra will simply be able to cut off their access to these customers."

The ACCC is requesting input from the industry on its draft decision, which if finalised would take place over a 12 month transition period.