Telstra's dominance in the Australian market means that we all pay more for our bandwidth than we should, according to peering company CloudFlare. Image: Telstra boss David Thodey (Photo: Getty Images)
In a blog post, CloudFlare CEO Matthew Prince runs down the relative costs of peering arrangements that CloudFlare pay around the world. In it, he notes that
Australia is the most expensive region in which we operate, but for an interesting reason. We peer with virtually every ISP in the region except one: Telstra.
Why not Telstra?
Telstra, which controls approximately 50% of the market, and was traditionally the monopoly telecom provider, charges some of the highest transit pricing in the world — 20x the benchmark ($200/Mbps). Given that we are able to peer approximately half of our traffic, the effective bandwidth benchmark price is $100/Mbps.
To give you some sense of how out-of-whack Australia is, at CloudFlare we pay about as much every month for bandwidth to serve all of Europe as we do to for Australia. That’s in spite of the fact that approximately 33x the number of people live in Europe (750 million) versus Australia (22 million).
If Australians wonder why Internet and many other services are more expensive in their country than anywhere else in the world they need only look to Telstra. What's interesting is that Telstra maintains their high pricing even if only delivering traffic inside the country. Given that Australia is one large land mass with relatively concentrated population centers, it's difficult to justify the pricing based on anything other than Telstra's market power.
Telstra's denied the claims, telling ZDNet that the claims made by CloudFlare "are overstating our charges by a factor of ten".