iiNet executive questions NBN Co's objectives

Murky wholesaling definition leaves ISP troubled

iiNet chief regulatory office, Stephen Dalby, has questioned the NBN Co's objectives and its role as a wholesaler at a Senate select committee on the National Broadband Network (NBN).

"We really need more information generally — not just us but the whole industry — about what ‘wholesale’ means," he told the hearing. "Whether the term used is ‘retailing’ or ‘wholesaling’, is it the supply of services to a large customer, whether that is a government agency. That needs some definition."

Dalby was asked by committee chair senator Ian McDonald whether the service provider was concerned about the future possibility that the NBN Co may become a retailer of Internet services.

"It concerns me that there is no clarity about the flexibility the minister is giving himself in order to say yes or no in that instance that is acceptable," he said.

Dalby questioned the role of a wholesaler, and what room it left for other players in the market.

"Does it mean you buy a big fat pipe, or does it mean that you have to meet certain conditions as a telecommunications company in Australia that is providing retail services to end users, rather than a large company buying services for its own purposes?" he said.

"It is a concern that there is lack of clarity in that area of the draft [NBN exposure bill], and that clarity has not improved over the last 12 months, I have to say. In terms of ownership, the concern that we have had is that NBN Co - and this really goes towards the question of ‘wholesale’ and ‘retail’ - should not be supplying to end users themselves."

NBN Co chief executive officer Mike Quigley denied any plans to retail services directly to end users.

However, the draft legislation currently includes a clause which, at Minister Stephen Conroy's discretion, would allow the company to sell directly to individuals.

Dalby used large corporations including Wesfarmers, Channel 10, Rio Tinto and Channel 7 as examples of large corporations who, under the muddy wholesale terms, could conceivably buy access directly from NBN Co instead of going through a retail service provider. The iiNet executive's concerns echo sentiments expressed by Vocus chairman David Spence, who said that such companies were potential new service providers under the NBN.

By contrast, telecommunications economist John de Ridder forecast fewer service providers under the fibre network due to slipping profit margins.

"If [NBN Co] is an independent company that has constraints about who it can supply to, then we really do not have a problem with who might be or might not be an owner," Dalby said.

Though the Australia Competition and Consumer Commission (ACCC) is slated to regulate access provisions put in place by NBN Co for the network, Dalby and other industry experts voiced their reservations about the watchdog's powers over commercial transactions.

"The current environment has enough room to drive a bus through most of those areas that talk about discrimination," he said. "The current regime really is dysfunctional and needs serious overhaul."

Dalby, along with Optus Director of Corporate and Government Affairs, Maha Krishnapillai, voiced particular concerns over negotiations between Telstra and NBN Co regarding discounted access pricing.

"It concerns me if the basis of the private discussions about a deal are just purely based on providing an incentive to someone to come into the camp," Dalby said.

Krishnapillai told the Senate hearing that the draft NBN access bill's equivalence arrangements "are very loosely defined and are well below the standard Optus and others have argued should apply to NBN Co".

"[In] taking a 'worst possible scenario' approach, Telstra could potentially negotiate special prices in return for an agreement to migrate its eight million customers to the NBN. The minister may argue that any carrier in like circumstances would be able to obtain the same discount but clearly like circumstances do not exist in this situation," Krishnapillai said. "The reality is that no other carrier has eight million customers to bring across and so, in effect, no other carrier would qualify for those same terms. Again, such an outcome would clearly compromise the competition reform credentials of the NBN."

Optus's recommendations to the bill included that "any deal between Telstra and NBN Co. in terms of migration must be transparent, must represent demonstrably fair value for taxpayers, must be subject to independent assessment by the ACCC and/or parliament and, importantly, give Telstra no systemic and future advantage in delivering services on the NBN".

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Tags nbn coNational Broadband Network (NBN)iiNetoptusSenate Select CommitteeNBN

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