NBN Co’s chief executive has rejected criticism of the company’s efforts to increase its revenue from the business segment, with the network operator defending its direct engagement with major enterprises over the rollout of fibre services.
CEO Stephen Rue told a Senate Estimates committee that NBN Co has “never hidden” its intention to offer services to Australian businesses.
The retailer announced last year that it would seek to generate $1 billion in revenue from businesses, the CEO said. “Yet it seems to have been a surprise to some, and arguments have been made as to why we should limit our entry in the enterprise space,” Rue said.
Australia’s largest telco, Telstra, has previously said that it is expecting the NBN rollout to reduce its earnings by $3 billion with CEO Andy Penn claiming it is essentially the “re-nationalisation” of part of the company’s business. At Telstra’s AGM earlier this month, chair John Mullen said that NBN Co was “starting to sell directly to enterprise customers,” which he described as “problematic”.
“The original mandate for the NBN was that the NBN would be a wholesale provider only and would not favour or discriminate between retail service providers, or RSPs,” the Telstra chair said.
“It certainly wasn’t envisaged that NBN Co would negotiate contracts directly with customers and encourage them to seek special deals from certain RSPs.
“That, however, is what we are seeing today. Instead of remaining a wholesaler, the NBN is now going outside this mandate and is targeting our customers directly.”
NBN Co pushing its fibre as a solution for enterprise customers also recently drew the ire of Vocus CEO Kevin Russell.
“If you go into the communications room in the basement of 452 Flinders Street, you’ll find no fewer than six fibre providers that have invested capital to provide competitive services,” the CEO said in a recent speech.
“And recently, NBN became the seventh. Is this really where NBN should be spending taxpayer dollars?”
“Infrastructure investors are being undermined by tenders seeking 100 per cent NBN fibre – favouring providers who have not invested in infrastructure, over those who have built similarly capable assets,” Russell said. “This has long-term implications for the Enterprise market.”
(Vocus earlier this year revealed it was effectively giving up on the consumer NBN market.)
NBN Co earlier this month also received a warning from the Australian Competition and Consumer Commission, with the ACCC saying that the company had been “discriminating” between RSPs when it came to the supply of upgraded NBN infrastructure to business customers.
Rue said that the three central arguments made against NBN Co’s enterprise push were that it has access to cheap government funding, that it shouldn’t talk to end users because it’s a wholesaler, and that it was diverting resources from completing the rollout of the network to Australian households.
The CEO said that the company’s enterprise deals were “entirely commercial” and weren’t based on its target internal rate of return of 3.2 per cent. Rue added that it has “always been common practice for wholesalers to talk to customers,” adding: “Surely no one thinks a business model based on customers, not knowing their choices is healthy. Instead, restricting market information will do no more than limit choice and limit competition.”
He said that the company remained focused on completing its network rollout by July 2020 (barring some 100,000 premises) and has different teams for the business and residential market.
Paul Tyler, NBN Co’s chief customer officer- business, told the Estimates hearing that in those cases NBN Co is not directly selling carriage services; instead its component of the deal is delivering fibre connections to its network.
The company is required by legislation to operate as a wholesale-only provider of network services.
Tyler said that NBN Co has an industry engagement team of around 20 people but it doesn’t directly sell services to end users.