Fears that large enterprises could become ISPs and receive wholesale prices from the National Broadband Network company have been confirmed by the Federal Government's implementation study released today.
"Defining wholesale-only is simple in theory but complex in practice," the study said.
"For residential users, it is straightforward to restrict NBN Co from any direct relationship. The situation for sophisticated businesses is more complex," it said.
"Consider an entity, such as a bank, that uses telecommunications services as an input to delivering banking services to end users. This could be classified as either a wholesale or a retail service depending on the strictness of the definition.
"The risk is that relaxing the wholesale definition in this or other similar ways could provide an opportunity for NBN Co to expand its scope beyond what was originally intended by government."
This very issue was raised by internet service provider (ISP) iiNet at a recent Senate hearing in Melbourne.
"It would be very easy for any big corporate in Australia to set up a small team internally, buy a $10,000 carrier licence, declare itself a telecoms company, and rock up to NBN Co saying that they want to start buying services," iiNet's regulatory affairs manager Steve Dalby said at the hearing in April, referring to the lax wholesale-only provisions in the legislation surrounding NBN Co. It was a thought echoed by iiNet counterpart Optus.
"We remain deeply concerned that these Bills signal a significant step back from the government's clear commitment to operating NBN Co as a wholesale-only provider," Optus director of government and corporate affairs Maha Krishnapillai said, noting that potential retail deals by NBN Co are "a real threat to Optus and other carriers who have significant government contracts."
The implementation recommended "a narrow starting definition" for the wholesale-only restriction, but with "practical flexibility".
It said NBN Co should only be permitted to offer services to a carrier or service provider as defined by the Telecommunications Act, unless specific exceptions for classes of customer are made by the minister.
"Of course, obtaining a carrier licence is not difficult, so an alternative for a sophisticated enterprise seeking a direct relationship with NBN Co would be to set up as a wholly-owned carrier to serve its own needs," it said.
However, it considered that the risk of this happening often was low as long as NBN Co only provided a Layer 2 bitstream service, instead of Layer 3 as it would be difficult for non-ISPs to sign up without putting in a fair amount of effort.