Senate fights over NBN volume discounts

Summary:Independent Senator Nick Xenophon has again criticised certain provisions of the National Broadband Network legislation currently before the Senate, arguing that the Bills would allow NBN Co to unfairly offer large telcos preferential pricing deals due to their size.

Independent Senator Nick Xenophon has again criticised certain provisions of the National Broadband Network legislation currently before the Senate, arguing that the Bills would allow NBN Co to unfairly offer large telcos preferential pricing deals due to their size.

This morning, the Senate commenced debate on legislation associated with the fibre project, after both NBN Bills passed the House of Representatives several weeks ago with only one minor amendment.

The NBN legislation noted that although NBN Co must not unfairly discriminate between those seeking to access its wholesale services, it will still be able to negotiate with them. The documents stated that the concept of "efficiency" can be used to facilitate normal business negotiation such as "offering volume-based discounts".

The carriers that would benefit most from volume discounting would be those with the largest existing customer bases; market leaders like Telstra, Optus, AAPT, iiNet and TPG. However, the legislation also stated that if the NBN Co enters into a non-standard agreement with a telco, then it must publish the terms of that agreement on its website within seven days of it being entered into.

Xenophon said he believed it was "fundamentally wrong" that NBN Co should be able to negotiate on price with large telcos. "We need to remember that NBN Co will be equally owned by all Australians," he said. "Governments should not be providing sweeter deals to one business over another." The senator questioned how the notion of "efficiency" would be quantified and proven, claiming it would be easier for larger telcos with more resources to demonstrate they best met the requirements.

"It is my concern that the big players will continue to monopolise the market and the smaller players will be pushed out," he said, particularly highlighting the potential for Telstra and Optus to maintain their existing dominant market share.

It was often smaller players that were "crucial" to generating innovation in the market, said Xenophon.

Labor Senator Mark Arbib responded to the concerns on volume discounts.

"Discrimination based on efficiency has long been recognised to promote competition and innovation in the market," he said. "[The legislation] already contains safeguards that address the concerns.

"Under the Bill, NBN Co will not offer a volume discount unless it is in accordance with the framework that has been approved by the ACCC [Australian Competition and Consumer Commission] as part of NBN Co's special access undertaking. Further, any differentiated deals must be published so there will be full transparency, and the ACCC and access seekers can take action if they consider that the rules have been breached."

The Opposition has also raised other issues regarding the NBN legislation, ranging from the idea that it opens the door for NBN Co to become a retail internet service provider, to concerns about the so-called "cherry-picking" components of the Bills, which require other telcos wishing to build networks to open their infrastructure up to rivals. The government has proposed amendments to the cherry-picking provisions in the legislation.

Xenophon said that he could understand the Opposition's view on several matters. However, Xenophon's understanding was that the provision allowed specialised groups such as energy utilities getting access to NBN Co's infrastructure directly would be for "necessary and desirable uses only". Xenophon also believed that the market would resolve some of the issues.

On the issue of whether large companies such as banks could obtain a carrier licence and thus buy services directly from NBN Co, Xenophon said such an option would not prove attractive if retail telcos offered competitive deals in the market.

The independent senator said the legislation supporting the NBN needed to be "water tight".

"Australian governments don't have a good track record when it comes to telecommunications," he said, noting that the Aussat project had been described by former Prime Minister Paul Keating as "a billion-dollar piece of space junk" and that the privatisation of Telstra had been similarly botched.

"I believe the NBN is a good idea," he said. "It's possible to have a good idea but to execute it badly. My concern with preferential pricing and conditions is that we are seeing just that."

Josh Taylor contributed to this article.

Topics: Broadband, Government, Government : AU, NBN

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