Can brinkmanship build a just monopoly?

Can brinkmanship build a just monopoly?

Summary: We're only days into 2012, but ISPs are already drawing NBN Co into a showdown over its Wholesale Broadband Agreement. Are they just testing its patience, or can their stonewalling push the company back to the drawing board yet again?

SHARE:
13

If a camel is a horse designed by committee, what are we to make of the National Broadband Network (NBN)? Seemingly far from the authoritarian monopolist that it's made out to be, NBN Co has solicited input at every stage of its development so far and changed its plans numerous times as a result. However, all this caring and sharing has embroiled the company in yet another fierce debate as more than half of Australia's ISPs refuse to sign its final Wholesale Broadband Agreement (WBA).


Building consensus is hard — but how accommodating can NBN Co be before an impasse locks major ISPs out of the NBN? (Bactrian Camel image by Michael Pereckas, CC2.0)

The WBA, you'll recall, was under construction throughout most of 2011, with numerous changes made over several drafts to accommodate the concerns raised by these very same ISPs — which, NBN Co conceded to Communications Day, include "the big names".

NBN Co just can't win: in trying to be consultative, it has helped perpetuate the delays that have pushed back its own subscriber base, which in turn got it a pasting at the hands of coalition opponents when subscriber numbers of just 4000 were recently revealed. Now, with Christmas lights still on houses and just three days to go before NBN Co's deadline for internet service providers (ISPs) to sign the WBA, we're headed for yet another industry stand-off.

Is this really the way to build an equitable national infrastructure?

Not everybody is refusing to sign, of course: 12 ISPs, including newcomers like SkyMesh, are aboard and ready to start signing up new customers nationwide at a furious pace. Yet with the likes of major ISP iiNet still unapologetically standing their ground and NBN Co refusing to extend the deadline, something's going to have to give.

iiNet's stated objections to the WBA relate to issues such as its circumvention of regulatory oversight and refusal to shoulder liability for service problems — weighty issues that would seem to be driven as much by NBN Co's commercial and legislative mandate as by any cultural desire to avoid accountability.

Can a bloc of recalcitrant ISPs force NBN Co back to the negotiating table? Or are they just being NBN curmudgeons, whose obstructionism will just give a head-start to those rivals that are willing to accept the WBA and get on with things?

Can a bloc of recalcitrant ISPs force NBN Co back to the negotiating table?

NBN Co's posture so far has largely been that all of its customers must sign the same WBA — so if a dozen early adopters are already on-board, it would seem difficult if not patently impossible for NBN Co to then start allowing the hold-outs to dictate different terms. Under NBN Co's equivalence policy, earlier agreements would need to be revised, over and over again, until everybody was happy. If we're ever to get past this, NBN Co has to draw the line somewhere.

The thing is: it never hurts to try — and time is, despite what NBN Co believes, on the ISPs' side. Because with Telstra's structural separation undertaking (SSU) still very much up in the air, NBN Co still can't migrate the bulk of its customers from Telstra until the SSU is finalised. In the meantime, the rest of the ISP community can risk a bet on the idea that NBN Co will likely back down by extending its deadline, even if it doesn't give in to demands to modify the WBA.

After all, as Stephen Conroy knows all too well, it's hard to create a sense of urgency when there's nothing to back it. Just as the government blinked when Telstra took so long to submit its revised SSU that it risked cancelling the whole contract by missing its 20 December deadline, ISPs are arguing that NBN Co needs them more than they need it — and that they can afford to wait a while.

The biggest chunk of NBN customers, after all, will come from Telstra — and only once the SSU is signed in March. Or June. Or August. Or whenever, despite Conroy's attempts to impose an enforceable deadline, it's actually finalised. And that will, ultimately, be whenever Telstra wants to finalise it; this is the sad reality of NBN Co's and the government's negotiating position.

Are the ISPs simply trying to replicate risk profiles they have enjoyed for years in agreements with Telstra — or are they trying to target NBN Co's soft spot to extract concessions they have been unable to get for ADSL services in the past?

And on that day — and only then — the hold-out ISPs will finally have to make their real decision. Will their aversion to risk force them to continue pushing for terms that half of their competitors have already deemed acceptable — and risk losing customers that just want better broadband? Or will they simply have to give in to market reality and move forward with the WBA as it stands, knowing that — even if they don't like the quality of the pitch — they're competing on the level playing field for which they've fought for so long?

Certainly, there are valid concerns that large ISPs could be materially impacted by NBN Co's failure to assume more risk in the wholesale relationship. What is not clear, is how this varies from existing situations. Are the ISPs simply trying to replicate risk profiles they have enjoyed for years in agreements with Telstra, or are they trying to target NBN Co's soft spot to extract concessions they have been unable to get for ADSL services in the past?

Whatever their motivations, it already seems clear that 2012 is set to be packed with the same kind of brinkmanship that characterised the NBN debate through 2011. Whether empty rhetoric becomes well-grounded opposition will become clear in the longer term, but there is an immutable deadline as an election looms next year. Nobody's going to extend that deadline, which means NBN Co needs to take steps to ensure it delivers in 2012. And that means getting customers, by hook or by crook. Without them, only one thing is certain: camel, horse or white elephant, the project will never fly as high as it needs to.

What do you think? Can stubborn ISPs move this mountain? Or will NBN Co simply ignore holdouts and focus on its more-compliant signatories?

Topics: NBN, Broadband, Telcos, Telstra

About

Australia’s first-world economy relies on first-rate IT and telecommunications innovation. David Braue, an award-winning IT journalist and former Macworld editor, covers its challenges, successes and lessons learned as it uses ICT to assert its leadership in the developing Asia-Pacific region – and strengthen its reputation on the world stage.

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Talkback

13 comments
Log in or register to join the discussion
  • Maybe the ISPs are talking and acting tough because they see that as the best way to push their interests in extracting the best deal possible.

    After all, most of them had years of experience in having to fight the ol' monopolist Telstra every centimetre of the way to achieve competitive working arrangements, and, in some cases at least, having to fight for their very existence.
    anonymousI
  • Currently, the cart stands before the horse and the camel is laughing its head off.

    The culprit seems to be the indecision by the amateurish all and sundry, not forgetting the holder of the key - ACCC.

    Until the SSU is finalised and approved by the authority entrusted to monitor this most costly and intricate project. Signing up to the WBA is an exercise in futility at this stage simply because no one seems to know what could develop in the near term and thus not prepared to stick her/his head out.
    Vasso Massonic
  • You don't seem able to consider that NBNCo might be as intransigent as the ISPs. That these issues have been raised throughout the negotiations but the NBNCo has refused to budge. This is the inference I draw from Steve Dalby's comment on Delimiter.

    Leaving aside whose fault it is, how is it right that the NBNCo should use the WBA to sideline the ACCC? How is it right that the NBNCo should refuse to accept liability for customer-service guarantees, negligence or network outages? Surely if the fault is within the NBN, including the NTU, the NBNCo is liable.

    This is a very one-eyed article.
    DMHDibhala
    • Certainly possible that NBN Co is also meeting them with intransigence, although its backdown (subsequent to publication of this piece) suggests it has recognised the importance of giving ground. As would the signing of several tier-one ISPs.

      I wonder if there isn't a larger issue here, however: is NBN Co intentionally ignoring these sorts of issues to reduce its own exposure as much as possible, or is it simply too geared-up as a rollout organisation and deficient as a long-term telco? Sure, it has invested in substantial facilities like its NOC in Melbourne, but has enough attention and detail been given to long-term maintenance, failure-response teams, fleet management, etc? It may be a sign of larger systemic oversights from an organisation that is right now just going hell for leather to lay fibre and sign up customers.
      braue
  • NBN Co has stated that it has issued no less than five different drafts of the Wholesale Broadband Agreement. The trouble is that in every one of these drafts, the concerns of industry have been completely ignored. It's one thing to say that you are consulting with industry, but quite another to actually take their comments into account. NBN Co is asking the ISPs to sign agreements which are completely uncommercial and leave all risk with the ISPs. The ISPs are the ones that are being bullied here, not NBN Co.
    ozzie1-064e2
    • CMOTDibbler and ozzie1.

      Whose fault was it when Telstra and NBNCo met a (near) impasse in their negotiations?
      Beta-9f71a
  • Spot on ozzie1

    Issuing five drafts of anything is a sure sign of incompetence. Imagine what the state of the deployment will be in the long years ahead.
    Vasso Massonic
    • It's almost as bad as a so called professional company submitting one RFP bid and it was non compliant. Now that's the ultimate in incompetence.

      Plus I remember some referring to these ISP's as leeches, but now?

      Oh the fickleness of the chronically Liberal, TLS shareholder.
      Beta-9f71a
    • Sounds like incompetence of the ISP's involved.

      Short memory you guys have.

      It's ok to attack Telstra at every level on every legislation and regulation, now you're doing it to NBNCo.

      I'm wondering who is more nasty, Telstra or the Providers?

      Can you any me this CMOT, Vasso, Ozzie1?

      How much bullshit can you print before you forget the real history of the telco industry.
      DanielZenno
      • So its ok to criticise Telstra but not NBNCo? Is NBNCo holding some sought of holy grail, or are they god now?

        This is the exact stance of the NBN Zealots, the members of the church. NBNCo can never, yes thats right, NEVER be wrong. If there is a problem, its ALWAYS someone else's fault

        For those with any kind of clarity or bipartisanship in their head, they would realise how serious of a problem this is. The WBA completely sidelines the ACCC, once the WBA is signed the ACCC has no regulatory power whatsoever over issues regarding broadband, and having clauses in the WBA which amounts to NBNCo never being liable over problems that they have personally caused (which they have) is very very serious

        And its obvious why the big ISP's are the ones complaining, because they are the ones that have had to deal with these issues in the past with Telstra. Where as Telstra would commonly accept the liability (just not do anything about it because they are not forced), or conversely say its not their fault when its not, NBNCo doesn't have to accept blame for anything.
        deteego
        • Whilst endlessly criticising the NBN and of course the Labor party (some with justification mind you) the only people you have NEVER and I repeat NEVER criticised (even tried to cover up for when they have ****ed up or talked bullsh!t) are the Coalition.

          I think you truly, gullibly believe they are perfect.
          Beta-9f71a
  • Australians have seen the NBN Co become a reality because of the anti competitive and unbelievable monopoly producing threats and blackmail that the Labor Government felt necessary to remove all competitors and give the NBN some hope of financial success.

    Senator Conroy (and Julia Gillard) may have success, but only if the ACCC allows free and open competition for the NBN Service Providers and the only regulation placed on them is competition by their duty to offer the consumer acceptable contracts.

    Also the ACCC must expedite a decision (NBN Co/Telstra Agreement) to allow the NBN roll-out to commence as soon as possible and give the Government some chance to be returned at the next election. Some directional advice please Senator Conroy.
    sydneyla
    • Absolute hypocritical BS Lawrence.

      Coming from someone who from 2005-2009, swore at blogs daily that Telstra didn't not have a monopoly (and wanted the ACCC dismantled, as they were the wayward sheriffs out to get Telstra) and who also swore that he did not have TLS shares (after having a juicy interview and telling the world on NWAT) your further lies, like your desperation are laughable.
      Beta-9f71a