NBN study confirms wholesale business risk

NBN study confirms wholesale business risk

Summary: 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.

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TOPICS: Broadband, NBN
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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.

Topics: Broadband, NBN

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7 comments
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  • "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..."

    So a company such as, ummm...iiNet, Steve, Lol...?

    Check the last comment at this URL from Rhys, I think he nailed it, kudos -

    http://www.zdnet.com.au/could-cba-and-bhp-become-isps-339302467.htm
    RS-ef540
  • Yeah, I don't get it either. So what if CBA wants to start selling ISP services to it's customers. I'm pretty sure the virtual ISP idea (where, say, Woollies rocks up to a carrier and buys services to market as WooliesISP) has been banging around since before the Big Tech Crash.

    So long as the services are resold, who cares who does it?
    mpm123
  • I don't think you guys get it. Say Commonwealth Bank get a licence, then start selling their services to themselves. That means they buy and sell to themself, with no markup making it impossible for other Telco's to compete for their business as they are running at cost price. This would ruin contracts that are already in place with other Telco company's.
    rbx765a
  • Exactly. Many people may not realise, but consumer Internet services are only part of the revenue base for large ISPs. Companies like Optus sell Internet access and branch-office connections to the big banks, airlines, and every other company to the tune of millions and tens of millions per year. If the CBA, in your example, or the ATO or DoD can buy wholesale services from NBNCo to link up hundreds of branches instead of paying wholesale + margin to get Optus or Telstra to do it, they're effectively getting retail services at wholesale prices, which is why there is so much pressure for the government needs to clarify the NBN's wholesale-only status and close loopholes like that. It's big savings for the company but would represent a devastating revenue hit for ISPs.
    braue
  • So what? They should be able to, makes perfect sense and happens in many other markets. Big businesses don't pay retail for services, they pay wholesale.
    evilsync
  • Let's face it... really there is nothing stopping any big business from diversifying, is there?

    Apart from the fact that most competent CEO's, concentrate on their "own core business"! The area in which they have superior expertise and can profit - and they leave the peripherals to the experts in other fields.

    When Telstra and Optus are looking for Capital to invest, they don't start their own bank, they approach a financial institution. When banks are looking for the safe haven of investing in gold, they don't go prospecting and when CBA and BHP are wanting comms, they go to the experts in comms.

    Yes this could make it easier for them, but why would they bother? It's really not worth their time. In the time they spend saving say $50m in comms, they can make $100m concentrating on their core business...

    Plus, for companies such as CBA and BHP (I use them, because the original article highlighted them as the hypothetical examples) to gamble with such an important peripheral to their profitable area of expertise/core business, would be reckless at best?

    Imagine if CBA did their own telecommunications and it went haywire??? Where would they be, how much would they lose and ironically, who would they need to call to help them remedy the problems?... Not ghostbusters.

    So to me, this is simply NBN sabre rattling and FUD, coming from those who have ironically, made an art form out of accusing Telstra (whom I am have been most critical of...) of sabre rattling and FUD.
    RS-ef540
  • If big business is avoiding the use of a traditional, regulated ISP, how does that fit with Conroy's internet filter?
    Does BHP, for instance, have to filter their own access to the internet?
    More worryingly, will Conroy insist the NBN applies the filter? It's certianly one way for the government to get complete control over access.
    Pachanga-4184c