Primus CEO sees threat, promise in Telstra

Primus CEO sees threat, promise in Telstra

Summary: Second-tier ISPs deserve discounts on wholesale NBN services as compensation for their past infrastructure investments, incoming Primus CEO Tom Mazerski has suggested as he offered an optimistic assessment of Telstra's separation commitment, while slamming preferential government dealings with Telstra and Optus.

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Second-tier ISPs deserve discounts on wholesale NBN services as compensation for their past infrastructure investments, incoming Primus CEO Tom Mazerski has suggested as he offered an optimistic assessment of Telstra's separation commitment, while slamming preferential government dealings with Telstra and Optus.

Tom Mazerski

Tom Mazerski
(Credit: David Braue/ZDNet Australia)

While he had expected legal obstructionism when approaching Telstra, Mazerski — who in August was chosen to replace long-time CEO Ravi Bhatia — told the CommsDay Summit in Melbourne that he had been pleasantly surprised by the company's progress in moving towards structural separation.

"I went to Telstra and said, 'I'm changing the way I do business, and we'll have no more hours taken to get things done'," Mazerski explained. "I really thought the answer was going to be a letter to my lawyer saying, 'please refer to page 812 of your contract' but I didn't get that. It was a really pleasant surprise to me, and in that piece of structural separation I believe Telstra is well along the way."

While there were still legal issues as Telstra and the ACCC pore over the detail of the company's structural separation undertaking (SSU) document, Mazerski said that it appeared to him that Telstra's cultural shift towards separation is already well underway.

"If you look at people, and their behaviour, and how they deal with their wholesale customers, it's a reflection of the leaders at the top," he said. "Telstra is really way ahead when it comes to structural separation, in challenging their wholesale people to separate themselves from the retail business. You have to give credit where credit is due."

He wasn't, however, giving Telstra much credit for the ongoing controversy around its South Brisbane fibre to the home (FttH) network, which he derided for being conducted with virtually no industry consultation, even though the move had broad and deep implications.

One of those implications was to raise access prices, leading to frustration amongst resellers like TPG and iiNet that have customers in the area and have no choice but to migrate to the fibre plans or lose their customers.

As well as potentially entrenching a monopoly or duopoly in local-loop access, such policies are likely to deter private investment from operators that will have to weigh up their capital decisions carefully, Mazerski warned.

"If my company decides, for example, that it's just not worth our while or effort, we can take our capital and invest it somewhere else to give a better return to our shareholders," he said.

"You have to recognise and have a recognition of these events. You can do all these things, but if you still have one or two providers with a majority share, you have failed miserably in bringing competition to the market."

Contradicting the arguments of industry players like Internode managing director Simon Hackett, who has frequently expressed his displeasure with NBN Co's 121 points of interconnec (PoI) model, Mazerski said that the PoI structure isn't a problem for Primus, and is "more of a customer issue."

However, he wasted no time in slamming the "tier-one secret agreements" between the government and Telstra and Optus, arguing that "every word and page should be made publicly available. There is very little transparency and visibility in those agreements; all I know is that somebody is getting a whole lot of money for something."

While Telstra and Optus were Australia's undisputed tier-one providers in terms of network ownership, Mazerski hit out at the government, claiming that it ignores second-tier providers that have invested significantly in their own infrastructure in the 14 years since telecommunications deregulation.

"There has been no tier-two compensation for recognition of the capital investments companies like mine and others have made," Mazerski said.

"There really needs to be recognition of how the tier twos can be compensated for all the good work they've done to bring competition to the level it is today."

Mazerski offered two options for balancing the playing field: first, that NBN Co provide a "significant discount" to tier-two providers to balance the playing field in light of the government's Optus and Telstra payouts or "balloting" — polling all customers in a particular exchange area about which ISPs they'd like to go with before they sign up.

He said that this would let carriers focus their infrastructure investments based on real demand, rather than trying to stay ahead of the network roll-outs of larger and better-funded players.

"Economic theory tells us we need many-player, low barriers to entry, and to have market power players to be deleveraged," Mazerski said. "You can't just have a business plan that works off the backs of the tier-two carriers. They cannot support an NBN business plan by themselves."

Topics: NBN, Broadband, Telcos, Optus, 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.

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6 comments
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  • Here we go again, calls for action to distort the level playing field created by Senator Conroy and to unfairly assist those who are unable to compete in the real world.
    sydneyla
  • indeed here we go again, syd…

    i love the way you always “unbiasedly (ahem)” back telstra and talk about the level playing field. the (so called) level playing field you now embrace, but fought tooth and nail to avoid, as you bluntly refused to accept telstra’s enviable head start and last mile advantage, previously.

    look, i have said many times the nbn is far from perfect… BUT it is easily the best alternative for australia, imo.

    however I’m sure these competitors (you as a tls shareholder – a proven disparaging opponent out for you own financial gain) who I agree, have had it easier than businesses in some other sectors, not having had to outlay/invest in costly infrastructure to aid their core businesses per se’, would love even more, to have received a pstn to profit to the tune of $b’s each year and also receive $11B for their pits, ducts and customers…

    so please !
    Beta-9f71a
  • Beta with great respect. Two points. Do you not agree that after exceptional and intense work, Senator Conroy is delivering a fair and level field on which pure competition can be based. Why do you keep returning to past history to support your argument?

    Point Two. Do you not understand the principal of financial return on investment and the need to associate that with capitalisation when looking at the size of a company profit. Of course the Telstra profit is big, so is its capitalisation which must be serviced.
    sydneyla
  • yes syd, they are thankfully, finally making it “much fairer” than it was! glad you now agree that your entire argument from 2005 - now was totally flawed.

    but due to the past head start telstra received (which needs to be factored) and again I agree the others also had an easy (but legal) ride, imo… it can never be fair. I.e. everyone is not starting on an equal footing.

    can you look beyond those TL$ shares to see that?

    having the last mile monopoly and being wholesaler and retailer (although again, you previously argued it was fair that way, but now typically flip-flop) wasn’t fair at all. the nbn is a vast improvement in that aspect and many others.

    as for capititalisation/roi, seriously… telstra capitalisation is due to circumstances of how the pstn came about and telstra's ownership thereof. i.e. a golden goose landed in their laps and they profited accordingly.

    it was circumstances and not telstra's fault, but also, they must admit that the pstn gave them many $b's they otherwise wouldn't have had.

    now before you or your idiot mate start on, shareholders purchased the pstn for $60B or whatever other exaggerated figure you can conjure… i am talking about telstra’s ownership of the pstn prior to privatisation (before those few greedy, nwat throw-backs came along) not the sale of telstra to shareholders. two entirely different things.

    can you look beyond those TL$ shares and differentiate reality from your own $’s?

    since I answered your questions don’t forget to answer mine…!
    Beta-9f71a
  • Beta, it is an undeniable fact that over the past many years every aspect of Telstra and indeed the Industry has been covered time and time again. Your questioning opinions are mostly acceptable, except one.

    You claim that I would never change from a sycophantic attitude towards Telstra. Let me tell you that at the last Telstra AGM in Melbourne I called (during public Question Time) for and assurance from the Telstra Board that they would all resign if no progress was made with improvement in Telstra customer service.

    As you have endorsed, Telstra thanks to David Thodey, has made good progress in every department including customer service. It is good that you agree that Telstra can proceed in a spirit of competition to seek the Australian consumers acceptance of Telstra as the company to embrace in coming years.
    sydneyla
  • well... we'll have to take your word on that won't we syd, because unlike you, i am not a co owner of any comms company, don't go to AGM's and ergo, have no bias in that regard.

    perhaps one day... you may even do likewise, even just once, in a public arena?

    but i won't hold my breath having seen literally thousand(s) of comments from you and not one really ever criticising "god bless aussie icon telstra"?

    pity you didn't have the same tenacity to fire up against the one who actually deserved it though...sol (go on tell me you did..."now").

    ooh, although i answered your questions, you didn't answer mine AGAIN?
    Beta-9f71a