Small ISPs should start small: Conroy

Small ISPs should start small: Conroy

Summary: Communications Minister Stephen Conroy has dismissed Internode's concerns about National Broadband Network (NBN) pricing smaller ISPs out of the national market, stating that new players wouldn't necessarily be national right away.

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Communications Minister Stephen Conroy has dismissed Internode's concerns that National Broadband Network (NBN) pricing would force smaller ISPs out of the national market, stating that new players wouldn't necessarily be national right away.

Stephen Conroy

Communications Minister Stephen Conroy (Screenshot by Josh Taylor/ZDNet Australia)

Internode's managing director Simon Hackett last week raised concerns that the high price for using a Connectivity Virtual Circuit (CVC) at each of the 121 points of interconnect (POI) where NBN Co hands over NBN traffic to internet service providers (ISPs) would mean that smaller internet service providers (ISPs) serving less than 250,000 customers would be priced out of supplying services on a national level.

Conroy told the ABC's Inside Business yesterday that the government preferred a 14 POI model for the NBN, which would have resulted in lower costs for smaller ISPs serving a national market; however, the decision on 121 POI was made by the Australian Competition and Consumer Commission (ACCC).

"The complaint being made by Internode is a very important contribution, and it would've been really fantastic for Internode to have made that argument to the ACCC. And while the government and NBN supported 14 POIs, the final decision was that recommended by the ACCC. So this is a complaint about what the ACCC decided, and unfortunately Internode chose not to put in a submission."

Internode made two submissions to the POI ACCC inquiry, and while the company advocated 14 POI in those submissions, the company made no reference to CVC costings at the time. Conroy said that smaller ISPs may opt to simply service individual POI first rather than going national.

"There's many who would argue that a small start-up company may not want to seek access to all of the 121 sites at the beginning. They would want to grow as a strategy to become a national company," he said. "So Simon's analysis is based on a number of assumptions. There's nothing wrong with his assumptions, but there are many who would dispute and say that a start-up company wouldn't necessarily try and be a national company on day one."

Late on Friday, Hackett posted a blog detailing how NBN Co could address this issue without compromising the bottom line.

According to Hackett, if the CVC cost was reduced from $20 per megabit to $1 per megabit, and the charge for a customer port was increased from $24 to $25.63, this would balance the pricing in a way that wouldn't disadvantage the smaller ISPs, which would otherwise be forced to wholesale from a larger telco such as Telstra or Optus.

"While income below 250,000 customers would appear lower for NBN Co in the rebalanced model, in reality it will be the same or greater," he said. "That's because without this rebalancing, there will simply be no direct customers of NBN Co below the 250,000 level, with those smaller providers being forced into the uncomfortable position of having to buy access at a mark-up from one of their much larger retail competitors."

Topics: NBN, Broadband, Government, Government AU

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Armed with a degree in Computer Science and a Masters in Journalism, Josh keeps a close eye on the telecommunications industry, the National Broadband Network, and all the goings on in government IT.

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10 comments
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  • As "Andy" who commented on a similar article on another site pointed out,

    "Conroy is actually lying. Internode made at least TWO submissions last year.

    According to J Lindsay:
    No it's not true.
    We made two submissions to the ACCC on the topic:
    http://www.accc.gov.au/content/index.phtml/itemId/961575
    http://www.accc.gov.au/content/index.phtml/itemId/974480
    jsl"
    AkiraDoe
    • Hi AkiraDoe,

      Internode did indeed make two submissions to the ACCC inquiry, as I mentioned in the above article. :)

      Cheers,

      Josh Taylor
      Josh Taylor
      • It seems I posted on the wrong article... I've been brought down by tabbed browsing once again!

        :)
        AkiraDoe
  • Wouldn't this mean that the bush is disadvantaged..

    as the upcoming ISPs are not going to by bandwidth in the regional areas and just fucus on the metro areas... its the ADSL farce all overagain.
    woodwa@...
  • Re: ""The complaint being made by Internode is a very important contribution, and it would've been really fantastic for Internode to have made that argument to the ACCC. "

    And the truth is that Internode *did* make that argument to the ACCC.

    The Senators statements regarding Internode having ignore opportunities to raise this earlier (as made on Inside Business) were false and the implication that this is a new notion dreamed up by Internode in the last week is misleading.

    Internode has two public submissions on the public record on the ACCC web site (as noted in a post above this one).

    The Minister was misinformed, and has perpetuated this misinformation, unfortunately.

    We have asked his office to correct this misinformation and to cease to make the incorrect statements in the future.

    Deeper, we hope that our genuine, and consistently expressed concerns about structural flaws in the NBN pricing model (that we have been raising for months) might, now, get a fair hearing.

    They have solutions - but the solutions start with moving past making false statements about the commitment and consistency of the Internode position here. The position is consistent and it is a very long held view.

    Here is one example of how these things can be solved:

    http://blog.internode.on.net/2011/04/01/rebalancing-nbnco-pricing-model/

    Regards,
    Simon Hackett
    Internode
    simonhackett
  • Conroy's argument doesn't stand up to scrutiny. He only talks about new start-ups not necessarily wanting to connect to all of the 121 sites. Fair enough, but what about the many existing national ISPs with less than 250000 customers? Has he considered them at all? Wouldn't they be forced to buy off Telstra, Optus or one of the other big telcos instead of being able to buy straight off the NBN? Surely that is going to force most of them out of business.
    ozimarco
    • Exactly! The NBN is (will be) a National Asset. There is no room for the wholesale/retail model that is used now. The consumers who have paid through tax for building the damn thing should have the right cheap and unlimited access.
      Treknology
  • The underlying problem I see with this saga is there will be no guarantee for any RSP/ISP to truly service the full nation. It would seem from this article that a customer in whoop whoop has no real guarantee of being provided with an internet connection by anybody.

    If no one decides to service these remote areas, how do they get connected? NBN Co can't do it now.
    Frank27-aa0fe
  • Seriously... with NBN infrastructure in place and customers waving dollars, you think RSP's aren't going to want those dollars...?
    RS-ef540
    • If your wholesale price for access to the NBN is $80.00 pm and you have users in the bush who really only want email and about $10 pm retail. Who, as an IAP, is going to connect them?
      Treknology