NBN Co should heavily discount National Broadband Network (NBN) wholesale pricing for larger telcos playing under Telstra and Optus, according to Primus Telecom CEO, Tom Mazerksi.
He was speaking at the Communications Day Summit in Melbourne.
While NBN Co has struck deals with Telstra and Optus for the two big telco players to decommission their copper assets and move customers over to the new fibre network, Mazerksi claims tier two players have been left in the cold.
He considers tier two players to be any ISP that is not Telstra and Optus and is of a similar size to iPrimus.
Mazerksi was highly critical of what he calls “secret agreements” between NBN Co and the big two as they offered little transparency and did not allow industry input.
“All I know is somebody's getting a whole lot of money for something,” he said.
NBN Co is paying Telstra $11 billion for decommissioning its copper and customer migration. Optus would be getting $800 million.
Mazerksi said tier two players are not being recognised for their network capital investments which have brought more competition into the local telco market.
“There really needs to be a recognition of how tier twos can somehow be compensated for all the good work they have done in this market to bring competition to the level that it is at today,” he said. “... It appears to me that the NBN Co model is this: 'I have to deal with the two Tier ones because they own everything'.”
By being secretive with the deals with the two biggest telco players and alienating tier two ISPs in these kinds of arrangements, there is a risk of a return of a monopoly or a duopoly in the market, according to Mazerksi.
The objective of the NBN is to level out the playing field in the telco market and provide more broadband choice for consumers.
“You want a lot of players in the market, you want low barriers to entry – which the NBN will fix – but there is still a piece missing,” Mazerksi said.
“You can do all that but if you still have one or two providers that have majority share of the market then you have failed miserable in bringing competition to that market because market power is one of the dynamics that have to be corrected.”
Thanks to the NBN Co deals, Optus and Telstra retain very high market advantage. This is partially due to the large sums of money they receive, Mazerksi said.
“They are going to get more cash to do more so where does that leave the tier twos?” he said. “They cannot support an NBN business plan all by themselves.”
Mazerksi recommends NBN Co give tier two companies significant wholesale pricing discounts.
He said if you took telco markets around the world into account, a 55 per cent discount on NBN prices was acceptable as tier two companies could not get the scale and scope of the larger companies.
“That then gives at least the marketing dollars, the redeployment dollars, the capital incentives to keep the tier two providers in the game and get more of them into the game,” Mazerksi said.
Communications Day Summit in Melbourne concluded today.