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Could Telstra and Optus dominate the NBN? iiNet snub a spanner

ISP iiNet has refused to sign up to NBN Co’s wholesale agreement. Is this a major stumbling block, or a chance for Telstra and Optus to earn big?

The nation’s largest supplier of National Broadband network services and third-largest broadband provider, iiNet, has refused to sign NBN Co’s wholesale broadband agreement. But telecommunications analysts say the whole rollout is under a cloud of confusion, and a new agreement may be on the way regardless.

On Friday, iiNet’s chief regulatory officer, Steve Dalby, told The Australian that given iiNet would be liable for customer compensation if NBN Co does not connect users on time, and the NBN had delivered less than 80% of services on time, his company was not willing to take the risk of the agreement:

There is a real commercial risk for us around these lax customer service guarantees, which suggest that if a customer is not connected on time to the NBN or there are faults with the service then we will be financially liable to compensate them. Considering that the NBN Co does not meet customer appointments and has continually failed to meet its rollout targets means this is just too risky for us to sign on.”

If NBN Co’s performance to date is anything to go by, they won’t want to bind themselves to guarantees that could result in regulatory penalties. It’s quite a rational approach by them, but it’s ludicrous that we retail service providers have to foot the bill for their poor work, and I can’t believe it is government policy.”

For a company that’s built its brand offering around customer service, missed appointments are a significant concern, says Telsyte communications analyst Chris Coughlan.

But it could have dire effects for consumers. Telecommunications expert Paul Wallbank says the broadband company’s refusal to sign the agreement could see the entire broadband market “dominated by two players, which wasn’t what was supposed to happen”. However, he says he can understand iiNet’s reluctance to sign the agreement, as the telco does not have the market power of Optus and Telstra, and thus would be unable to bring as much clout to renegotiating the agreement should problems arise.

Obviously Telstra and Optus are in a position where they can negotiate these disputes from a far more powerful position — they own the infrastructure,” he said. “The big question for the telecommunications industry is that the government are changing the scope of the project. So it’s very hard to see why you would be signing a wholesale agreement when you don’t know what the wholesale arrangements are going to be. Frankly, it’s hard to see how anyone can be signing an agreement when no one knows what the physical network is going look like.

And that’s the mess we now find ourselves in with broadband policy. That’s an indictment on both sides of politics in Canberra.”

NBN Co’s record of delivery so far is so dire they cannot be trusted to deliver on their side of the bargain, Wallbank says. “Their commercial performance to date has been utterly abysmal. So iiNet are completely within their rights to do what they’ve done,” he said.

It’s an assessment Coughlan agrees with. “Everybody I know that’s had NBN Co connected has had a nightmare of an experience over it,” he said.

Asked to speculate on what is likely to happen now iiNet has refused to sign, Wallbank says things will likely remain in limbo until NBN Co brings out new, revised agreements when the scope of the project under the new government is known.

The government has come out with its policy, but we don’t know what the scope of the NBN project is. Before now, it was 93% fibre. Now we don’t know. It’s like trying to remodel your kitchen and not knowing whether you’ll be using gas or electricity,” he saud.

Commercially, it’s too risky to deal with NBN Co on these terms. And while all that’s getting worked out, Australia is going to slip dramatically in its broadband coverage, and that’s a problem.”

*This article was originally published at SmartCompany

Correction: An earlier version of this article said iiNet would no longer be able to offer NBN services to its customers. That is not the case. The ISP will instead simply continue operating on its interim agreement with NBN Co.

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