NBN BUZZ: ISP showdown

NBN Co gets closer to a double deadline, Exetel's John Linton is unconvinced on the size priority for ISPs, and Hackett's getting a plane.

NBN Buzz is a weekly wrap up of everything that's going on with Australia's largest infrastructure project. For previous editions visit our NBN Buzz page.

Does size matter?

Internode boss Simon Hackett has been one of the most vocal critics of the National Broadband Network’s structure and the way it will reshape the telecommunications landscape. Hackett cited the now time-tested adage that ‘size equals success’ in the NBN world as the most prominent – though not only – reason to accept a takeover offer from rival iiNet.

This merger will create a player with almost 900,000 subscribers, enough to compete with Telstra and Optus. Indeed The Australian brings us this report showing how more consolidation is expected for a sector that’s saturated with providers.

But there’s one man who thinks this is all too premature.

Exetel chief executive John Linton has dismissed the size priority amongst ISPs as “the sheerest nonsense” in a direct response to Hackett’s claims. As explained in this Delimiter article, Linton contests that it’s “anyone’s guess” how the NBN will influence the market if and when it’s built.

It’s true that a number of smaller ISPs are hoping to utilise aggregated services from the mid-tier ISPs to roll out a national presence, but there’s a problem with this option. First and foremost the pricing hasn’t been decided yet, so it’s hardly firm ground to stand upon. But it also makes the smaller ISP vulnerable to the whims of their mid-tier provider. And all that assumes there’s enough competition amongst the mid-tiers to offer a competitive price.

Finally, Linton’s reminder that Labor might lose the next election and spark a restructuring of the NBN is seriously hypothetical. Putting polling aside, Shadow Communications Minister Malcolm Turnbull has spent a substantial amount of time convincing the electorate that there’s very little a Coalition government would do reforming the NBN.

Unproductive productivity posturing

Speaking of the Coalition, as we settle in to the new year Shadow Treasurer Joe Hockey has nominated the NBN as the opposition’s primary target. In an interview with the Sydney Morning Herald, Hockey made the unusual claim that the NBN detracts from productivity.

Treasurer Wayne Swan fired back at his counterpart’s claims, arguing that if Hockey had his way we’d still be using two cans and a ball of string.

It should be pointed out, however, that Hockey’s claims were in the context of a discussion about price. Given that his second nomination for themes of 2012 was productivity, it’s quite conceivable that he was trying to argue that the project’s $36 billion price tag could be used in other ways to increase productivity – not that the project itself decreases it. His leader has suggested road building.

It's hardly a productive discussion. Higher internet speeds for public institutions, businesses, schools, and homes increases productivity – we all know this on an instinctual level from every time we’ve seen that hourglass turning. That’s on the demand side.

On the supply side, the consolidation amongst ISPs (assuming Linton is wrong) will increase productivity because the same national services will be provided by a smaller number of players. Given that our banking sector has four real participants and our supermarket sector has two, the idea of three or four major ISPs is hardly a stretch.

Double deadline

NBN Co's showdown with the nation’s largest ISPs is set to come to a head today. The battle is over the one-year contracts NBN Co has drawn up for wholesale broadband services. The major ISPs were supposed to have until January 12 to sign it however Telstra and Optus have yet to sign. Primus today relented, and Fairfax is reporting iiNet (now with Internode in tow) have signed. 

Given that ISPs that don’t sign the wholesale broadband agreement won’t be able to add new customers to the NBN, something had to give. It appears that it was NBN Co.

According to The Australian Financial Review, NBN Co has made some last-minute concessions to the ISPs and while a spokesperson for the government-owned broadband company declined to offer a deadline, discussions were said to be ongoing. In the meantime, iTNews is reporting NBN Co distributed "transition arrangements" to providers yesterday allowing them to sign new greenfield fibre customers until the end of the month.

Meanwhile, another battle is being waged that’s set to come to a head next week. It’s of course Telstra’s structural separation (SSU) undertaking and the Australian Competition and Consumer Commission will not be accepting submissions after January 16. So far, the latest version of Telstra’s SSU has received a better reception from the telcos and they’re expected to finally relent and leave it to the ACCC to find fault with it.

Wrap up

While many tech-savvy onlookers are asking when the NBN cables are coming to town, they can keep themselves preoccupied by asking whether the NBN bus is coming to town. The 23-tonne “mobile interactive discovery centre” – a driving brochure – was at Rosny Park this week, which is east of Hobart, to help answer the questions of curious bystanders.

Relations are less harmonious between NBN Co and a number of residents in various districts around the country angry at the planned construction of towers up to 40 metres high in their suburbs to support the fixed wireless network of the NBN.

And finally, now that Simon Hackett has sold Internode to rival ISP iiNet after ten years of ongoing discussion with rival boss Michael Malone, he’s revealed to The Australian what luxury he will afford himself with the $30 million in cash from the deal. He’s going to buy a plane.