Independent Senator Nick Xenophon has again mounted a strident criticism of certain provisions of the National Broadband Network legislation currently before the Senate, arguing that the bills would allow NBN Co to unfairly offer large telcos like Telstra and Optus preferential pricing deals due to their size.

This morning, the Senate commenced debate on legislation associated with the fibre project, after both NBN bills passed the House of Representatives several weeks ago with only one minor amendment. However, the chamber was virtually empty this morning, with the Government believed to be currently working with the Greens — which holds the balance of power in the Senate — on amendments to the legislation.

However, Xenophon took the chance this morning to criticise certain elements of the legislation, in advance of any amendments. The comments came months after the Senator made similar statements about the NBN legislation in late November last year.

The NBN legislation notes that although NBN Co must not unfairly discriminate between those seeking to access its wholesale services, it will still be able to negotiate with them. The documents not ethat the concept of “efficiency” can be used to facilitate normal business negotiation such as “offering volume-based discounts”.

The carriers who would benefit most from volume discounting would likely be those with the largest existing customer bases — in order words, market leaders like Telstra, Optus, AAPT, iiNet and TPG. However, the legislation also states that if the NBN Co enters into a non-standard agreement with a telco, that it must publish the terms of that agreement on its website within seven days of it being entered into.

Xenophon said he believed it was “fundamentally wrong” that NBN Co should be able to negotiate on price with large telcos. “We need to remember that NBN Co will be equally owned by all Australians,” he said. “Governments should not be providing sweeter deals to one business over another.” The Senator questioned how the notion of “efficiency” would be quantified and proven, claiming it would be easier for larger telcos — with more resources — to demonstrate they best met the requirements.

“It is my concern that the big players will continue to monopolise the market and the smaller players will be pushed out,” he said, particularly highlighting the potential for Telstra and Optus to maintain their existing dominant market share.

Xenophon it was often smaller players which were “crucial” to generating innovation in the market.

The Opposition has also raised a number of other issues regarding the NBN legislation, ranging from the idea that it opens the door for NBN Co to become a retail ISP, to concerns about the so-called ‘cherry-picking’ components of the bills, which require other telcos wishing to build networks to open their infrastructure up to rivals.

Xenophon said on several matters that he could see the Opposition’s argument. However, he said his understanding about specialised groups such as energy utilities, for example, getting access to NBN Co’s infrastructure directly was that such access would be for “necessary and desirable uses only”, and added that the market would resolve some of the issues.

On the issue of whether large companies such as banks could obtain a carrier licence and thus buy services directly from NBN Co, Xenophon said such an option would not prove attractive if retail telcos offered competitive deals in the market. With regards to the cherry picking issue, Xenophon said it was important to understand that the NBN was “a significant taxpayer investment” which needed to be protected.

Ultimately the independent senator labelled the NBN “a good idea” and said he was a supporter of the project. However, he said, the legislation supporting it needed to be “water tight”. “Australian Governments don’t have a good track record when it comes to telecommunications,” he said, noting that the AUSSAT project had been described by former Prime Minister Paul Keating as “a billion dollar piece of space junk” and that the privatisation of Telstra had been similarly botched.

“I believe the NBN is a good idea,” he said. “It’s possible to have a good idea but to execute it badly. My concern with preferential pricing and conditions is that we are seeing just that.”

Image credit: Office of Nick Xenophon

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3. Troubled Optus slams NBN legislation
4. Turnbull slams Conroy’s “incompetence”
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5. Telstra ‘price squeeze’: Hackett slams ACCC inaction

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1. Michael Wyres
   Posted 21/03/2011 at 1:24 pm | Permalink | Reply

   I was listening to the debate this morning. I don’t think it’s fair to say he “slammed” it – he expressed his concern that it wasn’t what he wanted – however Ludlam said enough to say that some amendments coming from the government side stemming from the committee would likely see these issues covered.

   I doubt it will be voted on in its current form. The amendments will be introduced at the third reading, debated, and then hopefully voted upon.

   Then back to the lower house.

   • Renai LeMay
     Posted 21/03/2011 at 2:16 pm | Permalink | Reply

     Yeah, it seems like it will be going through parliament for a while. Supposedly Ludlam is to speak on the matter this afternoon.

     • Michael Wyres
       Posted 21/03/2011 at 2:26 pm | Permalink | Reply

       He spoke this morning also…managed to call the PM “Julia Abbott” too… *grin*

2. alain
   Posted 22/03/2011 at 11:41 am | Permalink | Reply

   It is interesting that the NBN should be singled out for volume discount attention when the other areas that really matter with a market advantage, that is the vast buying power of Telstra and Optus that hold sway on supplier deals with Smartphones, mobiles, contracted third party infrastructure builds to upgrade and increase wireless coverage etc are supposedly ok.

   Concern that all ISP’s can buy from the NBN Co at the same plan rate as Telstra and Optus I would have thought is the least small ISP’s have to worry about.
   ISP’s compete today with better value deals than BigPond and Optus, it makes negligible difference to the big two’s market share.

   I would be more concerned post NBN on how to separate Telstra and Optus from their multi million dollar advertising budgets and the marketing power of the all-in-one retail package deal.

3. David
   Posted 22/03/2011 at 1:38 pm | Permalink | Reply

   Volume deals are standard in the commercial world. Want to buy 1000 cars, you’ll get a discount. Whether its electricity, airline seats, food etc etc, volume = discount. So why should the NBN be different? Making an issue of this really shows how nive the politicians are.

   • NightKhaos
     Posted 22/03/2011 at 1:42 pm | Permalink | Reply

     It was all to do with the idea that the NBN is supposed to be a level playing field.

4. David
   Posted 22/03/2011 at 1:49 pm | Permalink | Reply

   Naive even!

5. Matthew
   Posted 23/03/2011 at 1:59 pm | Permalink | Reply

   The big advantage that telstra and optus will have over small ISPs is not bulk discounting the but stupid number of points of interconnect.