NBN Co claims RSPs can hold it to ransom

NBN Co claims its retail service providers wield sufficient power to threaten the company’s revenue by keeping end users on legacy services or cheap NBN speed tiers.

The extraordinary claims are included in a 130-page submission to the ACCC’s NBN wholesale services inquiry, obtained by iTnews.

They are likely to deepen mistrust between NBN Co and its RSPs that has built up over the past year due to the handling of negotiations for the wholesale broadband agreement (WBA3) as well as previous allegations that RSPs “cut corners” on quality.

NBN Co has been fighting off allegations in recent months that it coerced RSPs into signing up to unfavourable terms in WBA3.

It used its submission to the ACCC inquiry examining the WBA3 to paint a picture where both sides in the negotiation of the document had “relatively equal bargaining power”.

However, it is how NBN Co characterises the bargaining power of the RSPs that is unlikely to win it many friends.

NBN Co claims it operates in an environment where RSPs could “credibly threaten” NBN Co’s revenues if the government-owned network builder did not play nicely.

It calls the options available to RSPs “bypass risks”.

NBN Co did not directly allege any RSP had engaged in the behaviour, but the suggestion that RSPs would sabotage customers’ needs to further a bargaining position is unlikely to be well-received.

NBN Co claimed that one of the bypass risks “arises from RSPs not migrating end users to the NBN network quickly enough and instead supplying end users with services on legacy networks for as long as possible (i.e. until the disconnection date)”.

Whether or not this actually occurs is questionable.

NBN Co’s own figures show that, on average, it achieves expected take-up rates of NBN services before the disconnection date, which would mean RSPs aren't hoarding ADSL users for last-minute conversion.

It also runs counter to NBN Co CEO Bill Morrow’s repeated assertions that RSPs are in a “land grab” trying to put as many users on the NBN as possible (including the conversion of their existing ADSL bases).

In a “land grab” for NBN market share, it would make little sense for RSPs to delay migrating their customers, since there is enormous scope to lose them altogether to a retail rival.

A second “bypass risk” NBN Co claims it faces is from RSPs that can threaten to simply not do business with NBN Co, in favour of using “alternative networks" such as private fixed wireless or 5G networks.

“Moreover ...the bargaining power of RSPs in respect of service standards arises not only from their ability to partly or completely bypass the NBN network, but also from their ability to not increase the value of services they purchase from NBN Co over time (e.g. by preferring to connect end users to entry level products and not responding to NBN Co’s attempts to move to higher-value products),” NBN Co alleged.

“Because NBN Co relies on moving end users to higher-value services over time in order to
make a return on its investment, RSPs can exercise countervailing bargaining power when
they have the ability to ‘credibly threaten’ to minimise their consumption of higher-value services.

“The threat of such behaviour from RSPs is similar to the threat of ‘bypass’ in terms of its impacts on [our] revenue sufficiency.”

NBN Co also alleged that:

• Its service levels are far better than what RSPs offer their retail customers;
• That RSPs do not pass on rebates from NBN Co or commit to retail service standards;
• That RSPs may be engaging in some commercially rational regulatory ‘gaming’ of the ACCC in trying to set service standards outside of the WBA3 process.

The position of the RSPs will be revealed once the ACCC formally publishes submissions to its inquiry.