NBN Co sees the dissection of its wholesale deals

NBN Co’s commercial deals with retail service providers face enormous scrutiny after concerns were raised that they are a leading cause of consumer dissatisfaction with NBN services.

The ACCC said last month it would examine the efficacy of NBN Co’s “wholesale service standards”, which include performance objectives, operational targets and avenues of recourse, particularly compensation.

The inquiry is in part driven by widespread dissatisfaction among RSPs over how NBN Co approached the latest update to its commercial terms, contained in what is known as the wholesale broadband agreement or WBA3.

Many have not publicly voiced their dissatisfaction, but instead turned to the ACCC for help. Those that did not sign do not get access to new price deals and constructs.

“While WBA3 is generally understood to include many improvements of the previous version of the WBA, we understand a number of RSPs have indicated to NBN Co that they have concerns with aspects of WBA3 including in relation to the service standards committed to by NBN Co,” the ACCC said today. [pdf]

“Several RSPs have approached the ACCC to raise these concerns.”

The ACCC revealed a number of the issues that had been raised after the WBA3 negotiations.

They include “the relative bargaining positions of all parties and the effectiveness of negotiations in achieving service standards that will lead to competitive and efficient market outcomes".

Inequality has been a key theme in the industry since WBA3 was launched, with many RSPs unhappy about having limited input into the commercial terms for which they now have to offer NBN services.

“We are interested to understand from all stakeholders whether there is a significant degree of inequality in bargaining power between NBN Co and access seekers and if so, the degree to which this has impacted commercial negotiations, particularly in relation to service standards set out in WBA3,” the regulator said.

“We are also interested to understand if there are any service standards in dispute and whether there are additional service standards that should be included in a regulatory fallback position that have not been included in WBA3.”

The fallback could be an interim or final access determination (IAD/FAD), similar to the terms set by the ACCC for access to Telstra’s ADSL network.

Like previous FADs, the regulations would not replace the existing commercial deals; RSPs could still try to cut a good deal with NBN Co, but they would have something regulated to fall back on “if they are unable to otherwise reach agreement about access".

“This recognises the primacy of commercial agreements, and will apply without parties having to revert to the ACCC,” the regulator said.

The ACCC raised a series of questions over the WBA3 terms, including who the service goals favour and whether compensation payments for missed deadlines are too conditional.

There were questions raised about whether some forms of compensation could be gamed, resulting in connections being prioritised or de-prioritised to avoid paying compensation.

In addition, there were concerns that RSPs were being left to foot the bill for delays and problems caused by NBN Co, without being then able to recoup that money.

While the ACCC has made clear it will regulate if its - and RSPs - concerns are proven correct, the regulator is wary of doing anything that would add cost to end users’ services.

“We are particularly interested in understanding the cost implications on NBN Co of expanding the commitments that are currently covered in the service levels schedule, and the extent to which additional costs may be passed on to its wholesale customers and ultimately, to consumers,” the ACCC said.

“It is important to note that while there may be NBN service standards in dispute, or not included in WBA3, this may reflect different commercial positions, including potential cost impacts.

“For example, specific service standards that are significantly different to those currently in place could impact the costs faced by NBN Co and passed on to RSPs and consumers.

“We are particularly interested to understand whether these issues were a part of the commercial negotiation process and how decisions around any service standard/cost trade-offs were made and incorporated into WBA3.”