Primus CEO calls for major NBN discounts

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Primus CEO calls for major NBN discounts

Incentives to keep Tier 2 players in the game.

Primus Telecom CEO Tom Mazerski has called on NBN Co to cut wholesale rates to Tier 2 players by up to 55 percent to help them combat customer raids by cashed-up Tier 1s Telstra and Optus.

In his first public appearance as head of Primus Australia, Mazerski warned that payments NBN Co had promised Telstra and Optus to migrate their respective customers onto the NBN were essentially marketing war chests that could be used against Tier 2 telcos.

Telstra had negotiated a $9 billion deal to move fixed line customers to the NBN and decommission its copper network.

An Optus agreement to migrate customers off its cable network was made for $800 million.

Mazerski's inference appeared to be that Telstra and Optus could use their war chests to poach the customer bases of Tier 2 ADSL players as they moved into an NBN world.

If wholesale fee discounts were not palatable, Mazerski proposed a ballot system, in which customers in NBN serving areas would receive the opportunity to stay with their existing retail service provider or choose a new provider, without intervention or marketing from other providers.

Mazerski, who replaced predecessor Ravi Bhatia in August, pointed to examples in the US, during the initial structural separation of AT&T.

"There has to incentives for the Tier 2 retail providers to stay in the game," Mazerski said.

"That's where this whole market power dynamic has to be looked at.

"You want low barriers to entry which the NBN Co will fix as it's equal access to everyone.

"The piece that's missing is you can do all that but if you still have one or two providers that have the majority share of the market you have failed miserably in bringing competition to the market."

Mazerski told attendees of the Commsday Summit in Melbourne that the "secret agreements" hatched between NBN Co, Telstra and Optus reduced the incentives for smaller players to continue competing.

They only served to consolidate market power dynamics in a new environment, he said.

Though he conceded he understood the economic theory behind the agreements, he argued that tier 2 players - including Primus and similar-sized competitors - needed compensation for redeployment of customers and assets to the new network.

Mazerski's discount proposal appeared to be the opposite of the volume discount pricing proposal raised in draft legislation put forward to Parliament this year and temporarily championed by Optus.

NBN Co CEO Mike Quigley had promised not to offer any discounts to providers at the time.

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