26 August 2015
by David Ramli

Secret NBN plan aims to help big brands like Woolworths and others sell internet access


NBN Co. chief executive Bill Morrow says new players like Woolworths must be helped onto the national broadband network.

NBN Co. is working on a secret plan to help retailers like Woolworths and other companies compete with phone companies to sell internet access.

The national broadband network is made up of 121 hubs across the country that connect to homes and businesses and are built by NBN. Phone companies that sell NBN services across the country, such as Telstra and Optus, must build or rent cables to connect all these facilities - a move that can cost tens of millions of dollars, preventing non-traditional players like supermarkets from reselling NBN services.

But sources said that NBN is working on a proposal to solve this problem by connecting these facilities itself and selling a wholesale service to new entrants directly, much in the same way Telstra sells broadband services to rival phone companies at a higher price.

The move would help get a host of new players like Woolworths, Australia Post or Vodafone Australia selling NBN services using their own big brands. This would help it make more money sooner, which is vital for offsetting the $15 billion cost blowout NBN announced on Monday.

The plan has angered existing internet service providers who have locked in their investments with the expectation that the market structure had been finalised.

"There was a major debate about POIs [points of interconnect] several years ago and there were strong arguments made by people from a range of quarters but the debate was settled and serious investments have been made since," an industry source said.

"When initiatives like this are being canvassed it will raise serious eyebrows amongst major carriers and infrastructure advisers who have invested serious amounts of money on the basis of these questions being settled several years ago."

The concept has been raised in industry circles in the past few months and gained traction after the successful merger of iiNet and TPG Telecom. NBN Co. chief executive Bill Morrow told a business event in June he was concerned about smaller players being unable to afford reselling his company's services.

"We are thinking that through and thinking about what kind of product we can create that makes it easy for new entrants to come in, and we don't let the market get owned by two or three big players," he said at the time, citing Woolworths as a potential new player.

M2 Group chief executive Geoff Horth, who runs internet service providers Dodo and iPrimus, said he was disappointed by the news because the company had worked hard to launch a service designed specifically to help new players use the NBN.

"As participants in this environment making long-term investments we should be able to rely on having this framework hold up," he said. "So I do find it extraordinary that the NBN is contemplating building a product to compete with its customers.

"If they're looking to launch a product that competes with ours I'd be pretty disappointed [and] I'm happy to compete with NBN but I'm dismayed that I have to – they should not be building products that compete with their customers."

When asked about the latest plan, Mr Morrow said NBN Co. had to make sure it was relatively easy for fresh faces to sell internet services and boost competition. But he also said it was too soon to talk about specifics.

"We've got to make sure that we keep a low barrier to entry to ensure there is lots of retail competition and you don't want the POI issue to be that barrier to entry," he said. "There's a lot of different solutions that we're opening up and talking about and it's still early days.

"We'll have a consultative period when we come up with the two or three ideas that we'll be pursuing. There's a solution out there I'm sure will be acceptable by most all."

Australian Competition and Consumer Commission chairman Rod Sims said he'd spoken to Mr Morrow about a range of options and was supportive of moves to boost competition on the NBN. But he declined to discuss any specific product.

"We are both people who are watching the market and want the same outcomes – kindred spirits," he said. "NBN, given it's constructing each of those POIs, could put innovative products into the market and I'll really leave Bill Morrow to elaborate on those when he wants to.

"We'll certainly be talking to the NBN about the market structure over time."