Optus will push for NBN Co to be given the power to offer volume discounts to service providers on the National Broadband Network (NBN) under legislation currently in Senate Committees hearing.
Speaking at the Senate Committees into the National Broadband Network Measures-Access Arrangements Bill 2010, Optus government and corporate affairs director, Maha Krishnapillai, said the telco debated internally whether it was better to have an environment where no volume discounts were offered by NBN Co, but decided it was in its commercial interest to push for them.
“As the second largest player, we think there would be advantages, clearly, in us being able to say we are more efficient in terms of buying,” he said.
“What we are trying to do is mirror normal commercial negotiations and commercial practices... which say that if you are helping the supplier in their costs to you — effectively aiding efficiency — then there should be some recognition for you of that in commercial discussions.”
The decision comes despite concerns that offering volume discounts would undermine the level playing field which NBN Co, in its being the dominant wholesale provider of broadband carriage in Australia, would create.
In November, communications minister, Stephen Conroy, dismissed concerns held by independent Senator, Nick Xenophon, that the current NBN legislation may allow NBN Co to offer special pricing to major players such as Telstra.
“What is set out in that bill is that if the NBN wants to give say a volume discount, it has to go and get approval from the ACCC (Australian Competition and Consumer Commission)," he said following the passing of the <i>Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2010</i>.
"The NBN can’t just go off and give a volume discount to anybody or make new pricing arrangements."
Also speaking at the hearing, Internet Society of Australia director, Paul Brookes, refuted the argument for volume discounts arguing that automation of NBN Co’s carriage allocation systems should mean that it was no more or less work in supplying a major player, such as Telstra or Optus, than in a minor service provider.
“If NBN Co is doing its job properly and has set up automated provisioning, then there should not be any rationale for a reduction in cost to NBN Co’s service whether that is presented to them as one block of 10,000 or 10,000 individual orders,” he said.
“The cost should be identical as they are automating the whole thing. So we find it difficult to see how there could be an argument for volume discounts.”
Optus’ Krishnapillai added that despite the telco’s desire for volume discounts from NBN Co, it was difficult to gauge what volumes of carriage would be needed to justify such a discount.
“That is the real difficulty as I don’t know that volume per se should be criterion or effectively some kind of discount,” he said. “The key [criterion in the bill] is how you define ‘aiding efficiency’.
There is no definition around that so I don’t know that there is a number [for a volume discount].”
Optus interconnect and economic regulation general manager, Andrew Sheridan, said for volume discounts to apply, NBN Co would need to demonstrate that at a certain volume of carriage the economics of supply changed.
“It is not reasonable to say that if we had several times the volume of company X we should get a discount of X per cent,” he said.
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