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Telcos to pull plug on NBN?

The telecommunications industry has threatened to pull the plug on the company rolling out the National Broadband Network (NBN), unless it lifts its game.

iiNet Limited (ASX:IIN) chief regulatory officer Steve Dalby has told the Australian Financial Review (AFR) that NBN Co’s management treated the telco industry with contempt and refused to accept its advice on a range of issues.

iiNet also wants NBN Co to get its act together and lower the wholesale prices charged to telcos, with Mr Dalby suggesting the telcos could choose to go their own way. “NBN Co’s attitude is very dictarorial, its very public service and it’s very ‘take it or leave it’. It’s just surprising they have this attitude when you can actually leave it”, he said.

Mr Dalby suggested that rather than move their customers over to the billion dollar NBN, they would keep customers on their current systems, resulting in a lack of NBN customers and drastically reducing the expected revenues.

“NBN Co needs us more than we need them,” said Mr Dalby. iiNet is not alone with Singapore Telecommunications’ (ASX:SGT) Optus head Paul O’Sullivan warning in 2011 that NBN Co was asking for too much.

Internet service providers (ISPs) could utilise existing fibre networks in capital cities owned by companies like Telstra Corporation (ASX:TLS) and Vocus Communications (ASX:VOC), while using Telstra’s existing copper network outside the cities. While the speed would not be as great as Labor’s NBN plan to roll out fibre to the home, consumers wouldn’t have much choice if telcos refused to on-sell NBN products.

Foolish takeaway

NBN Co’s future relies to a large extent on having a good relationship with the ISPs. Part of that relationship means setting reasonable wholesale prices that allow ISPs to offer products to consumers that are affordable. Without that, the NBN could end up as white elephant.

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Motley Fool writer/analyst Mike King owns shares in Telstra and Vocus.

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