NBN 121 POI will raise costs and lessen competition

Stan Beer
Monday, 01 August 2011 15:19

Opinion and Analysis

Internode founder Simon Hackett was the first to sound the warning about the potential anti-competitive elements of the National Broadband Network, citing the massive cost impost on smaller ISPs wishing to provide national coverage who would have to pay to connect to the 121 points of interconnect (POI). Now, a second ISP has joined the fray, saying that providing equivalent services they already provide using the NBN would multiply their costs 15-fold - and it has a point.

The ISP, Australia On Line, told Zdnet that the broadband provider currently pays $40,000 a month to house to Telstra at seven points and would have to pay $700,000 to connect to 121 NBN points, effectively forcing it out of the ISP. This was exactly the same sort of point Internode's boss Hackett raised earlier this year.

When Hackett's objections were raised by iTWire with broadband minister Stephen Conroy at a doorstop he gave at a the Cisco Live 2011 event in Melbourne in March, his response would have raised more than a few hackles of all but the very largest broadband providers.

Senator Conroy said that start-up service providers would most likely need to use the services of wholesale aggregators rather than buying direct from the NBN.

"A new market could well be created," he said.

"Simon (Hackett) makes a number of assumptions. For instance, a start-up may not want to target the whole country but start out by servicing a local market."

When asked if having aggregators provide wholesale services to smaller ISPs would add another layer of cost, Senator Conroy said: "It will be up to the aggregators to provide a competitive service."

Let's examine these statements point by point.

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