NBN discounts criticised for ???pricing out’ small telcos

Smaller providers have slammed the National Broadband Network’s pricing discounts as giving the big four an unfair advantage.

The NBN Co dropped prices for its 50 Mbps product to the price of its 25 Mbps speed plan in December, with hopes it would encourage telcos to pass on the savings to customers and encourage Australians to up their speeds.

This has saved the average NBN 50 user $10 a month with Telstra, Optus and TPG Telecom quickly announcing price cuts.

However, smaller providers have not been able to discount their prices as some wholesale providers have not passed them along while others have found “hurdles” in the contract terms.

While the NBN sells directly to telecommunications companies there are requirements that mean smaller retail service providers may not find it financially feasible to buy direct.

Those without a large customer base buy from a wholesaler – the main ones being TPG, Vocus, Telstra and Optus, who buy direct. The ‘big four’ makes up 90 per cent of the NBN market.

Matthew Enger, managing director of LeapTel, a small retail service provider with about 2000 NBN customers, buys through TPG’s AAPT and Vocus and claims he has not yet been offered the discount.

TPG Telecom was the first provider to pass on discounts to customers through its TPG, iiNet and Internode brands.

“What NBN has effectively done is provided a huge advantage to the big telcos over the small ones who are trying to compete and keeping them honest,” Mr Enger said.

Others who have been offered the discount have refused it, said Dylan Brown, head of product for Inabox Group, which buys from a major telco and acts as an intermediary wholesaler.

One issue was a required minimum marketing spend, which Mr Brown said was $20,000 per provider. This is a figure he said was not feasible for “mum and dad battlers” who ran some of the smaller providers.

“They need the discount just to remain competitive … Immediately we’ve been priced out of the market.”

This is a contractual requirement from NBN Co, with similar costs included in the past.

MNF Group, an intermediary and direct buyer, is currently working through its contract updates with a wholesaler to pass on discounts, chief commercial officer Jon Cleaver said.

“[The] current complexity of NBN structure is a hurdle for healthy competition.”

MyRepublic managing director ANZ Nicholas Demos’ company predominantly buys direct but uses wholesale services for some areas.

His wholesaler has not yet disclosed what discounts they will be providing.

“It’s just helping the big boys … it’s doing nothing for the smaller players,” he said.

An NBN spokeswoman said it had 150 retailers “of all different sizes” selling the products in a very competitive market and had spent more than six months consulting with retailers on the new pricing.

It’s understood some smaller providers have taken up the discount offer.

“NBNCo’s existing pricing options will continue to be available for internet and phone providers who prefer this model,” she said.

Amaysim commercial director broadband Rob Appel said it has supplier relationships, including with Optus and NBN Co, and the new marketing initiatives “enable a degree of price flexibility” for those with access. The discount pricing will remain until the NBN’s new bundles are finalised.

Vocus, Telstra, TPG and Optus did not provide comment.

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