NBN retreat fires up Telstra rivals

Vocus is keen to cut Telstra’s lead in enterprise market on the back of NBN Co’s latest concessions to the industry.

Telstra’s enterprise business looks set to come under concerted pressure with rivals looking to make the most of NBN Co’s decision to stop making deals directly with business and government customers.

NBN Co on Thursday buckled under the prospect of legal action and fierce criticism from retail telcos to change its engagement model with enterprise customers. The latest concession comes hot on the heels of the company agreeing to no longer roll out its own fibre into commercial buildings in direct competition with existing networks.

Industry sources told The Australian that NBN Co’s board had been forced to act after a number of major telcos geared up to take it to court and submissions to a parliamentary inquiry on the NBN which universally poured scorn on the company’s actions.

The company’s original approach, which saw it strike contracts with retail customers and also roll new fibre into commercial buildings with existing networks, had been widely criticised for breaching its remit as a broadband wholesaler.

Under the revamped contracting model, NBN Co will let the telcos deal with businesses as they sign up to the NBN, removing itself from the retail landscape.

Vocus boss Kevin Russell said NBN Co’s move will allow it to turn up the heat on Telstra.

“Our main target is to gain market share in enterprise and government markets and our number one competition in that area is Telstra, so a healthy relationship with NBN will help us chase those markets a lot harder,” he told The Australian.

“There are markets, particularly regional ones, where there’s only one provider and the NBN will definitely drive competition in these areas.”

Mr Russell, a vocal critic of NBN Co’s original approach, added that the telco industry had been galvanised by NBN Co’s intrusion.

“When the incumbent and the challengers are united in their oppostion, you know something needs to be fixed.”

Macquarie Telecom group executive Luke Clifton is also confident that NBN Co’s retreat opens the door for smaller telcos to steal customers not just from Telstra but also the likes of Optus and Vocus.

NBN Co isn’t disbanding its enterprise engagement team altogether under the new model, with the company saying it will continue to engage with enterprise customers to understand their infrastructure requirements and to educate them about the services available over the NBN.

According to Mr Clifton, NBN Co’s education efforts will increase the competitive intensity in the market, giving businesses a choice on who they get their broadband from.

“The issue of price gouging is still alive and well for businesses across Australia and NBN Co’s enablement of new providers in an underserviced and overpriced market is vital to change.”

Telstra has a 60 per cent share of the enterprise market and the telco was circumspect in its response to NBN Co’s latest concession.

“NBN Co’s decision to stop contracting directly with enterprise customers is a good result for industry, but also a good result for customers as it removes the complexity of having to deal with multiple suppliers and contracts.”

“We need to see the detail of what the changes will mean in practice and when they will be implemented.”

“We think it is important that NBN Co clarify the implementation timing for the industry,” a Telstra spokesman said.

NBN Co will release a telecommunications industry consultation paper to seek views on how any sales leads or inbound interest should best be shared on a non-discriminatory basis.

Optus’s head of regulatory affairs, Andrew Sheridan said NBN Co’s backdown will deliver better outcomes for telcos.

“NBN Co plays a valuable role in improving competition and access to enterprise grade services and we look forward to close collaboration with NBN Co through its consultation process,” he said.

“This is a very welcome move by NBN Co as it brings its enterprise model back into alignment with the industry structure and maximises the benefits for enterprises.”