Internode says NBN pricing will phase out smaller ISPs

  • Hackett cites "Valley of Death" for anyone smaller than Internode
  • NBN will bring consolidation to just a handful of players
  • Minimum 250,000 customers needed to make an ISP worthwhile

Simon Hackett, Internode’s managing director, has warned ISPs if you’re not part of the big five – being Telstra, Optus, AAPT, iiNet or Internode, then you won’t survive when the National Broadband Network (NBN) is completed.

"How many retail national service providers do you think the NBN is planning for?" Hackett asked. "The feeling of the rhetoric is that there will be hundreds of them. It's actually just five. We're the number five player in the industry. Anyone smaller than us, never gets across the valley of death."

Hackett has claimed that internet providers will need at least 250,000 customers to make it worth their while to offer plans on the new broadband network. He told the Communications Day Summit in Sydney yesterday, that if an ISP has only 10,000 customers, then it will cost the provider as much as $106 per month per customer to connect to the NBN.

He has claimed the challenges stem from, “(a) the ACCC’s decision to force NBNCo to locate its points of interconnect at great distances from its own wholesale customers and (b) The NBNCo’s decision to model its pricing structure on the ‘scarcity’ based pricing model of Telstra Wholesale, rather than upon the ‘abundance’ based pricing model that is appropriate for a new national dark fibre based network.

The Internode managing director has argued the only other way for smaller ISPs to survive is to buy the networks wholesale off larger companies like Telstra or Optus. Optus managing director of wholesale and satellite divisions, Vicki Brady, has confirmed Optus is planning on offering wholesale NBN services.

"This is why Vicki Brady wants to sell wholesale services to 10,000-customer ISPs; because they're dead without it. Quite deeply," Hackett said.

Telstra CEO David Thodey also spoke at the Summit, calling on Australian telcos to work together to meet consumer expectations in the growing broadband and smartphone market.