While Telstra, Optus, and 25 other internet service providers (ISPs) were quick to sign up to NBN Co's wholesale broadband agreement (WBA), iiNet, its subsidiaries, and a number of other smaller telcos are holding out, stating that the offer on the table would leave them vulnerable to paying out compensation to customers for NBN Co's issues.

NBN Co announced this morning that the ISPs had signed up to the wholesale broadband agreement, which comes into effect in March and governs the way that NBN Co offers services to the individual ISPs over the course of a year.

iiNet's chief regulatory officer Steve Dalby told ZDNet that iiNet, Internode, Adam, and the other iiNet properties would not be signing up to the WBA until a number of outstanding issues are addressed, in particular around the customer service guarantee (CSG).

Retail service providers are bound by the customer service guarantee to provide a minimum level of service to customers, or pay financial compensation. Most recently, Telstra copped an AU$510,000 fine from the Australian Communications and Media Authority (ACMA) for failing to meet its benchmarks for connecting new services.

Dalby said that on the legacy copper network, when a retailer is fined for something that is Telstra's issue, such as a failure to fix a line fault, Telstra compensates the retailer for the fine they receive for failing to meet their customer service guarantee.

But he said that under the WBA for NBN Co, there is no such guarantee for compensation for NBN Co's failure to meet installation or fault repair deadlines.

"The major concern we have derives from NBN's appalling delivery record," he said.

"NBN Co says, 'that's a problem between you and your user; it's got nothing to do with us. If we don't meet our installation times and appointments or repair deadlines, well, sorry guys'. Actually, they probably won't even say sorry."

Dalby said it is "unacceptable", given that iiNet has no right to do any of the installation or repair work when it comes to the National Broadband Network (NBN).

Dalby said it would be less of an issue if NBN Co had been able to meet its targets.

"One thing NBN Co can't claim is that it's ever met a target," he said, indicating that NBN Co is failing to meet one in three of its appointments for new connections.

"They're not only failing to meet their appointments, they are failing to communicate that they are," he said, stating that customers often call up iiNet and blame the retailer for NBN Co's failure to meet appointments.

"We won't sign because we can't accept that commercial or financial risk that we will be hit with never-ending CSG payments without them underwriting the costs of those, and we are then getting hit with TIO complaints," he said.

Dalby said that iiNet is also concerned about the Australian Competition and Consumer Commission's (ACCC) lack of powers to arbitrate over the WBAs.

"There's an overriding issue about the regulatory recourse," he said.

"If I execute this agreement, and there is something the ACCC has competition concerns about, or feels it is appropriate to arbitrate on a dispute, it doesn't matter what they come up with. Once I've signed that WBA, the WBA has precedence over any determination.

"It's just a ludicrous situation."

Dalby suggested that Optus and Telstra's reasoning for signing up to the WBA quickly was connected to the companies both receiving large financial payments to transfer the customers to the NBN as part of their respective deals, and he said NBN Co would be hoping that Optus and Telstra's signings would influence smaller players in the industry.

"They're being paid to connect their customers, whereas we have to pay them for permission to connect our customers," he said.

A spokesperson for NBN Co had been asked to comment on iiNet's claims.

Until iiNet signs up to a WBA, the ISP remains on its interim agreement with NBN Co to continue to offer services, Dalby said. He indicated that given the tens of thousands of iiNet customers on the NBN today, it is unlikely that NBN Co would withdraw its interim agreement with iiNet while negotiations are still ongoing.

He also suggested that the smaller ISPs would not sign up to the WBA until iiNet gets on board.

"They're watching us to see what we do, because they don't believe they have the negotiating power."

A spokesperson for NBN Co declined to release the full list of ISPs that have signed up to the WBA.