Note 16: Wholesale / Resellers

Posted: 03 April 2006

A network operator may provide their network to other businesses at lower (wholesale) prices than they sell to their own retail customers. Network resale may be initiated by government policies that seek to inject competition benefits into an infrastructure monopoly, or by operators seeking to increase the utilisation of their network (possibly to help defray costs for its establishment or maintenance).

Retail customers may purchase from several retail businesses, some of which offer their own network's services, whilst others are reselling other business' networks. Businesses may 'complete' their product range by supplying most components using their own infrastructure, and supporting the remainder by reselling another network. Retail resellers are commonplace for phone and internet networks, but can also include non-telecommunication networks such as electricity utilities.

Network resellers develop retail customer relationships and use the network operator's infrastructure to deliver the necessary 'network services'. A reseller's retail customers interact with the reseller's staff and systems, though, to answer some inquiries the reseller's staff may utilise the (wholesale) systems of the network operator.

To avoid proprietary (customer and pricing) details from 'leaking' between business divisions, the network operator's wholesale division is often kept separate from the operator's retail division. To reduce their costs, the wholesale division has no direct connection with a reseller's retail 'customer': the retail customer is 'owned' and managed by the reseller; the reseller is the wholesale 'customer' of the network operator's wholesale division.

The wholesale division reduces its cost structure by eliminating the consumer marketing and support costs inherent in a retail business, and only dealing with very specific inquiries from a reseller's internal staff for more serious problems. The reseller's internal staff will develop a better knowledge of the operator's network and systems than would be possible for a retail customer to acquire allowing questions to be more targeted. Most questions from retail customers (e.g. bill inquiries, new connections, price inquiries, disputes) will be addressed by the reseller's own staff and not form part of the wholesale division's support costs.

Industry regulators will often ensure network operators offer their network infrastructure to resellers on a 'comparable basis' to the network operator's own retail division. This approach is intended to ensure network operators do not stifle competition by providing resellers with lower quality service (e.g. slower to connect, poorer availability, slower service restoration), thereby hindering the reseller's ability to provide a competitive, 'comparable' service to retail customers.

Billing information provided by the network operator is one of these comparable areas. For example, details of network transactions must be forwarded in a timely and consistent manner so that the reseller's customers can inquire upon transactions performed in a similar timeframe, and the reseller can generate bills to a similar schedule as the network operator's own retail division.

Tags: Billing, Wholesale, Reseller