The magazine of the Melbourne PC User Group Tendering at Gigabyte Speed Matt Rocke |
|
Australia's proposed move to the next phase of broadband for everyone is far from cut and dried, reports Melb PC member Matt Rocke. |
In the shifting sands of fiscal outlay from one government to another, $4.7
billion in
funding for the NBN (National Broadband Network) has been transferred from the
Regional Communications Fund and the Future Fund into the new Build Australia
Fund. The economy is booming and it's time for the nation's leaders to think
about how we invest for growth in the new century upon us.
If the Rudd government is to live up to the nation builders claim derived from
Labour's traditions, the
biggest and most public test will be the rollout and delivery of broadband via a
NBN. Minister for Communications, Steven Conroy is in a hurry to make good on
this election commitment, something many in the industry find alarming given the
magnitude and potential regulatory impacts of a new fixed network build. That's
not to say FTTN isn't overdue, just that were Telstra
likely to win the contract, some serious policy considerations are outstanding
or undefined.
During the pre-election telecommunications debate, then Communications
minister Helen Coonan challenged Steven Conroy on the timeframe of Labor's
proposal, namely that
the first nodes would be activated by the end of this year. She indicated that
the current regulatory framework for fixed competition took years and is under
constant review and legal challenge.
The ULL and LSS agreements for unbundling and line
sharing between Telstra and other carriers have been the major driver of
competitive broadband services. Yet the wedding of Telstra Wholesale and its
competitors has been a strained and arduous
marriage. As rocky as it's been,
in the present fixed network space there's been a degree of 'network'
competition.
Apart from carriers like Optus and TransAct's own physical infrastructure
independent
of Telstra's network, the alternatives to expand the footprint for competitors
is via an unbundled connection. That is, the broadband connection via Telstra's
'last mile of copper' but through a competitor accessing its own switching and
data carriage.
The competitor carrier controls the features, line profile and capacity of the
broadband as well as most of the revenue.
This form of network competition allows for differentiated services. It requires
complex wholesale relationships that manage price, quality, connection, change,
relocation and disconnection transactions between Telstra and other carriers. A
'hybrid' network like this exists in conjunction with vigorous competition
in wireless broadband and allows other carriers to
market with scale and some certainty over their capital and operational
expenditure.
It's been no small investment to get to this point. DSLAM equipment must be
physically co-located at the local exchange, backhaul leased
or interconnected, signals aggregated and terminated to switch resources and
local and global internet serving capacity. Widespread choice for ADSL2 has
become available because of these investments.
FTTN (Fibre To The Node) changes the game. It's a closed network. It removes
network competition, and makes the national network almost a continuous pipe
from the switch or data gateway to the home. Indeed fibre to the home is the
absolute example of a closed network, but this will never happen across a wide
area in Australia due to distance and expense. Therefore, carriers
interconnecting to the local loop and running their own fixed networks have a
valid concern over who controls FTTN. If it becomes the standard, these
investments will become a transition technology long before the expense of the
roll out is recouped.
In many ways the local network, is a natural monopoly - it's expensive and
wasteful to duplicate it. Therefore
the real issue regardless of who wins the tender to roll it out is the
environment the government mandates for
access. For the benefits to be realised, broadband must not only be fast and
everywhere, it must be affordable for
consumers and business alike.
Labor has great faith in the ACCC. The ACCC has been instrumental in ensuring
fair competition for consumers and business by setting
wholesale prices and mediating disputes. Here's a question: How many vigorous
markets are best served by mediated competition? Moreover,
many past complaints in the broadband sector
have arisen because delay, brinkmanship, claim and counter-claim have become
tactics in an overall strategy of winning market share rather than market
forces.
There are good reasons why Telstra is best placed to build a new network, many
due to
the posture Telstra has adopted at key points in the FTTN process. The new
network requires Telstra's current architecture, customer base and co-operation
to function. Moreover, the FTTN build will
for the first time in a long
while re-standardise the fixed network, making way for a fully integrated IP
core and access system. To protect its market and shareholder interest, it would
be fair to say Telstra has offered its network intelligence and facilities in a
limited context within the view that Telstra will build and manage the new
network. Would
anyone anticipate less under the Trujillo leadership team?
It can also be argued the government has made it challenging for others to
present a viable alternative tender. Having an FTTN built by another entity
altogether, an investment fund or consortium, would requires a degree of
certainty about how wholesale access is to be mediated, yet this is exactly
where the Rudd government has been vague.
Telstra had pitched battles over this very issue with
the Howard government, so what's changed? The Rudd government has made some key
decisions that have changed the attitude of some players. It's cancelled the
OPEL (joint venture between Optus and Elders) WiMAX build for rural Australia
saying the technology was sub-standard. It's also increased the subsidy for the
Australian Broadband Guarantee from $3,300 to a whopping $6,000 per customer,
for new connections to rural and regional areas.
As well,
the government has stopped short of arguing the case for structural separation.
Structural separation requires the owner of the FTTN to run the network and its
own retail operations as independent businesses so there's
essentially no difference to the network arm on whom the end user elects as
their preferred service provider.
Many believe such a separation is critical for transparency to minimise transfer
pricing and exploitation of market power.
To many, the new Rudd government is taking a "hear no evil, see no evil"
approach to the tender process. No doubt having the outstanding policy
considerations on the back burner may accelerate an outcome in the short
term, yet it may lock the industry into another era of access disputes, claims
of improper use of market power, and inflated prices. Could the nation builders
in parliament encourage a case of history repeating in this new millennium?
See you in court.
|