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Proposed NBN 'retail restraint' law is bad for everyone

The tortuous and ignorant debate over 'retail creep'

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Comment On the face of it, the Liberal Party is showing a laudable determination to ensure that NBN Co – the government-owned corporation set up to build, own and operate Australia's National Broadband Network – doesn't cut out the existing retail market by selling directly to customers.

Hence its proposed legislative agenda that would forbid NBN Co selling services directly to organisations such as electricity utilities.

The coalition's idea goes further than that, insisting that NBN Co's customers should not buy NBN services to carry traffic on their own internal networks.

In proposing an artificial distinction between "internal" and "customer" traffic, the coalition is either plumbing new depths of stupidity, or it has conceived a new way to white-ant the project.

Define 'customer'

A number of utilities already hold telecommunications carrier licences in Australia. These include VicTrack, ETSA Utilities, Jemena (formerly Alinta), Country Energy, Ergon Energy, Aurora and RailCorp.

With the exception of VicTrack, these same companies do not, however, have much in the way of retail telephone or broadband services to offer – so why are they carriers?

They hold licences because they need to comply with Australia's Telecommunications Act, which demands licensing of anyone who owns network infrastructure that brings them under the definition of "carrier". They need network management; their scale brings them under the purview of the Act, so they hold licences.

If any of these utilities decided to offer retail services, they already have the legal status to do so.

The coalition realised that it couldn’t ban particular industries from holding carrier licences, so instead, they want to regulate the kind of traffic retailers can carry on their NBN connections. They propose an explicit provision in legislation that NBN Co services can only be used for the purposes of on-selling those services to end users.

A carrier, according to the Liberals' proposal, would not be able to use services purchased from NBN Co for their own "internal use".

Even if you agree that the industry at large must be defended against the threat of NBN Co becoming a vertically-integrated retailer, banning carriers from putting "internal use" traffic on the NBN is a very bad idea.

Let's look at traffic that networks must have, but which can't be sold on to end users:

  • Diagnostics – A retail provider will want its diagnostics and network management to reach all the way to the ONT (Optical Network Terminal) in the customer’s premises.
  • Billing – Retailers will also interact with the NBN at points of interconnect, which is where they’ll exchange billing and other management traffic.

People create converged networks because they are more efficient than maintaining multiple, parallel network infrastructures. Eliminating converged networks by legislative fiat is complex and inefficient – and it favours those carriers who, like Telstra, maintain extensive fibre networks distinct from the NBN.

The answer, the bush lawyer will tell you, is to draft "technology neutral" legislation that can exempt whatever is necessary to the normal operation of the retailer's network.

The problem then becomes a definition of "necessary". Sure, network management traffic is "necessary" to the normal operation of a service over the NBN. But where would such legislation draw the line around what is necessary?

Would the coalition really expect a provider to send reports from the CRM system over one network, while using a different network when customer traffic is involved?

Punishing the wrong people

The carriers most disadvantaged by a forced and artificial restraint on their use of an NBN connection would be the small carriers.

Telstra's national fibre network already serves most of its 5,000-plus exchanges and a host of business locations. ISPs such as Internode and iiNet don't own or have access to a comparable footprint – their internal operations would be constrained by a law preventing them from (for example) including that connection in their purchases from NBN Co – they would need to buy a retail service from some other retail provider.

All of this is proposed by the coalition, purportedly to prevent utilities decimating the telecommunications industry by buying NBN connections for smart home networks.

Smart metering isn't even that interesting to carriers: it's not lucrative and it doesn't generate much traffic. That's one reason that the utilities have had to create their own industry lobby to try and get mindshare for "smart grid" applications.

The coalition isn't about protecting the telecommunications industry: it's about imposing inefficiencies on the NBN, so as to further undermine the whole project. ®

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