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Aus regulator seeks tweaks to Telstra NBN plan

Separation anxiety

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Australia’s competition regulator has pushed a pawn in the telco regulation chess match, soliciting industry comment on Telstra’s first draft of its structural separation regime.

In issuing its 200-page-plus discussion paper ,the Australian Competition and Consumer said its “preliminary view” is that the current undertakings offered by Telstra need a rewrite to comply with Australian competition law.

The structural separation plan is a key component of the negotiations surrounding Australia’s National Broadband Network (NBN), since its aim is to turn Telstra into a retail business, competing on hopefully-equal terms with other retail carriers for customer business on the NBN. It’s designed to work alongside a migration plan in which Telstra’s copper-based customer access network would be progressively withdrawn as the NBN is rolled out.

The devil, however, is in the detail, with the key issue being in the transitional arrangements offered by Telstra, covering equivalence and transparency measures.

At the moment, Telstra is the most important wholesaler in the country for anybody wanting to offer DSL-based broadband services. Not only does it provide the copper service a retailer needs, it also controls access to the exchange buildings, and away from the hotly-contested metropolitan markets, it is often the sole operator of backhaul networks.

While the ACCC endorses the notion that the structural separation undertaking “has the potential to lead to a competitively neutral environment”, it is concerned that under the proposed undertaking, there might remain scope for Telstra to retain its control over upstream facilities. This would leave the carrier in a position to favour its internal customers over other carriers or ISPs.

Hence the ACCC’s concern. As commission chairman Rod Sims said in releasing the discussion paper, “there needs to be a clear and enforceable commitment to ‘equivalence of outcomes’ that enables wholesale customers and Telstra’s retail businesses to gain access to key input services of equivalent quality and functionality”.

The commission also wants to make sure that both the structural separation arrangements and the transitional arrangements will remain “fit for purpose” throughout the slow process of the NBN build.

Scribes hyperventilate over ‘wireless promotion’ clause

Comment: One thing causing over-excitement about the discussion paper in Australia is that the commission also expressed a concern about the agreement between Telstra and NBN Co that the carrier will not promote its wireless services as an alternative to fixed-line services.

It would be easy, going by the way this is reported, to think this was the ACCC’s key concern – and that this somehow “proves” that the wireless promotion constraint is somehow designed to crimp the growth of mobile broadband.

That’s the danger if you go no further than the executive summary.

The wireless agreement – which doesn’t even arise until page 64 of the discussion paper – is potentially detrimental to competition for the supply of voice and broadband services, the commission says.

On the surface, this appears to endorse the view that the constraint on Telstra is an attempt to shut down competition. But a closer reading of the discussion paper reveals a more complex consideration.

The shorthand description of the migration plan – one which this writer has used on The Register in previous stories – is that NBN Co will make payments to Telstra for customers as they are disconnected from the copper and connected to the fibre.

This, however, turns out to be incomplete, as the discussion paper notes (quoting from NBN Co): The disconnection payments are made to Telstra upon disconnection of a premises in accordance with the Definitive Agreements, rather than upon migration of Telstra’s customers to the NBN, it says.

That create a risk for NBN Co that isn’t merely about infrastructure-based competition. Telstra is in a unique position, since it owns the customer copper: without that constraint, NBN Co is concerned that Telstra, unlike any other substantial carrier, could attract disconnection payments when all it has done is move a customer from one Telstra product to another.

Telstra is the only provider for which this opportunity exists. The agreement between it and NBN Co does not apply to the Optus or Vodafone mobile networks, because they’re not in the same position. They can promote a fixed-to-mobile substitution (unless persuaded to make the same undertaking as Telstra), so long as they can deliver the services they advertise – because they won’t be receiving a disconnection payment for the migration.

The question the ACCC has to resolve – and the industry has to address in its submissions to the discussion paper – is whether the agreement has the potential to be harmful for consumers.

Nor does ACCC chairman Rod Sims seem to view “wireless equivalence” as the biggest question to be answered. In this conversation with the ABC’s Ticky Fullerton, Sims’ list of “key” issues are “the compliance plan” (which he said “won’t cause them [Telstra] a problem”); that the Telstra-NBN Co agreement isn’t significantly varied without ACCC approval; and “ensuring that there is equivalence of outcomes”.

Both Telstra and the ACCC have stated that all of the issues raised in the discussion paper can be solved. It’s possible, if the process drags out, that Telstra might put its plans as it now stands to its shareholders for a vote, with a proviso that they may need to be varied to comply with ACCC requirements.

However, there’s nothing in Telstra’s response that suggests the kind of anti-regulator outrage that the discussion paper would have triggered if it really was throwing a spanner in the works.

For his part, ACCC chairman Rod Sims is on the record as saying that the regulator thinks all of the issues raised in the discussion paper can be solved. It’s a negotiation, not a battle. ®

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