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to work alongside a migration plan in which Telstra’s copper-based customer access network would be progressively withdrawn as the NBN is rolled out.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. ®
COMMENTS
The Telstra/NBN plan is already an almighty stuff-up.
Any objective examination of the NBN implementation/deployment strategy has to conclude that these 'structural' problems originated with the original sale (privatisation) of the once government owned telco, Telstra, by successive Australian governments, both Liberal and Labor.
1. In an outrageous grab for money, governments sold off Telstra in its entirety, which essentially consisted of:
(a) a retail division;
(b) telephone exchanges and other technical infrastructure and;
(c) cableways and network rights of way (cables, trenches, street ducts etc.) that stretch across Australia and which took over 130 years to build.
2. They sold Telstra off to 'mum and dad' investors and other small shareholders of Australia who were duped into believing they were getting a good deal when in fact they're were sold a poisoned chalice (it was anything but a good deal).
3. Selling off the cableways and rights of way meant that other Telcos, Optus and Vodafone etc. (who governments invited to compete with the once monopolistic Telstra), now had to go begging to Telstra for access to the cableways/distribution network. Naturally, Telstra used its monopoly over the cableways to screw the competition. Essentially, Australian communications prices were held much higher than the world average as there was stuff-all real competition with Telstra still effectively a monopoly.
3.1 The blindingly obvious alternative would have been for Telstra's cableways to come under the ownership of a Cableway Authority that was owned and controlled by BOTH the government and all major competing Telcos. This would have minimised and optimised communications network costs for the nation as a whole. By selling network distribution to telcos at wholesale, all would have been on a level playing field.
[Remember, Australia has a population of only 21.8 million--only one third of that of the UK [61.8m] spread over an area the size of Europe, so optimizing the network installation over such an area is of paramount importance if costs are to be minimised. In the Australian context, running duplicated, physically paralleled communications networks across the country is the stuff of lulu-land and or charlatans. Down here, even the local sheep look intelligent.]
4. Nevertheless, the way out of this bind was for Optus and Vodafone to build their own networks which they did. But due to the enormous size of the Australian Continent, they still had to rely on Telstra for access to the traditional POTS network and its cableways for access to anywhere that wasn't densely populated--and that's most of the country!
5. After years of ineffective competition something had to be done to fix the almighty stuff-up. Voilà the National Broadband Network (NBN) was born and would be THE saviour--the solution of which the government would invest many billions.
6. Trouble was Telstra still owned the cableways! So what could the government now do? Well, it could nationalise Telstra (or at least that part of it), but nationalising is out of favour worldwide these days and Oz pollies would look even sillier on the world stage if they did, so they had no other option other than, in effect, to buy it back--err well sort of. It's the complicated deal that's the subject of this news story.
7. What must be remembered and is key to this story is that the all-up cost of the NBN will cost MANY TIMES MORE than if the Telstra cableways had been kept by the government (that's to say only items (a) and (b) should have been sold off).
8. For those of you who think this is a simplistic analysis as new fibre to the homes is new infrastructure and would've added to the cost, it's true, it would have. However, Telstra is extending its already extensive fibre network and has been doing so for years. Had the status quo continued (and simply been transferred on to a Cable Authority) then fibre to the homes would have been the end product of a naturally evolving infrastructure that was first discussed, planned and even trialled as early as the mid 1970s (in tests in Sydney's eastern suburbs).
9. We must not lose sight of what has really happened. Through sheer ineptitude, incompetence and a disregard for the Australian people, successive disingenuous Australian governments have committed treason against its citizenry by:
(a) forcing telcos competing against Telstra to double up with parallel competing network infrastructures of their own instead of sharing the existing cableways infrastructure--for which the Australian public ultimately has to pay, and;
(b) concocting the NBN strategy to both 'hide' the original sell-off fuck-up and to justify its reversal with the expenditure of many extra billions of dollars over and above that necessary had the Telstra cableways remained in government hands.
This is not just an Australian scandal but also a worldwide one, yet it's received little international publicity. I suspect the reason why even you muckraking journalists have missed the big-picture view is that even you have succumbed to the government's carefully orchestrated NBN propaganda.
A point to remember: treason of such magnitude, had it been committed 70 years ago in WWII, would, most likely, have had the perpetrators with their backs to the wall.
Those accountable should still be held responsible. A Royal Commission would be a good place to start.
After the sell off the government wants to kill Telstra now it has its money
After the sell off the government wants to kill Telstra now it has its money and screw mom and pop investors who bought the shares from the government.
While Telstra was a bad ex-govt organisation attitude, only Australia Post remains as nasty and anti-customer focused as Telstra was.
Now the fat mexican had his ass kicked back to the United States and the new guy is in, they have been working on improving customer service and simplifying everything so everyone can understand everything. Free cash is building up and the stock exchange is taking notice.
And now the Gov't wants everything from Telstra for its new NBN Telco, erm.... make that Broadband Provider and then wants the only thing they leave Telstra with, mobile phone business cut off from competing with NBN and keeping competition running and prices down for Australians.
NBN called me up the other day about the new mobile service in my area which is on the edge. They said they could get me 12Mbps service..... maybe.... no guarantee.... wireless....
I told them Telstra offers 21Mbps service already and have been advertising for ages.... The NBN guy on the phone was surprised and unaware.
Typical government organisation! So out of touch with reality and the people.
Meanwhile all the regional/rural promises are scrapped, anyone not in a major city is on their own cast off on the dregs of internet access and by the day NBN offers less and less to the bulk of Australia which was the whole reason the NBN is around, to improve internet for people outside of cities.
And now that assholes give city people high speed internet and nothing for everyone else in this country.
Pack of liars!!!
Get that bloody Ranga out of Canberra now!
But how do we stop making it an even bigger stuff up?
Pointing fingers at the past is not going to work. As you noted *both* sides of politics have got blood on their hands at this point.
I think your analysis otherwise is pretty spot on, although I'd even question if selling part b (the exchanges) was a good move. There are parallels to be drawn with the privitisation of electricity and gas retailers.
So if we can't undo the past, and what we desperately need is (a politically acceptable) Nationalisation of the cableways, then the NBN seems (on paper) to be one of the better options. Unfortunately this round of "structural seperation" of Telstra seems to be about as weak as previously mooted proposals and looks very likely to achieve further lockin for Telstra, rather than levelling the playing field. And we the Taxpayers will pay through the nose, both Publically in a multi-billion cash payment to Telstra, and Privately in continued monopolistic pricing.
I really really want to see Telstra get broken apart, but the NBN is looking less and less fit for purpose.
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