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ACCC set to okay Optus HFC exit

Monopoly concerns outweighed by consumer benefits, apparently

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Optus will exit the HFC business and pocket $AU800 million, if yesterday’s proposed determination from the Australian Competition and Consumer Commission stands.

The draft determination from the ACCC would allow Optus to pass its HFC customers to the National Broadband Network as it rolls out, and once the rollout is complete, to decommission the network, which has a footprint in Brisbane, Sydney and Melbourne.

Calling the decision “finely balanced”, the regulator decided that the NBN handover would avoid the cost of operating the HFC network in competition with the NBN and reduce the cost of migrating HFC subscribers to the new fibre-to-the-home infrastructure.

Although the Optus-NBN Co deal reduces competition, the ACCC also noted that Optus is unlikely to extend its network beyond its current footprint, and with the NBN as its competitor, is unlikely to stump up the capital required for future upgrades to the HFC infrastructure.

The ACCC also noted that Optus’ services would only compete with the NBN “at the lower end of the range of services that the NBN will support”.

Moreover, the ACCC’s statement notes, should Optus lose too many customers to the NBN, its HFC network would become uneconomic to operate.

In a more optimistic era, Optus used to trumpet its network as passing more than two million homes. However, many of those are unserviceable (mostly because Optus does not offer HFC to apartments or other ‘multi-dwelling units’), leaving only 1.4 million homes able to be connected. Of those, fewer than 500,000 are connected, with around 400,000 taking a broadband service.

The network has suffered overbuild in the past – during the 1990s, Optus was shadowed practically house-by-house as Telstra rolled out its own HFC cable. That battle finally ended in the early 2000s when both carriers halted their rollouts and wrote down the networks’ book value.

Although now operating DOCSIS 3.0 technology, the two cable networks have themselves represented a competition sore point, with providers like Internode criticizing their lack of wholesale broadband access.

Communications Day is reporting that the "last man standing" in the HFC business, iiNet-owned TransACT, remains hopeful that it can secure a similar deal and avoid overbuild of its networks in the ACT and regional Victoria. ®

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