Status quo remains in Telstra’s South Brisbane

27

news The nation’s largest telco Telstra has confirmed it will not address several of the largest complaints by other ISPs about the way it is handling its new fibre rollout in the South Brisbane exchange area, despite signing a new accord regarding the region with Communications Minister Stephen Conroy.

Telstra has chosen to replace the copper connections to about 20,000 premises in the region as the exchange — where the copper cables terminate — is being closed in order to make way for the new Queensland Children’s Hospital in the area. The region is one of the first in Australia to receive fibre services to the home — but is not part of the Federal Government’s flagship National Broadband Network project, although the long-term plan is for the infrastructure to become part of the NBN.

However, over the past year other major ISPs such as Optus, iiNet and Internode have expressed strenuous complaints about Telstra’s handling of the situation, with issues ranging from the company’s wholesale prices — which are claimed to be markedly higher than equivalent broadband prices on the previous copper network — to the lack of equivalent services such as the ability to stream IPTV services via multi-cast or offer so-called ‘naked’ services without an attached telephone line.

On Monday Communications Minister Stephen Conroy announced that Telstra would provide what he described as “an open access wholesale service” on fibre networks it is currently deploying in South Brisbane and also in some new housing estate projects.

For customers in those new housing estates, the deal is good news. As iTNews has documented in an extensive article on the subject, the deal will see Telstra’s fibre in those area opened up to retail competition for the first time, with rival ISPs like iiNet, Optus and TPG able to provide services over Telstra’s network, if they sign supply arrangements with the telco.

However, in both the new housing estates and in its South Brisbane network, Telstra has stated that it will not provide ‘naked’ services or allow multi-cast IP video services that would allow the ISPs’ own video platforms (typically FetchTV) to operate. “There is no change from the [South Brisbane Exchange fibre arrangement] that we have detailed with our customers in previous months,” a Telstra spokesperson said. “An underlying voice service is required for Telstra wholesale and retail customers because this is the way the network is configured and multi-cast is not supported by the network.”

In practice, what the deal signed between Conroy and Telstra means is that Telstra will be exempt from having to meet the Government and NBN Co’s regulations for the setup of new fibre infrastructure. Broadly, the regulations are meant to ensure that any new fibre infrastructure built around Australia has to match the standards of the NBN, so that NBN Co will not overbuild fibre infrastructure in areas where it already exists.

“We welcome this decision to exempt the South Brisbane Fibre network and other smaller specified ‘Velocity’ fibre networks these networks are set out in the Velocity networks exemption) from the Government’s ‘level playing field’ obligations,” the Telstra spokesperson said. “It provides Telstra and its wholesale customers with certainty concerning the availability of a broadband fibre product in these areas. Telstra has agreed to offer a Fibre Access Broadband (FAB) service to wholesale customers as a condition of this exemption.”

Telstra said it had been in discussion with NBN Co in relation to the South Brisbane exchange area — as this area is eventually expected to become part of the NBN. “These discussions continue,” the telco said. And it added that it had signed commercial deals in the area with 20 customers (usually retail ISPs) of its wholesale division.

Conroy said the deal would facilitate competition in the fibre areas covered by the arrangement, and it would be subject to scrutiny by the Australian Competition and Consumer Commission. The ACCC has already stated that it is satisfied with Telstra’s arrangements with customers in the region. However, it is likely that Telstra’s reluctance to offer naked broadband services and IPTV services over its fibre networks will continue to rankle other ISPs and their customers.

In addition, there are other issues which Telstra is facing in the South Brisbane area that have the potential to spill over into the new housing estate areas where it will also begin to open its networks to competition.

Internode has complained publicly about poor Telstra pricing in the South Brisbane exchange area, stating that its own higher pricing in the region was based on the “crazy” underlying wholesale costs which it said Telstra was charging for other ISPs to access its new infrastructure. TPG is also charging higher prices in the region than on other copper infrastructure, and it remains unclear what Telstra’s wholesale pricing on the fibre infrastructure in the new housing estates will look like.

opinion/analysis
It remains unclear why both the ACCC and Communications Minister Stephen Conroy are unwilling to take more drastic action with respect to Telstra’s obviously uncompetitive actions with regard to its fibre networks located around Australia.

It seems like common sense that Telstra should not be simply allowed to replace its existing copper network with a fibre network in certain areas and then be able to completely change its wholesale service offering to retail ISPs, charging them radically different prices for access to the infrastructure and not offering fairly basic services such as broadband without a compulsory associated telephone line. Especially when it seems like much of this infrastructure will eventually become part of the National Broadband Network.

I believe Telstra is not speaking correctly when it says it cannot support naked broadband or multi-cast IPTV streaming services over these fibre networks. I am very sure that this is technically possible. The phrase ‘don’t rock the boat’ comes to mind when I think of the actions of the ACCC and Conroy with regard to this contentious and ongoing issue.

Image credit: Telstra

27 COMMENTS

  1. “charging them radically different prices for access to the infrastructure and not offering fairly basic services such as broadband without a compulsory associated telephone line”

    Welcome to the Coalition’s “private sector” view of broadband

    • if you want to argue, which government just gave them to go ahead to rip people off here? oh wait, yes, it was labor. Go spout your political garbage somewhere else

      • @ Guest, both you and Marcos put forward valid points. Although I think your’s was actually more political than Marcos’s.

        What you both demonstrate is, that this problem is not political per se. The unwritten commonality in your comments is, that this is what we expect from private, money hungry companies.

        Something we can hopefully see the back of when the NBN is completed, but will sadly probably not see the back of, if as Marcos suggested, the NBN is stopped.

  2. All these companies complaining about Telstra’s high prices are free to build their own networks if they are really so unhappy with Telstra prices and conditions of access contract. Their complaints are self-serving ranting as they don’t want to take any risk, yet want to profit from these investments at Telstra’s expense.

    Welcome to this false competition where one company invests and everyone else piggy back to its network at below cost prices.

    • Technically you’re right, but we need to get the regulatory settings right first. After all, Optus did try to roll out its own network (HFC) and Telstra simply followed right behind with its own HFC network, mirroring Optus’ rollout. Wasted investment — neither network has likely made a decent return.

      • but we need to get the regulatory settings right first

        What are the right regulatory settings ?
        No-one seems to be able to answer this, apart from airy-fairy pixie dust.

    • Micheal_1, I must call your interpretation flawed. If you review the prices, you’ll clearly see that Telstra is overcharging for their services and refusing to provide basic features (multicasting) which the network is probably capable of. They can do that as they’ve ripped the copper out, removing any effective competition. Networks are a natural monopoly and, as such, must be regulated. Network duplication is a terrible waste of resources and most ISP’s simply don’t have the money.

  3. Yes, well done Michael_1. Trot out that stupid old argument that has no basis in practicality. Do you really think it makes sense to have 3 or 5 or more fibre networks running in the same conduits in the same streets? It was dumb enough that some areas ended up with two pay-tv networks hanging from the power poles.

    It made no practical sense in the 90’s when that was done and it makes no more sense now even if those other ISPs had access to the conduit infrastructure (or do you propose that the streets be dug up multiple times to have whole new conduits installed?). Unbelievable!

  4. Maybe we should have separate electricity, water, and gas networks for every major energy provider while we are at it.

    Some infrastructure falls naturally into a monopoly model. The essential piece is the regulation of the monopoly so that all service providers have reasonable, equivalent access.

    With regard to Telstra’s refusal to provide “naked” services or multicast, this is simply to force other service providers into adding to Telstra’s coffers.

  5. Forcing people to pay for a phone line they will never use is just outrageous in my opinion. Just another example of Telstra’s blatant money-grabbing, just because they can. The ACCC needs to step in urgently.

  6. I also agree ACCC at once force greedy money-crazed telstra to use nbnco’s naked fttp pricing model
    nbnco is selling fibre at cheaper discounted AVC rates than regular NBN AVC pricing when voice port not in use at all (same as 16 dollar naked copper ULL v. 30dollar wholeslae difference).

    if nbnco can do it so must telstra! stop ripping public off now

  7. “It remains unclear why both the ACCC and Communications Minister Stephen Conroy are unwilling to take more drastic action”

    Unclear? It’s very clear. The govt is DESPERATE to keep Telstra on side in the move to the NBN and structural separation to the point of letting them get away with any anticompetitive behaviour in the meantime. The NBN is THE ONLY promise from the last election the government has not done a 180 degree turn on. If Telstra were to play hardball and kill the NBN (and don’t for one moment believe they can’t), Labor would be sunk.

  8. The DBCDE who advise Conroy are living in the past. Everything they come up with turns into a Telstra pay day. Compare what the NBN was was supposed to be, and what it became – a multi-billion dollar payout for Telstra.

    • I’m sorry, have you got a better idea on how to deal with the incumbent when you’re replacing one of their multi-billion dollar assets with another multi-billion dollar asset? I don’t think “Because I’m the government and I say so” will work.

      • Actually “Because I’m the government and I say so” does work. That’s what a government is — a monopoly on the use of force in a geographical area. I am surprised that Conroy hasn’t been harsher with Telstra. He has the power to be.

        • My point is that if Telstra were not compensated for their network being replaced there would be considerable political repucussions that mean that no sane government official would suggest such an action.

  9. telstra should not a cent for giving up copper. it always belongs to the people of australia. 60billion telstra pay for copper is only small part of total private super savings. no need for compensation. also telstra is only just one company in ASX 500. stockmarket will not crash. after building nbn, government should nationalise telstra and optus wireless network and not pay any money. wireless internet is too expensive but important for ipad and smartphone. government should take back wireless and give cheap to australian public. no more profiteering. spectrum is too precious scarce resource to give awaycheaply for a few billion dollars, belong to people always.

    also another idea for ISPs can only allowed 7% ROI (same as NBNco standard). if higher profits then ACCC must make them lower prices immediately. internet is human right. ISPs must not make millionaires on back of poor people who need to access internet to search jobs, email and read news. this is worst crime.

    • Ignoring your terrible English (Telstra should not a cent… what?), you are just plane wrong on every count. Your ideas are completely infeasible, and your understanding of the current situation is woefully inaccurate to comment with any authority of this matter.

      Since it won’t be enough just to call you out, I might as well point out some specifics:

      [The copper has] always belongs to the people of australia.

      No, the copper has always belonged to the organisation currently referred to as Telstra. At some point the government did own said organisation, but they opted to sell the organisation for a quick cash injection, and put it under a piece of binding legislation known as the USO in order to ensure that the organisation continued to operate universally accessible phone services.

      no need for compensation. also telstra is only just one company in ASX 500. stockmarket will not crash.

      Do you know what legal precedent is? I’ll define it for you: an already decided decision which furnishes the basis for later cases involving similar facts and issues. If the government takes an action which means that they can decide to make a asset of a privately owned company redundant, thus completely removing all its value, without first compensating said company, how do you think this precedent will affect further business decisions in Australia? It will create an unacceptable business risk.

      This means companies will be reluctant to invest in projects in Australia because they have precedent that the government may chose to take action making their investment redundant without compensation. This will create a huge problem of underinvestment in private infrastructure initiatives, like mobile broadband in Australia.

      after building nbn, government should nationalise telstra and optus wireless network and not pay any money. wireless internet is too expensive but important for ipad and smartphone. government should take back wireless and give cheap to australian public. no more profiteering.

      First, is $10/m to expensive for you? Because if it is, I would seriously reconsider the reality of the situation, like the fact building and operating mobile networks is a multi-billion dollar expense.

      Second, mobile networks is one infrastructure sector where it beneficial to remain privately owned because it is a sector that easily allows competition due to the relatively low costs of entry coupled with the fact you can get a high average revenue per user. In other words, infrastructure competition in sector works. The same cannot be said for fixed line Broadband, where the cost of entry is high, and the revenue you can get from users is low. Meaning the time to recover the investment is long, if you want evidence of this, look at the NBN, a 10 year project, which will take approximately 20 years (after compensation) to repay the initial investment.

      spectrum is too precious scarce resource to give awaycheaply for a few billion dollars, belong to people always.

      It does belong to the people. Look at the conditions of purchasing a license:

      Spectrum licences are offered for terms of up to 15 years, and are issued with no automatic right of renewal. At the end of the licence period, replacement licences will generally be reallocated following a price-based procedure. This provision does not prevent a spectrum licence being reissued to a person to whom it was previously issued.

      also another idea for ISPs can only allowed 7% ROI (same as NBNco standard). if higher profits then ACCC must make them lower prices immediately.

      Impossible to enforce. No seriously, there is no practical way to enforce a maximum return. Further, inflicting this standard will discourage investment meaning we would end up worse off because of lack of investment.

      internet is human right. ISPs must not make millionaires on back of poor people who need to access internet to search jobs, email and read news. this is worst crime.

      Dwellings are a basic human right, and yet you are allowed to charge rent or force people to purchase them and some people make millions of dollars in profit by doing this. Food is a basic human right, and yet supermarkets are allowed to charge customers to purchase it and make millions of dollars in profit by doing this. There are already provisions in our society, like unemployment benefits, to enable underprivileged people to survive in society. The fact it now being a basic human right does not automatically mean that companies are not allowed to make a profit from it.

      • I don’t have anything constructive to add, but I find it hilarious that you criticise his English, then call him “plane wrong” in the very first sentence of your post.

  10. A monopoly in of itself isn’t the problem. It never was.

    The problem stems from a profit driven enterprise, operating both a retail and wholesale service over the same monopolised infrastructure. It automatically introduces a simple expediency of driving profits by using a separate costing model for retail and wholesale customers.

    It is, quite simply, a conflict of interest. This is manifested best by the comparative gulf that exists between Telstra Wholesale based services, and most ISP infrastructure based services. Meanwhile, Sol’s successor has spearheaded a revolution in pricing; it’s easier to drop retail prices when you have that split pricing model.

    Telstra has a charging model for Bigpond that differs from Wholesale, further, that Wholesale really exists at all from a consumer point of view, comes down to enforced competition through regulation.

    Unfortunately the ACCC is often it’s own worst enemy. It’s been forced to “step in” to set pricing multiple times as Telstra has proven it will continue to put shareholder gains and net profit ahead of complying with regulation.

    Unfortunately it (ACCC) has proven to be a less than average arbiter of change and can make some considerably non-consumer-friendly choices. Examples include dropping the ball allowing Telstra to invent “Zones” for ADSL services, and enforcing a large POI count for the NBN. The later might be debatable, however it’s a non-trivial choice, that I am sure will cause yet more consolidation in competition.

    South Brisbane is simply an illustration of what would happen under a Liberal FTTN offering. Telstra can simply out-build and shut-out competitors. The ACCC seem to feel there is no need to regulate Telstra’s greenfield deployments, thus we can presume this would be the same outcome for the Liberal FTTN.

    It is debatable as to how far such a network could overbuild could continue before the ACCC swung into action, likely around the same time competition starves further and yet more consolidation occurs.

    This would return us to a commercial, profit driven enterprise with virtually no regulation outside of the TPA at the head of a large fibre deployment. NBNco’s income is derived from wholesale, thus they have a large economic driver to make wholesale work. Telstra, do not. So why would they?

    The ACCC needs to walk softly, but carry a very big stick. So far, they have talked loudly and forgotten the stick. This should have been a case of the ACCC stepping in, requesting the issue be resolved, or arbitrate an access price. Telstra will not simply “play nice” when asked. There’s no profit in “nice”.

  11. The annoying part of the current install is the throttling on the uploads. Plans that have been published (ie that I have found) are all asymmetrical: at megabits per second including 30/1 .. 100/5.

    5 mbps uploads? On fibre? That is an insult. And these are business plans mind you.

    Still trying to work out a way around it – but if you want faster uploads, seems you need to talk to the Telstra Ethernet guys. So instead of ~ $90 per month (for 100/5 and 300GB) .. try $2500.

    I wonder how many tails I can get installed?

  12. Updated on the business end …

    From Telstra:

    “The new network is not capable of symmetrical or committed rate products. Those types of services are being offered over the existing Wideband fibre which will remain in place, and if you require an additional service you can contact Telstra or your service provider. The new network we are bringing in is to replace your PSTN and ADSL services. Each fibre/ONT can support 2x PSTN lines and 1x Broadband service. These will run back to a box in the service cupboard outside your office so it is not an issue if you need more lines.”

Comments are closed.