news Shadow Communications Minister Malcolm Turnbull has made a lengthy parliamentary speech damning the ACCC’s decision to sign off on Optus’ $800 million deal with the National Broadband Network Company, describing the regulator’s assumptions when approving the arrangement as “heroic”.
The deal, signed in June 2011, is a similar arrangement to the multi-billion-dollar contract NBN Co has signed with Telstra. Like the deal with Telstra, the contract recompenses Optus for the shutdown of its competitive infrastructure and virtually guarantees NBN Co a steady slew of retail customers to be transferred onto its infrastructure. Many of Optus’ customers will likely remain with the company during the transfer, although they will have the option to switch to rival providers once on the NBN — an option they did not have when on Optus’ HFC cable network.
In a statement issued this morning, the ACCC said its draft determination with respect to the Optus deal represented “a finely balanced decision”. Optus’ contract with NBN Co is not available for public viewing; neither is Telstra’s.
However, in a speech to Parliament last night (read the full speech online here), Turnbull said the ACCC’s draft determination on the eal was “a thoroughly unconvincing and contradictory document”. “Indeed, so unconvincing is the draft determination that one shrewd observer of the NBN saga suggested to me that it was a draft determination designed to be reversed following the period of public consultation,” he said.
Turnbull said that in every other country of which he was aware, one of the key objectives of telecommunications policy was to promote facilities-based competition, which meant encouraging the HFC cable owners — usually pay TV companies — to compete with telcos.
“But here in the socialist paradise of Julia Gillard’s Australia the government is building a massive new fixed line telecommunications monopoly and, just in case there would be any competition with it, the government is paying Telstra and Optus to decommission their HFC networks as well as paying Telstra to decommission its copper network,” the Liberal MP said. “It is difficult, therefore, to think of anything more anti-competitive than a new government owned Telco, the NBN, paying Optus $800 million to shut down the HFC network, which is currently offering high-speed broadband services comparable to those that will eventually be offered by the NBN itself.”
Turnbull pointed out that the ACCC had actually disagreed with many of the assertions made by NBN Co and Optus as part of the rationale for the deal.
“For example, it expressly rejects the NBN Co.’s argument that if the HFC deal is blocked by the ACCC then the rollout of the NBN will be slowed down or diminished,” said Turnbull. “It does not accept the argument that the HFC deal with Optus will improve the NBN Co.’s internal rate of return, which was the justification the government gave for the deal, I might add. It also rejects the argument from NBN Co. that the HFC deal is required in order to deliver the reforms to the Australian telecommunications market initiated by the government—structural separation and so forth. It further rejects the argument that the HFC deal will bring forward the claimed benefits of allegedly enhanced competition in the telecoms market.”
The ACCC also concluded that there was a cost saving to society by operating one national telecommunications network instead of two.
“But is this a public benefit, or is it really is simply a supposed benefit to Optus? Even if you accept the ACCC’s proposition, why does it not offset that benefit to Optus against the $800 million cost incurred by the NBN and the unfortunate Australian taxpayers who are ultimately funding that and many other payments to the NBN?” asked Turnbull. “It all seems a very thin argument. It is as though the ACCC has concluded that what is good for Optus is good for the public of Australia.”
Turnbull also took aim at the regulator’s claim that NBN Co will be strongly regulated and thus won’t need the sorts of competitive market tensions that keep many other corporations in check.
“To put one’s faith solely in a government regulating a commercial monopoly against its own commercial interests is naive in the extreme,” said Turnbull. “This draft determination should be consigned to the wastepaper bin of competition history and replaced with a ruling that ensures facilities based competition is preserved in Australia.”
It’s not the first time the Optus NBN deal has been heavily criticised by NBN commentators.
When it was first announced, telecommunications analyst Kevin Morgan accused Communications Minister Stephen Conroy of looking after his “mates” at Optus, describing the SingTel subsidiary’s deal as “extraordinary largesse” and highlighting the fact that Optus has supported Conroy over the past few years while the NBN has gathered steam.
“Throughout the four years wrangling that supposedly saw Telstra structurally separated and locked into the NBN (neither has happened in reality) Optus has been Conroy’s most loyal ally and often his attack dog … Now it’s pay-off time,” wrote Morgan at the time.
I totally agree with Turnbull’s sentiments as he has expressed them here. I have been a long-time critic of the Optus deal and he has made all the arguments which I have made about the deal; plus a lot more, and in greater and more eloquent detail. That’s why he’s a politician and I am a mere scribbler ;)
You can see why NBN Co requires a complicated deal with Telstra: Telstra owns the nation’s copper network infrastructure, which will be replaced by the NBN; NBN Co requires access to Telstra’s ducts to expedite its own fibre rollout; and one of the objectives as whole is to structurally separate Telstra and change its nature away from that of a vertically integrated monopoly.
But the same has never been true of Optus. There simply is no need to pay Optus to migrate its HFC cable customers onto the NBN, when they would eventually do so anyway, and it seems ridiculous to be paying Optus to shut down its HFC cable network, when that network is already the subject of significant competitive pressures anyway. The HFC cable network owned by Optus has already been duplicated by Telstra’s own HFC cable and copper networks; there is simply no ethical need to pay the SingTel subsidiary to shut it down.
The ACCC’s draft determination on the Optus deal is a very contradictory document. It’s as if the regulator seriously examined all of the issues, but then threw that consideration away in a transparent attempt to push the NBN policy through at all costs. Well, that’s not good enough; we need the ACCC to be more independent than that. No doubt a number of submissions to the regulator’s draft determination will also argue that point in much greater detail.
Image credit: Office of Malcolm Turnbull