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.
opinion/analysis
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
Mmmm, this was not a good deal for NBNCo. AND its’ PR. As you say the ACCC needs to be more impartial in this whole thing, regardless of the fact that the NBN is the best outcome for consumers.
In this case the $800 Million is too much for the small and intangible gain NBNCo. will make.
Not surprised to see Turnbull jumping on it. It’s a crappy deal and if it’s one thing politicians do seem to be able to do , it’s point out crappy deals.
I kind of hope this “draft” is actually thrown out. It’ll be a blow for PR, but at least maybe NBNCo. will get a better deal out of it and stay strong in its’ ethics.
Malcolm Turnbull vs Rod Sims
*ding-ding*
FlGHT!!!!!
(How can the ACCC red-light the deal? Telstra insists that Optus should also be stripped of its HFC network to put both telcos on equal competitive footing.)
“(How can the ACCC red-light the deal? Telstra insists that Optus should also be stripped of its HFC network to put both telcos on equal competitive footing.)”
This is the problem. And yet again it’s Telstra controlling the sector, via the ACCC.
And people STILL want Telstra to have this power while being privately controlled and all out for profit??
Actually, having just read Malcolm’s Speech, I’ve found something quite interesting. The 3 reasons he gives that the ACCC have determined for WHY the deal should go ahead:
– “…The only substantial benefit from the deal, the ACCC concluded, was that decommissioning the Optus HFC network would ‘reduce or avoid inefficient duplication of infrastructure’.”
This one is quite weak, I agree. Duplication would be at Optus’ cost, not NBNCo. It should, therefore be their problem and they shouldn’t be paid to deal with it. However…
– “First it asserts, or assumes, that Optus will not invest in its HFC network to increase its capacity to offer products comparable with the higher speeds available on the NBN—one gigabit per second, for example”
Actually, I have no problem with this assertion whatsoever. Optus have not extended their network in the last 10 years and have made no noise about doing so even before the NBN. Turnbull goes on to talk about the rapid pace of technology meaning this seems unlikely for HFC, but that fact remains that the speeds available across copper/coax will inherently be slower than fibre- simple physics tells us this and we’ve debated it before. Optus would have to update to the latest possible technologies AND node split to a degree that would be, in my opinion, uneconomically viable for the future of their network to provide similar speeds to the NBN. Meanwhile, NBNCo. simply flick a software switch and replace a few transmitters and we get 1, 10 or maybe even 100Gbps.
– “Having assumed that the NBN will overbuild the Optus HFC network, the ACCC goes on to assume that Optus or some future owner of its network will not invest to enable it to compete with the NBN. But why would it not do so, given that its capital cost is so much lower than the NBN’s capital cost? ”
Why would it not do so? Because it wouldn’t bother with HFC when fibre was already in the ground and had the mainstay of connections because of the advantages of fibre over HFC. Could Optus compete via their own fibre network? Certainly and there is nothing stopping them doing so, however, we’re not talking about fibre, we’re talking about HFC. The ACCC is determining the fate of the HFC, not some possible future competitors fibre network. And lower capital cost? How so? Fibre is 15mm and can handle bandwidths, currently unknown, HFC is 100mm in diameter and it will therefore be MUCH more difficult to lay more and its’ bandwidth is currently limited to between 100Mbps and 1Gbps and that doesn’t even bring to the ballpark contention, which HFC suffers, but fibre doesn’t.
– “Then the ACCC assumes that, in the future, consumer demand for high-speed access will exceed that possibly available on the HFC. But who knows? Given that the HFC can be upgraded now to well over 100 megabits per second, given the utter absence of any applications which would require that speed now…”
We’re getting a little shakey now Malcolm. You’ve already stated that you disagree with the assertion the ACCC have made regarding upgrades to make it competitive with fibre at “up to 1Gbps” essentially admitting they will HAVE to upgrade to compete. And yet here you’re saying we don’t NEED the speeds? There are many business applications that already require over this speed and there is no doubt residential customers will want it and beyond soon. HFC CAN be upgraded to more than 100Mbps, but as I’ve already said, it likely involves node splitting which is CONSIDERABLY more expensive than the equivalent upgrade that allows fibre to reach well over these speeds, with nothing more than software and transceivers.
– “If you accept the ACCC’s reasoning, then the people running the NBN Co. are commercial morons. If you accept the truth of what the ACCC is saying—that is, if the HFC remains in place, the NBN Co. will overbuild it anyway, Optus will not invest in the NBN to compete with the NBN network and in due course Optus will walk away shedding tears of regret and remorse having lost lots of money in its vain, Don Quixote type attempt to compete with the magnificence of the fibre network—why is the NBN Co. giving Optus 800 million bucks?”
Here’s the ACTUAL problem; was it worth $800 Million dollars. Probably not. But alot of the arguments for the deal by the ACCC hold up. It is just unfortunate that Optus seems to be captaining this ship in terms of monetary agreements.
The arguments are reasonable, but the deal is not worth it. There’s no doubt though that Turnbull has used this to his advantage VERY eloquently :)
Hear Hear!
Good to see someone making sensible arguments in this matter.
Turnbull’s argument for facilities based competition reminds me of the heady days of the Cable boom in the UK where 5 different companies dug up lots of streets in London to each lay their own fibre, or the ridiculous situation when Optus and Telstra were competing to lay HFC on top of each other. This isn’t socialism, but common sense. In the same way that we don’t have two companies running power lines into our houses, we don’t need multiple companies running HFC/Copper/Fibre into out houses. I currently have 2 telecom connections, the legacy copper and the newer HFC. I’d love to clean that up and only have one connection.
+1 Ken. I WISH I had 2 connections at the moment mind you….then I’d have a choice of HFC over my crappy 2Mbps ADSL!
I see things like this from Turnbull and it shows that he has a brain.
Not really sure what ground the ACCC have here with the Optus deal.
That being said – are Telstra being made to decommission their HFC network as well?
Off topic comment:
I still cannot believe the Oppostion didn’t just stick with Turnbull as Opposition Leader.
He’s a much better prospect as a PM that either Abbott or Gillard.
“That being said – are Telstra being made to decommission their HFC network as well?”
Yes. They’ve already made that agreement. This Optus agreement is in fact part of that agreement, in as much as Telstra has required Optus to sell their’s as well, so as they are on “fair ground” for competition….yeah, except for the fact that Telstra have more than 60% of the market to play with…..very fair.
“I still cannot believe the Oppostion didn’t just stick with Turnbull as Opposition Leader.
He’s a much better prospect as a PM that either Abbott or Gillard.”
+10. We would’ve had a decent, constructive debate about the NBN which probably would’ve ended up us getting the NBN in its’ current form, or very close to it, for less money and taking less time.
Instead they insist on the Tony “the head-kicker” Abbott….
Correction replace “sell theirs” with “decommission theirs as well”
Both Optus and Telstra still own their networks, they are just agreeing to not use them.
I note SMH etc printing similar article, with no ability to comment.
I agree with why pay $800Mill, however operational install efficiency would be a factor.
If the HFC was to remain operational, considering that speed of roll out in this political climate as well as “take up rates” are such major issues. NBN would be foolish to include areas covered by HFC in any early roll out, leave them to last if at all. Many businesses have HFC running past their doors.
Having said this I have Optus HFC cable in my street, Optus refused to connect me when I applied, insisting on ADSL2+, neighbours who are connected put up with it. Being employed they get on after work, right when it is being hammered and get as bad as my rubbish ADSL2+. If the NBN was not to be provided where there is HFC I would seriously consider relocating.
Will OPTUS be forced to wholesale, will OPTUS be forced to upgrade to provide more nodes and better upload?
Let me get this straight:
Coalition MPs are better at accounting than CPAs, better at communications network design than network engineers, better at judging guilt than the courts, better at understanding scientific research than scientists, and now they think they are better at protecting competition than the ACCC?
Seriously, does anyone believe them anymore?
I like the new pic of Turnbull :-)
I still reckon he looks like Larry from the 3 Stooges.
I have no idea who he is talking to, but it looks like mike morhaime :P
Renai
I have had difficulty accessing your site and or some of the items, I can but assume you have had extremely heavy traffic??, Possibly due to the dearth of ability to read comments re similar items in the mainstream media. ?. Capacity upgrade in the pipeline?
+1 It kicked me off about 6 times :D
I had some issues before, DNS errors and such.
Might want to have that checked, although could be the ISP just having a shit day.
Probably an Internode fanboi DOS attack in retribution for publishing something negative about Simon ;)
Maybe Malcolm Turnbull needs to realise we need the NBN and the government need to retain ownership of it so we will have true competition at the next level nationwide.
They could have had the platform today if the government DIDNT sell Telstra ‘as is’ but instead just sold the retail split of it. Retaining the networking and wholesale as a non-competing and non r&d organisation that keeps costs low by minimising profit. Eventually corporates would have built networks simply to get the next level of technology, not to fight off profiteering of the monopoly.
The government needs the NBN to return the nation back where it should have been before the government made the mistake.
I used to have a lot of respect for Malcolm Turnbull, I even favored his early vision of a fiber to the node as I felt there was still life in copper. But his attitude of simply bashing for the sake of bashing and dropping his solid plan in favor of whatever the mirror shines of a labor plan/policy has lost my interest. I dont even read his comment anymore, I just see more bashing and think, ‘really? again?’
Bring on the NBN and vote labor, they need one more term to see what we all want come to fruition. Vote them out for not delivering if they dont, but at least give them the chance to deliver on the time frame they promised.
The only thing Malcom Turnbull needs to do is get a clue.
Seriously.
+1 on the comment tho.
As time has gone on, I’ve gotten the distinct impression that Turnbull wants the NBN, as is. The original spiel of ‘Ve vill destroy ze NBN as fast as ve kan’ has given way to ‘we will do it differently, but honor whats allready been done’.
The arguments against an NBN have all but disappeared, which for the average person is a good thing. There is one key comment thats been made by the Coalition that backs this up as well – they will honor all contracts in place.
The net effect being that by the time the election rolls around next year, we’re going to have contracts in place for the rollout up until 2017 or longer, meaning a distincy portion of the population will contractually be in a position to enjoy it. It will be cheaper to roll along and just let it keep going, and I think Turnbull sees that.
With todays report that there are considerably higher than expected uptakes of the faster plans, a CBA should also show that the ROI for the NBN as is, is much better than what the Coalition expected 2 years ago, so even if they dont change anything the cost will be much lower – NBN will be in a positive return position sooner than expected.
Whats this got to do with the Optus signoff? Not much, except if they honor this as well as the Telstra agreement, it simply means that whoever is in charge can get to the real meat of the build without looking over their shoulder at any competition.
Much easier to build this sort of network knowing that the players that are in a position to potentially undermine you, cant or wont. For whatever reason.
“The net effect being that by the time the election rolls around next year, we’re going to have contracts in place for the rollout up until 2017 or longer, meaning a distincy portion of the population will contractually be in a position to enjoy it. It will be cheaper to roll along and just let it keep going, and I think Turnbull sees that.”
The trouble is, Turnbull isn’t running the show, Abbott is. And Tony Abbott is an angry little man with a chip on his shoulder, or so it seems.
The sad thing is, even though I consider myself a Labor voter in general, I would strongly consider voting Lib if Turnbull was in charge and he said the NBN will continue as planned, and I wouldn’t be surprised if a lot of people feel the same way.
Count me in too, I’m a swing voter and will never vote liberal while the mad monk is leader and the libs continue this pathetic short term thinkingre the NBN.
When the Libs get it at the next election, will they be able to reverse this ridiculous decisioon by the ACCC?
It was described as “vandalism” elsewhere which I’d totally agree with.
I’ve been on Optus cable for probably 8 years and it has been faultless. Down only once in all that time, for a few hours, due to a massive tropical thunderstorm and downpour. It works brilliantly. Why rip it out so that NBN can have no competition an be free to raise their rates?
“Why rip it out so that NBN can have no competition an be free to raise their rates?”
It’s not really a case of “ripping it out so that NBN can have no competition” it’s redundant and not needed due to fibre totally eclipsing the speeds HFC can achieve, the real point is should NBNco be paying for rubbish that would die a natural death once the fibre is installed? No.
Also please explain why you believe NBNco will raise their rates due to this.
At this stage, mate; I’d be impressed if they reversed anything.
The LNP Coalition ‘say’ they are against the Carbon Tax, but Tony Abbott himself is infact in support of one. One which has the same delivery method as the one we see now.
The LNP Coalition ‘say’ they are going to demolish the NBN, but given that they’ve said they intend to continue existing commitments rather than cancel and a Cost-Benefit Analysis would confirm their fears that a FTTN NBN would be more expensive in terms of revision, delays and renegotiation with Telstra.
The LNP Coaltiion ‘say’ they are going to remove the MRRT from the mining sector, which I find completely unfeasable given that they’d have to revise the financial outlook of the country, purely at a lack of incoming tax.
Realisitcally, its alot of chest-beating and drum-pounding. They’re almost a shoe-in, but given they’ve got no policies costed, they have no alternative NBN plan, they’ve got no alternative budget costed to show where they’re getting the money from to pay for anything – I think this country’s about to get a very rude shock to the system.
They’re both useless, thats why you dont vote for a party because you like them. You vote for the party because of their policies. At the moment the NBN is a crowd-puller. While it is, the LNP arent as safe as they think they are.
+10
+10
If they reverse either of the carbon tax or MRRT, they will need to reverse everything they have paid for. that includes the increase in tax threshold, the $500 or so a large portion get as carbon tax compo, etc etc. Those ‘taxes’ are paying for stuff, and if you cancel them, that stuff either has to be paid for another way, or reversed as well.
Figuring out HOW to solve that sort of problem is why so many laws take a full election period to actually get going.
Like you, I think there is a lot of chest beating going on thats going to result in nothing happening. And if that happens, whats the difference between putting in a party that does nothing, or leaving the incumbent party thats got the best understanding of whats going on?
All the big talk of the last 2 years has given way to whispers and mumbling about what will happen after the next election.
<<<<If they reverse either of the carbon tax or MRRT, they will need to reverse everything they have paid for. that includes the increase in tax threshold, the $500 or so a large portion get as carbon tax compo, etc etc. Those ‘taxes’ are paying for stuff, and if you cancel them, that stuff either has to be paid for another way, or reversed as well.
dumbass, why do you need to fund "carbon tax compo" (rise in tax-free threshold, etc) if there's no longer a carbon tax?
You fool, he just said exactly that. -_____-
Coming back into this a couple of days later, hopefully Reality Check is still reading. First, ‘dumbass’ is a bit rich, given you clearly have no understanding of tax law. I’d like to point you to the rules of using this site, where personal attacks are a big no-no. I take that as a personal attack.
Secondly, what’s the issue? Well, you’re about to see some millions of Australians a pay rise, through an increased tax threshold. What happens when the money funding that disappears? Either the Government has to reverse those cuts, or work with that much less income to cover everything else. Neither is good for that government.
It doesnt matter if its not needed, the worst off in the country have been given extra money, and if you reverse it, you’re straight up taking it away from them. When is that a good thing to them?
Apart from that, some products are going to go up, using the carbon tax as an excuse. Do you really think they will drop prices if that carbon tax is removed?
David, you will note that “elsewhere” does not permit comments and in fact they have not since their article re the knock back of a NBN tower.
Courage of their convictions, or fear of destruction of their argument, or just manipulative propoganda. Agree with why pay $800Mill, but note their absolute focus on Soley download speeds and he did use the term “up to 100Mb”. Whereas the NBN is about Upload speeds as much as download. An area where the Coalition options such as HFC is handicapped
I’m glad we have somebody as informed as David of Brisbane here to tell us what’s what. I mean, until now I thought a soon-to-be-outdated HFC network had no possible way to compete with fibre. Until now, I knew NBN had a set rate of return rather than a desire for unlimited profit.
Thank god David is here to point out that HFC is perfect for him therefore it is perfect for everybody and will always be perfect.
End of sarcasm here. David is one of those few special souls who doesn’t have a [redacted] clue what he is talking about, and thinks the ACCC’s decision was “HFC vs. No HFC”. The truth that he and so many thick-skulls don’t seem to be able to work out is that the decision was “let NBN pay Optus to transfer their customers immediately vs. wait for Optus to turn it off anyway.”
There was never going to be Optus HFC in an NBN world. NEVER. Optus said that. Anybody with a brain could work it out anyway.
<<<< HFC network had no possible way to compete with fibre.
In the absence of the HFC Agreement, Optus has submitted that it is likely to offer
services using the NBN as well as its own HFC network. The ACCC considers it
likely that Optus would prioritise the provision of services using its own HFC network
over the provision of services using the NBN where possible. In particular,
information provided by Optus on a confidential basis indicates that the marginal or
additional cost it will incur in serving a customer on its HFC network will be
significantly below the price of acquiring wholesale services from the NBN to provide
the same service to the customer. This cost differential provides scope for Optus to earn
higher profits and/or offer lower prices by using its own HFC network. The ACCC
considers that this is likely to provide a strong incentive for Optus to serve its
customers using the HFC network wherever feasible.
Frontier Economics notes that capital cost
per premises for activating NBN fibre to the premises services for the 93rd percentile is
likely to be at least three times that of connecting a service to the bottom 10 percentile.
Frontier Economics submits that the combination of these factors suggests there is
significant scope for cherry picking to occur using the Optus HFC network.
<<<<one of those few special souls who doesn’t have a [redacted] clue what he is talking about
That would be you, buddy.
Reality Check,
You’re extremely good at hiding behind business analyses to show that your point of view is correct.
The fact of the matter is that the ACCC are out to ensure the consumer gets the best deal. That is why they exist. Optus could very well have competed with the NBN had this agreement not been approved, but that point is not the disputed fact here. The disputed fact is to whether it would have greatly affected NBNCo.’s business case. Overall, it would have made little difference to NBNCo. in the overall scheme of the network- Optus’ HFC cable passes 3.1 Million people….and yet only 489 000 are on it in any form and only 430 000 of them get internet on it.
This is partially because Telstra did its’ usual trick of rolling out its’ own HFC to match Optus’ to ensure Optus couldn’t get any edge. But it is also, from the numerous stories we’ve heard here and you can find on dozens of forums, because Optus and Telstra can’t offer services in apartments and to many streets entirely. And because of contention, some people find their ADSL2+ is better than HFC, if all their neighbours are on HFC as well.
For these reasons, competition from Optus was likely to DECREASE over time, NOT increase, because it is not economically feasible to upgrade HFC by both upgrading ALL apartment buildings and by node splitting to the extent that it can truly compete with speeds offered to ALL fibre customers, rather than just those who are lucky enough to not be in an apartment or don’t hav neighbours on it. Optus may very well have prioritised their own network over NBN connections because of per user price, but when it got to the stage that they simply could not offer the service and speeds of the NBN and people began leaving HFC DESPITE the money Optus would have spent JUST trying to keep up, their “competition” would have dried up in a matter of 2-3 years.
This deal is not so much about removing the competition because it would likely pose a serious undermining threat to NBNCo. down the track. It is about removing the competition to ensure NBNCo.’s business model is the most robust it can be, by having as many connections as possible, to ensure the NBN goes ahead in the first place. This is all politics. The ACCC KNOWS the NBN is best overall for the consumer and is politicking to ensure, ultimately, they WILL get what’s best, even if it costs a bit up front.
And that’s ALSO the point- is $800 Million too much to pay Optus? Probably, but it doesn’t really matter in the grand scheme of things because:
1- NBNCo. is NOT funded by the taxpayer (ie the Budget), it is funded by government DEBT
2- It WILL make a return, in its’ current model, regardless. If it takes an extra 2 years to do so, that, again, is irrelevant, because the money WILL be paid back.
Your “market analyses” are great for your average RETAIL telco- NBNCo. is NOT an average telco. It is a government owned public infrastructure WHOLESALE company.
Reality Check, you seem to have a serious mental roadblock trying to understand what viable, beneficial competition is. “It is cheaper for Optus to service people using HFC” does not equal competition, it simply means that people who stay with Optus HFC will be cheaper for Optus. The only problem with this is, nobody will stay on HFC when they can get a better and cheaper service from a cable that is already connected to their house.
What you don’t seem to understand is that competition of this nature is not going to have any effect on NBN’s prices. They are already obligated to offer the lowest prices they can, and ‘competing’ with a service that is inferior in all aspects including price to the consumer, cost to maintain and quality of service is not going to change that.
Malcolm started talking sense!!!
What a great refreshment, hope his boss listen to him too.
Did you see that pig fly past, I think it was Liberal blue in colour
Wow, it’s taken about 2 years but Turnbull has finally said something sensible about the NBN. Shame the rest of his speech was full of the usual rubbish.
I will admit When I read the Turnbull/Abbot/Media drivel, I am reminded of a shonky used car salesman flogging a flash car with a clapped out motor to a sucker – sorry customer by shifting the focus from the mechanicals to the leather seats and super sound system
The ACCC should apply legislation consistently. Consistent application of legislation should provide the same answer in the same circumstances. Would the ACCC have approved a deal for Telstra to pay Optus $800m to shut down their HFC network?
Compare apple with apples.
One is a purely commercial private company with shareholders even if provides most of the nations communications infrastructure removing a competitor to improve their dividend
The Other is a wholly Government (taxpayer ) Company that is tasked with providing a business capable communications infrastructure for the whole nation, including those served by HFC.
However if you insist they can be bypassed and left with their HFC which would mean other areas get connected earlier – Hmm could be advantageous to some, give them a conpetitive edge. just hope movies and downloads are the SOLE interest of those trapped on HFC or ADSL. But hey. they have the wonderfull benefit of competition between ADSL abd HFC – a choice in medium. And a choice between ADSL providers and plans or OPTUS HFC plans and services. – obviously a far superior outcome, especially in 10/20 years time
No they shouldn’t, CMOTDibbler. They are a decision-making body for a reason, because there are many factors to be weighed. If they made the same decision all the time, or the decisions were black and white, there would be no purpose to their existance.
@Renai, I agree with most of what you write but this is just poor reasoning!
Optus being paid the shut down their HFC prevents Optus or some potential future purchaser of the HFC from cherry picking customers in known profitable areas using an assert thats already been written down at great cost to taxpayers … End of story!
Note to self, watch out for iPad spelling corrections!
And if NBNCo hadn’t bought out the Optus HFC, then Turnbull would be arguing loudly that the Optus HFC would destroy the NBN’s economic viability.
The only thing consistent is Turnbull arguing against the NBN.
Turnbull should just accept the ACCC’s (independent umpire) decision that this deal is in the Long Term Interest of End Users (taxpayers).
“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.”
This guy really hasn’t heard of natural monopolies.
It isn’t being used to compete. Optus tries to sell ADSL2+ instead.
If it isn’t being used to compete, shutting it down isn’t anticompetitive.
If economics dictates that one network is more efficient (hint: it does), then it *shouldn’t* be used to compete. It’s nice to have this in writing though, since it prevents selfish private companies from doing silly things.
Anyway, I do agree that $800M is a bit much. Still, it’s not the ACCC’s job to protect NBNCo from overpaying.
<<<<This guy really hasn’t heard of natural monopolies.
He sure has, he's also heard of "infrastructure competition". To deny it doesn't exist is to deny the existence of Transact, Neighbourhood Cable and multiple GPON providers.
<<<<If it isn’t being used to compete, shutting it down isn’t anticompetitive.
Really? So Optus upgraded their HFC network to 100mbit for fun?
<<<<If economics dictates that one network is more efficient (hint: it does), then it *shouldn’t* be used to compete.
Sorry buddy, we don't live in a "economic textbook economy", we live in a "market economy". The market dictates what is efficient and what isn't.
<<<< It’s nice to have this in writing though, since it prevents selfish private companies from doing silly things.
. . . you mean "compete'' (and undercut a more expensive provider)?
<<<Anyway, I do agree that $800M is a bit much. Still, it’s not the ACCC’s job to protect NBNCo from overpaying.
It is certainly the Opposition's job to point out taxpayer-funded waste.
“He sure has, he’s also heard of “infrastructure competition”. To deny it doesn’t exist is to deny the existence of Transact, Neighbourhood Cable and multiple GPON providers.”
Would you agree that nobody is going to be offerening the sort of service quality NBN will be offering? I would hope so, and in that case, why has nobody else offered such a service until now? Now following this to it’s obvious conclusion, if nobody has done it before, why are they suddenly going to do it now that there is a nationwide government-backed network in place? Answer: they aren’t. There is not going to be infrastructure competition whatever the ACCC decides.
“Really? So Optus upgraded their HFC network to 100mbit for fun?”
As I’m sure you’re aware, a comparable maximum throughtput speed is not the sole basis of competition. Sure, both services might have the same maximum speed, but the NBN already has a higher real-world speed. The NBN is cheaper. The NBN is more reliable. The NBN is cheaper to maintain. The NBN can and will be relatively cheaply upgraded to 1 gbit in the very near future, and who knows how fast in the longer term, whereas HFC is already rubbing up against the limit of it’s speed capacity without astronomically high investment costs. All of these things (and more) are why HFC isn’t being used to compete with fibre.
“Sorry buddy, we don’t live in a “economic textbook economy”, we live in a “market economy”. The market dictates what is efficient and what isn’t.”
Correct. And in that market, Optus is the decider here. They already accepted the offer last year, they have made it plainly clear they have no intention of competing. There’s your market-dictated efficiency.
Reality Checked successfully?
“He sure has, he’s also heard of “infrastructure competition”. To deny it doesn’t exist is to deny the existence of Transact, Neighbourhood Cable and multiple GPON providers.”
Hmmm, let’s see now:
TransACT: Bought by iinet. It has a total reach of 55 000 premises on its’ own FTTK network in ACT. And 11 000 premises by its’ GPON network
Neighbourhood cable: Has HFC to 38 000 premises in VIC. Bought by said TransACT….see above
Multiple GPON providers- Confined almost exclusively to the 140 000 odd premises a year of Greenfields- and they DON’T rollout fibre to all of them. Many Telstra connect for a lower price to copper.
Let’s add that up shall we. 55 000 + 11 000 + 38 000 + (I’ll be generous) 100 000 = Near as makes no difference 200 000 premises….of the 13 MILLION we have in Australia. So about 1.4% of the market.
Yes, I can see healthy, large competition for the VAST majority of Australians RIGHT there….
“Really? So Optus upgraded their HFC network to 100mbit for fun?”
Nope. Because Telstra did it and they didn’t want to see significant customer loss. If Telstra hadn’t, they wouldn’t have. That’s not competition, that’s following after the big boys. Average speed on Optus’ HFC is debatable, but anecdotal reports put it at, usually, less than 50, sometimes as low as 10.
“Sorry buddy, we don’t live in a “economic textbook economy”, we live in a “market economy”. The market dictates what is efficient and what isn’t.”
The market….being Telstra, having 85% of the infrastructure use in Australia….mmm, that’s a healthy market…..
“It is certainly the Opposition’s job to point out taxpayer-funded waste.”
Interesting, as that seems to be all they do. Oh, and it’s not TAXPAYER funded. It’s government DEBT. The only people that have a problem differentiating the 2, INCLUDING your “market” are the Opposition.
It is also the oppositions job to come up with competing policy. And what competing policy do we have for the NBN? Oh, that’s right, a FTTN for “whatever is left” after they dribble out of the contracts. But not until they’ve done a CBA to see if it’s worth it…..which we don’t know. And it won’t be provided everywhere….but we don’t know where it WILL be provided. And we don’t really know how much it’ll cost….except it’ll DEFINITELY be less than the NBN….probably….maybe not, cause the NBN has to go on the books, which means writing down $15 Billion, minimum, before we’ve even started.
Remind me again how the Opposition are actually doing a good job at Opposing for the country rather than opposing because….they oppose, but have no better idea?…
Don’t think you would find anyone that believes $800m is a good deal apart from Optus who probably can’t believe their luck.
Their HFC network hasn’t been touched since it was laid down some fifteen years ago, no expension and minimal updates to changing standards.
Compensation to both Telstra/Optus is to speed things up, simply roll out a new network and let them compete, I can assure you that their networks would be empty in no time so I struggle to see why compensation is required.
I really wished I invested in a HFC network fifteen years ago, a few million for coax drapped over some power lines and a return of 800million after the asset is paid off, wow let me in on some of these deals please!.
Jason, the compensation is to force the people off HFC onto the NBN. Without that force, NBNCo. cannot guarantee its’ business plan as those are high density areas and make up for a large proportion of its city rollout.
The political climate REQUIRES NBN work towards making money until such time as large numbers of people actually see the benefits on the ground, which will happen next year and increasingly in the years to come. But with a change of government very possible, NBNCo. MUST prove itself NOW and that is difficult unless it can show, unequivocally, that it will get the numbers- which with these compensation agreements to force customers onto its’ fibre, it can.
This is the unfortunate thing; if the NBN was not such a contentious issue politically, ie, bi-partisan, it WOULDN’T have to compensate. Hell, Telstra and Optus would probably keel over if that were the case, because in no decent terms can HFC compete with fibre speeds, contention and upgradeability. And yet thanks to a currently backward looking Coalition, here we are.
‘A few million’ – Optus wrote down $1.4 billion off HFC in 2002! – in part due to Telstra (who wrote off $1bil) overbuilding them.
As far as Optus is concerned, this is a good way to exit a business which doesn’t really produce a return.
According to one lot who oppose the NBN 24/7.
But according to the other group of one-eyed critics, HFC is a thriving den of fervent competition.
Precious in a pitiful way aren’t they?
The reason why all these messy looking deals are necessary – and they do look pretty messy, both this and the Telstra deal – are to remedy the persistent effects of the 1990s HFC rollout debacle.
Not to do so would be to let the dead hand of past errors distort future sensible planning. And the problem is that to let Telstra benefit from a similar deal with its HFC while denying it to Optus would, amongst other things, give an unfair advantage to Telstra – as if it needed any more.
One other factor is at play here: in all the commentary, most notably from Malcolm Turnbull and Peter Martin (http://www.smh.com.au/business/nbn-paying-optus-to-destroy-infrastructure-20120529-1zhbr.html), the Optus HFC is treated as though it is common property, open to all. Commentators love to talk about using it as though they already owned it (the FTTN debate founders on this fallacy as well – talk of using the copper “because it’s there” ignores the fact that Telstra actually OWNS it). The reality is that Optus has no intention of expanding its use, does not wish to invest further, and treats it as practically a dead loss. On its own, there is no incentive for Optus to keep using it.
Any serious competition policy based on the idea that the Optus HFC will remain in viable use ignores this reality – Optus would run it down, not open it up to new customers, and it would become a millstone around the company’s neck (while Telstra looks on and laughs). It is compensation for THAT scenario that is behind the NBN Co payments, as much as a business deal (to smooth migration and secure its customer base).
The only alternative is that a future government would bribe Optus to keep it open and operating. Which is just another way of paying Optus to deal with the persistent problem dating back 15 years… and far less efficient in the end than the NBN Co course.
So, there really isn’t a viable alternative to the NBN proposal. Turnbull has no interest in following his argument to its conclusion, of course. He’s just scoring cheap shots, cloaked in the clever-sounding, smooth rhetoric that he does so well. Sadly, it’s just all shoddy goods.
The advantage would actually go to Optus in the PayTV market.
Optus have already written off their HFC network. They don’t need to recoup anything except running costs.
Imagine how cheap their PayTV offer would be if they had an HFC network, and their only competitor (with content rights), Foxtel/Telstra are stuck offering it through NBN. Remember, they will be paying NBN for every customer.
Optus would be able to undercut Telstra by pretty much the exact cost of the NBN wholesale-per-customer price.
Guys guys, its ok, this whole rant by Turnbull is just an early (late?) April Fools, here’s the punch line:
“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.
I can’t stop laughing. It’s even better that he is talking about the ACCC. Can’t believe no-one else picked up on this.
In other news, who wants to bet that the deal with Telstra included a stipulation that the deal with Optus wen’t through? “whaaat you crazy!” I hear you say; but think about it. If Optus had a network that was going to lose customers, for running pay TV, and they had a choice of paying NBNCo 24 dollars per customer, or 0 dollars per customer. Guess whose payTV operation would be cheaper?
Telstra would be stuck without an HFC network and a 24 dollar bill to slap ontop of whatever other costs NBNCo throws at them, and Optus have nothing.
This deal is 100% signed off on by Telstra. Indeed I reckon the deal is paid for by Telstra. (IE they agreed to not get paid an extra 800 million, so the government could pay off Optus to shutter their network too. seriously, can you people think beyond the first order effects? Take the whole freaking picture into account.
@Renai: This kind of stuff is why you have the opinion section. To share an opinion, perhaps do a little research, maybe throw a few ideas about why an idea might be as it is. To simply parrot someone else’s statement with little to no research is exactly why I don’t go to main stream news anymore.
I get it, 800 million dollars is a lot, but why do you think we are paying it?
Perhaps expecting speculation (because I admit that is what it is) to appear in this article is wrong, this really is just a retransmission of Turnbulls comments. I dunno… perhaps asking too much. I wager we wont know the full details of any of this stuff ever, as its all hidden away in the confidential contracts.
Just one little nit to pick, PeterA: “I get it, 800 million dollars is a lot, but why do you think we are paying it?”
We aren’t paying it. Sure, people may pay for it partially at some unknown point in the future with their NBN service price, but “we” in regards to a government-run business implies immediate cost to taxpayers, which this isn’t in any way shape or form.
+1 Karl. I don’t know HOW many times I have to try and get this point across.
I would ,in principle , agree that shutting down the HFC network is anti-competitve ,however the networks run both by Telstra and Optus have been in many cases non functioning or not available for customers since installation .I have both running past my house and cannot gain access to either for internet or tv services which makes the competitive option absurd.
Unfortunately I am in Abbott territory so I am unlikely to get NBN services for a long time , Sydney Northern Beaches.
Interestingly ADSL 2+ wasn’t available here via Testra at all until TPG forced one in the Telstra exchange and then the next day ,magigically Testra started offering ADSL 2+ they must have had it all along but didn’t want to turn it on ,a tale I have heard many times.
Perspective
Quote
“To require Optus to preserve its HFC network might keep the economic purists happy, but it will perpetuate a failed policy objective and deliver less consumer benefits than an alternate path”
David Epstein Vice-president, corporate and regulatory affairs, Optus Macquarie Park, NSW
The Australian Financial Review
http://afr.com/p/opinion/optus_nbn_move_good_for_competition_0RjWTWFjTegKmRZeDWHL6I
+1 Abel. Great opinion piece. Guy really gets the point.
Still a shame it cost $800 Million, too high I think.
Just looking at the Business, investor POV
>>But Mr Murphy said government business enterprises often had community service obligations, which the NBN had in providing high-speed broadband to most Australians.
“What you are trying to do is have a competitive market, which is in the best interests of consumers, not only in terms of price but also in terms of service,” he said.<<
http://www.tradingroom.com.au/apps/view_breaking_news_article.ac?page=/data/news_research/published/2012/5/152/catf_120531_194400_5904.html
And again
“However, Budde said it is too late to turn the clock back now. He said the Coalition needs to confirm why it wants improved broadband – technology decisions can then be made about what delivery method is the most appropriate.
“But just stabbing in the dark and then com[ing] up with [an answer of] ‘yes we want wireless’ … is a bit silly because you have to base that on some sort of a vision and some sort of a strategy of what you want to do with that network,” Budde said. ”
http://www.computerworld.com.au/article/426212/optus_nbn_co_agreement_makes_business_sense_analyst/?fp=4&fpid=78268965
Whilst not mainstream media, influential media amongst influential people
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