news Communications Minister Malcolm Turnbull has made a public statement which appears to have significantly undercut the stability of Australia’s telecommunications regulatory environment, winding back the potential for telcos such as TPG and Optus to invest in their own broadband infrastructure ahead of the rollout of the Coalition’s Broadband Network.
In September last year, national broadband company TPG flagged plans to deploy so-called fibre to the basement infrastructure to some 500,000 apartments in major Australian capital cities, in a move which will compete directly with the new Coalition Government’s plans to conduct similar rollouts under the Coalition’s Broadband Network (CBN) scheme.
Unlike Labor’s previous policy, under the Coalition Federal Government’s broadband policy, fibre will typically not be extended all the way to home and business premises. Instead, up to a third of Australian premises are likely to be serviced by extensions of the HFC cable networks owned by Telstra and Optus, while for a significant number of other premises, the Government is planning to deploy fibre to neighbourhood ‘nodes’, and then use Telstra’s existing copper cable for the remainder of the distance to premises.
However, in documents associated with its financial results briefing in mid-September — shortly after the Coalition won last year’s Federal Election, national broadband provider TPG — one of Australia’s largest ISPs and telcos — revealed its own plans to skip the Government’s planned rollout and leverage its own fibre infrastructure to widely deploy a Fibre to the Basement option.
Courtesy of its existing PIPE Networks business, TPG has extensive fibre infrastructure in built-up areas of major capital cities throughout Australia. In its briefing documents, the company said it would be “leveraging and expanding our existing fibre network” to deploy “fibre to the building” in Sydney, Melbourne, Brisbane, Adelaide and Perth. The ISP has “500k units currently in design”.
TPG noted in its briefing documents that it would be offering up to 100Mbps packages including “unlimited” downloads and home phone line rental, as well as a bundled Wi-Fi modem and unlimited local calls and “standard” national calls to landlines, for $69.99 per month.
The move was shortly followed by a similar announcement by Optus, which is examining its own fibre infrastructure to determine whether it may conduct a similar FTTB rollout to TPG.
The previous Labor Government enacted so-called “anti-cherry picking” legislation designed to ensure telcos could not overbuild its previous National Broadband Network plan. However, it appears as though TPG and Optus are relying on a provision that allows existing networks to be extended by less than a kilometre.
However, in comments made to the Financial Review this morning (we recommend you click here for the full article), Communications Minister Malcolm Turnbull appears to have called the legality of both rollouts into question.
“It’s yet to be seen how much scope they’ve got for that,” the Minister reportedly said, adding that the issue would be examined by the Panel of Experts conducting a cost/benefit analysis of broadband and associated regulation.
The comments throw both potential rollouts — likely representing investments worth at the least, tens of millions of dollars — into jeopardy, as they open the door for new legislation to stop the rollouts from going ahead, even if they are already partway through. The Coalition’s initial broadband policy stated that the cost/benefit study was due to be delivered within six months, meaning that it is not likely to be finalised before mid-2014, given that the Panel of Experts was appointed in mid-December.
Turnbull’s comments come despite the fact that the Minister Malcolm Turnbull has repeatedly stated that he is in favour of infrastructure-based competition in Australia’s broadband environment — even in competition with the Coalition’s Broadband Network. Both network rollouts would be likely to provide infrastructure-based competition with the Coalition’s Broadband Network when it was eventually constructed, and hence undercut the finances of NBN Co in some regions.
“Infrastructure-based competition is the norm around the world because it drives investment, encourages innovation and keeps prices lower,” a frequently asked questions document about the Coalition’s broadband policy states.
It appears that this situation with regulatory uncertainty caused by Australia’s political sphere has happened previously with regards to Australia’s telecommunications industry. Internode founder Simon Hackett, for example, had publicly stated in September 2011 that if the Coalition won the 2013 Federal Election and cancelled Labor’s FTTP-based National Broadband Network project, then Internode could have listed on the Australian Stock Exchange and deployed its own fibre infrastructure further, in a similar vein as TPG and Optus are proposing.
However, the ongoing uncertainty about how Labor’s National Broadband Network project and the Coalition’s evolution of that project, dubbed the Coalition’s Broadband Network, would be deployed appears to have held back those and potential plans by other telcos to invest in infrastructure in Australia.
If I worked in strategic planning at either Optus or TPG, I would have been horrified to read Turnbull’s comments in this morning’s Financial Review. The Minister has essentially publicly threatened to modify Australia’s telecommunications legislation to make the Fibre to the Basement network rollouts which the two telcos have been discussing illegal, but six months in the future.
I don’t know how any Australian telco is supposed to make plans to deploy any infrastructure under those conditions. This is the very definition of regulatory uncertainty: Businesses which need to make decisions about where to invest their money and better serve customers are having those plans undercut by successive governments which appear unable to put in place a long-term stable framework for Australia’s telecommunications industry.
Even the Australian Competition and Consumer Commission has largely OK’d TPG’s rollout. And yet, our Communications Minister appears to believe it is perfectly fine to put commercial deployments by companies such as TPG and Optus on hold — delaying better services to customers and potential profits for those companies’ shareholders — while he decides how precisely to tinker with laws in this area.
What’s worse is how flippant Turnbull was about the whole issue. Tens of millions of dollars could be being invested by the private sector in better broadband — an objective the Minister has said he supports, to develop infrastructure-based competition. But now it’s ‘only an issue to be considered within six months’, and Turnbull appears to have abandoned his principles.
I’ve written extensively about this issue previously. In September 2011 I wrote:
“If there is one thing Australia desperately needs right now, it is for our elected representatives to stop making dramatic changes to our national telecommunications policy every few years and to come together around a set of universally agreed projects. The alternative is another half-decade worth of pointless wasted effort and industry chaos.
… despite their protestations, in large part it is the ridiculously unstable telecommunications regulatory environment which Australia’s incessantly warring politicians have gifted the nation with which has held us back in so many different areas over the past decade, and will continue to hold us back over the next five years.”
Image credit: Office of Malcolm Turnbull