blog Australian telecommunications analyst Paul Budde has penned an extensive blog post discussing the need for the Coalition’s Broadband Network (CBN) to remain on a ‘wholesale-only’ basis, despite the fact that the network’s architecture is set to radically change due to the ‘Multi-Technology Mix’ model proposed by NBN Co. Budde writes (we recommend you click here for the full article):
“While there is an enormous amount of debate around what kind of technologies should be used to make the NBN ‘cheaper’, those involved in those debates, reviews, and plans, keep missing the point …
In order to achieve affordability and high quality broadband services, you … need to look at wholesale-only based models. The reasons why such models fail if they are provided within the traditional vertically-integrated telco telecoms marketplace are that, in order to protect shareholders’ value of their current telco models and technologies, the incumbents will typically thwart and delay any wholesale-only model that provides new levels of competition and innovation that they are unable to compete with. They undermine the development of new business models by mounting campaigns of misinformation, seeking barriers to entry, using litigation as a competitive weapon, and engaging in predatory pricing or targeted rate discrimination.
We see this happening in the USA and in many European countries and we also saw all of this happen in the Australian market between 1996 and 2006, and some of this is also still lingering on here. The incumbent focus is on protecting their old business models rather than on providing innovation and digital productivity (lower costs) to their customers.”
Budde doesn’t explicitly say that he believes the MTM model proposed by NBN Co for the Coalition’s Broadband Network will avoid a wholesale-only model for the CBN, or that he believes that Telstra won’t be structurally separated under such a model. However, the analyst clearly appears to be worried about such an eventuality.
And who could blame him? If you look at the MTM model, what is immediately apparent is that it places a heavy reliance on Telstra’s infrastructure — both HFC cable and copper. No agreement has been struck between Telstra and NBN Co yet for access to re-use that infrastructure, and, despite the protestations of Communications Minister Malcolm Turnbull, nobody quite knows what it would cost in any case.
I strongly agree with Budde’s comments. The CBN project must go forward as a wholesale-only project. Australia cannot afford to repeat the mistakes of the past two decades and leave Telstra as a vertically integrated monopolist of any kind. Let’s hope the Coalition realises that fact.
Image credit: NBN Co