TPG, iiNet, ACCC support competitive FTTB rollouts

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NBN fibre rolling out to Blacktown

news National broadband companies TPG and iiNet, as well as the competition regulator, have published extensive submissions to the Federal Government supporting the right for commercial telcos to deploy their own Fibre to the Basement (FTTB) infrastructure throughout Australia in competition with the Coalition’s Broadband Network (CBN) project, rejecting the idea that such planned investments should be blocked or otherwise regulated to support NBN Co’s finances.

In September last year, 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 CBN. Shortly after, Optus and Telstra confirmed that they were investigating similar options.

Although it is illegal for telcos to deploy infrastructure which competes directly with the CBN, under legislation enacted by the previous Labor Federal Government, both telcos are taking advantage of a loophole in the law which allows extensions of a certain length to existing infrastructure. Both TPG and Optus have existing fibre infrastructure in many areas in major cities.

However, shortly after the FTTB plans were revealed, Communications Minister Malcolm Turnbull made a public statement which appeared to have significantly undercut the stability of Australia’s telecommunications regulatory environment and caused a halt in the plans by the telcos. In comments made to the Financial Review, Turnbull appeared to call the legality of the planned FTTB rollouts into question, adding that the issue would be examined by the Panel of Experts conducting a cost/benefit analysis of broadband and associated regulation (the Vertigan Review).

Yesterday submissions to the Review were published online. TPG’s submission makes it clear that it believes the status quo with respect to fibre extensions should continue to exist.

In general, TPG’s submission focused on the argument — long made by the Australian Competition and Consumer Commission and others — that infrastructure-based competition delivers the best outcome to retail customers in the telecommunications industry.

“The NBN was not intended to be a fixed line monopoly and it should not be a fixed line monopoly,” wrote TPG. “Carriers (other than Telstra) who had invested many hundreds of millions of dollars building “superfast” networks prior to 2011 were, and should remain, permitted to make use of those networks to compete with the NBN and other broadband providers. The Government expressly wrote that right into law (Parts 7 and 8 of the Telecommunications Act). Infrastructure based competitors investing their own capital and who are working within the confines of Parts 7 and 8 (in this document, referred to as “Extension Fixed Line Competitors”) will bring speedy and positive outcomes for end users. There should be no requirement to regulate Extension Fixed Line Competitors.”

TPG pointed out that areas which it and others would cover with FTTB rollouts were likely to already be covered by competitive infrastructure such as other fibre networks and HFC cable. In addition, “superfast speeds” are also available through 4G mobile broadband, and NBN Co also has the ability to compete in those areas if the company deemed it necessary.

“… if there is a bottleneck and a competitor believes that it should be given access to the network facilities of an Extension Fixed Line Competitor, there is a current mechanism in the Competition and Consumer Act which could operate to consider and, if necessary, permit that to occur,” TPG added. “If reasonable competitive outcomes are not achieved, those provisions could be made more robust.”

NBN Co executive chairman Ziggy Switkowski told the Senate last week that the planned FTTB rollouts could have a “quite severe” impact on NBN Co’s finances.

However, TPG noted in its submission that it did not believe NBN Co’s finances were threatened significantly by the sort of competition its FTTB rollout would represent. The real threat to NBN Co, according to TPG, is from Telstra, due to the incumbent telco’s vast existing infrastructure.

“In the case of the TPG FTTB build, TPG anticipates reaching a potential 500,000 premises,” the telco said. “Many of those premises will be entrenched HFC customers, due to their requirement for Foxtel Television. Of the remaining addressable market, TPG might reasonably only expect to be successful in securing a percentage of the customers. The number of households who will obtain TPG FTTB will be insignificant compared to the number of households to be targeted by NBNCo.”

TPG was not the only party to argue to the Vertigan Review that competitive FTTB rollouts should be allowed.

Fellow top-tier telco iiNet broadly supported the idea of rival FTTB networks being rolled out to compete with the CBN, but it also stated that certain conditions should be set on those deployments, such as third-party access and pricing similar to NBN Co’s own model, as well as NBN Co’s overall finances being considered.

“It would appear that a truly level playing field cannot be achieved unless either: The competitors of NBN Co pay their share of the costs of servicing uncompetitive areas; or NBN Co receives subsidies from another source (eg taxpayer funds) to fund uncompetitive areas,” wrote iiNet.

The ACCC also broadly supported TPG’s argument. It wrote:

“Generally speaking, the ACCC considers that, where it is economically efficient, infrastructure-based competition is likely to promote the long term interests of end-users. Where efficient network duplication can occur, competition between networks can drive dynamic efficiencies in terms of product differentiation, innovation and timely investment. Telecommunications is a complex and highly dynamic industry, and therefore there may be benefits to be gained from encouraging network-level competition and innovation.”

“The ACCC considers that non-NBN Co network operators should generally not be constrained from deploying networks in competition with NBN Co, including in new developments, unless there are particular circumstances which suggest it would not be in the interests of end-users.”

However, the ACCC also noted similar subsidy concerns as iiNet did, writing: However, where NBN Co faces competition, its ability to compete on price may be constrained by broader objectives and/or regulation. In particular, NBN Co’s pricing response may be constrained by a requirement to internally cross-subsidise non-commercial regions or a degree of national pricing parity.

“The ACCC considers that explicit subsidies to non-commercial areas are preferable and more transparent than internal cross-subsidies. This approach could address the dual questions of NBN Co being better positioned to respond to competitive pressure arising from infrastructure-based competition and the broader social objective of promoting the interests of consumers in non-commercial areas.”

opinion/analysis
I think we’re starting to see a consensus here, in that several major telcos and the ACCC all appear to agree that rival telcos should be allowed to overbuild NBN Co’s infrastructure, with explicit subsidies used to support rural and regional areas rather than the current cross-subsidy approach. I believe the Abbott Government will find it very hard to argue against this approach, given that it is largely the one being taken globally — competitive infrastructure in the cities delivers strong broadband outcomes, with rural areas being subsidised by the Government due to the unsustainable cost to private sector companies to providing equivalent services in those areas.

I wrote a lengthy piece arguing precisely this several weeks ago. At the time, I wrote:

“Telstra, Optus and TPG are private sector companies volunteering to deploy additional broadband infrastructure throughout Australia. Nobody will be holding a gun to consumers’ heads, forcing them to sign up for FTTB through these providers, and the Government should not be stopping these companies from risking their capital through infrastructure investment. Consumers will only benefit from having three to four different providers in their building all competing for their broadband budget, and the Government should leave the business case for these investments up to the companies themselves.

There’s also the fact that, although it doesn’t like to admit it these days, the Australian Competition and Consumer Commission has long been in favour of this kind of competition in Australia’s broadband market. This kind of competition is what the ADSL wars of the 2000′s were all about, as those same companies and others like iiNet frantically competed to fill up telephone exchanges with their own DSLAMs, delivering the broadband most of us enjoy today. If Telstra, Optus and TPG have their way, that battle would now extend to FTTB hardware in apartment basements.

The only stakeholder to be disadvantaged by this kind of competitive deployment is the Federal Government, due to the financial damage such competition would cause to NBN Co. As Kohler mentioned, competitive FTTB rollouts would undercut NBN Co’s business model of subsidising the bush with profits from cities.

However, one might well ask, why the hell should the Australian consumer living in a metropolitan apartment served by FTTB care about that? That’s an issue for the Government to sort out. Consumers just want better broadband, and they want it now. And they would rightly be outraged if the Government stopped private sector companies from (legally) providing it to them.

As for the bush, well, there should be no problem with the Government continuing to subsidise unprofitable telecommunications services outside the cities to the tune of billions of dollars, as it has done for almost two decades with the Universal Service Obligation rules.”

Image credit: NBN Co

99 COMMENTS

  1. And all of this nonsense could’ve been avoided if the Coalition had just stuck with Labor’s NBN instead of coming up with their patchwork, dog’s breakfast mix. They’ve dug themselves a nice big hole that they now have to scramble to get out of, either by making the CBN a giant financial black hole, or by denying the private sector the right to build their own networks.

    • Wasnt commercial competition the whole point behind the LNPMTMNBN? Build a basic improvement and let the ISP’s scramble to cherry pick the upgrades, as they have in the past?

    • No it couldn’t; this is all under the same laws that Labor wrote.

      We would still be having this debate right now.

      The only difference, is that tha alternatives offered by the CBN are more than likely not going to be competitive (product wise) compared to what the NBN was going to offer.

      But even if the product the NBN would have provided was comparable; it would still have the problem of cross subsidies to contend with. I think it is short-sighted to view this as a problem wholly unique to the CBN, specially given that people have shown themselves to be relatively price conscious. (early adopters not withstanding).

      • “No it couldn’t; this is all under the same laws that Labor wrote”

        Theoretically true, but I think that the timing should not be lost on this. I fully expect that TPG and everyone else understand that had Labor won the election they would have closed the loopholes as quickly as the issue came up, meaning that TPG et al would never have even tried.
        The Coalition on the other hand are in a bind because closing the loophole is anathema to their party’s public policy and is quite embarrassing for them (especially considering the rhetoric they espoused about infrastructure monopolies during the campaign).

        • Oh don’t get me wrong! The coalition are a pack of lying bullshit-when-it-is-convenient scumbags.

          I think the number of times I heard “Infrastructure competition” come out of the mouth of Malcolm Turnbull during the last 2 terms of Labor sent me close to insane.

          And then to see him almost go directly out of his way to complain about TPG’s plans to compete with infrastructure was the final straw.

          The liberals really did just operate by the seat of their pants, say whatever suits our needs (and gives our talking heads almost-logical-sounding talking points).

          The whole election and the entire campaign of negativity run from 2010 to present beggars belief, and amazingly (perhaps not so amazingly) it worked. People ate it up, and then promptly forgot everything they heard for the last 3 years and haven’t called them out on a single line of hypocrisy.

  2. Competition only exists where there is more than one provider.
    So how is it a good outcome for consumers if it becomes uneconomic for more than one provider to service any given building? Very large apartment buildings or complexes may have a large enough ‘market’ to justify it, but many will not, leaving residents with a choice of exactly one high speed broadband provider. Hardly a competitive market then.

    • That is not the govt’s problem … it is the problem of those companies investing their own money. You’ve heard of a concept called investment risk?

      • But it is the government’s problem to provide a framework that facilitates the broader social benefits, and in this case ensures that both good coverage and sensible priced broadband is as wide as possible.
        Competition is not relevant to the consumer that has only one provider at their door. This is the current situation where a limited few have a choice, and even fewer have a choice that has comparable performance, but the market does not work as a whole because most customers have little choice at all.
        Why the ACCC now think they are qualified to comment on the issue that they have been involved in creating through total failure to influence effective regulation and structure of the market, with ineffective controls on Telstra, and pricing and regulations that provided the dis-incentive to invest even in fixing copper faults properly, let alone new infrastructure.

        • “Why the ACCC now think they are qualified to comment”

          Riiiight. Somehow I do think they are qualified. In fact, my view is that they are close to being the *most* qualified.

          • “… I do think (ACCC) they are qualified. In fact, my view is that they are close to being the *most* qualified.”

            Personally, I thought the ACCC’s submission was a fraction self serving, arguing efficient (ACCC) regulation could address issues of market failings in most if not all scenarios. But IMHO ACCC regulation is no substitute for genuine consumer choice.

            I’m sorry Renai but the idea that a competative market for vertically integrated telecomunications will form in the basement of small to medium MDU is just fanciful. We’ve seen in the DSL market that this doesn’t always happen in aggregations in the thousands at exhanges. It’s not going to happen in aggregations of under 100 in individual buildings.

      • The notion of ‘last resort’ doesn’t mean NBNco roll up and deploy to your MDU as well.

        To the best of my knowledge, it’s instead of. In the case of FTTB this effectively means a single provider.

        • Hey mate, so what’s your solution to this overall issue? And bear in mind that solution can not be “Return to Labor’s FTTP plan”, as that option is mot on the table. Are you proposing that private sector telco investment should be blocked?

          • The solution was to always have a single wholesale provider, much like New Zealand, a single provider who can optimise a build, costs and development over a broad deployment base.

            Really it doesn’t matter what the technology for MDUs was, be it VDSL, Fibre, it’s always been more a concern as to how to offer this in a fair and equitable manner, and get it built before the next ice-age.

            The reason these guys are doing this, is the same reason ADSL infrastructure competition happened. They can make more by delivering the service themselves, than through Telstra. The same is almost certain to be true via NBNco.

            If TPG, iiNet are required to wholesale at the same rate as NBNco, then their infrastructure arms should be structurally separated and required to adhere to the same rules. Further they should be required to permit any retailer access to the service, and offer the same basic services as NBNco.

            In other words, the cherry picking legislation need to be maintained in some form to protect the consumer, and the infrastructure owner must provide access – this means people can continue to move between ISPs, just as they would over an NBNco service.

            I think it may be a little naive to presume everyone would play by the same rules NBNco must.

          • Think of a location like Sydney Park Village in St Peters (or Alexandria, or Newtown, whatever suburb its in) where there are several hundred units all in a relatively small area. Under the LNPMTMNBN, it was always a location prime for its own FttN node, to service all the properties at one convenient point.

            ISP jumps in, says they will put in FttB instead. In reality, they are simply running fibre from the node to each block of units, to shorten the copper loop, but its FttB nonetheless. There is an expense in doing this, and its an expense they either absorb, or charge to the body corporate. If they absorb it, its because they have a contract giving them exclusive rights to the location – an agreement with the strata managers/owners.

            No other ISP can roll a service out as a result.

            If they charge the body corporate, its going to be a reasonably large bill, with the residents having to fork out for the honor. Naturally, they arent going to want to go through that more than once, so will all sign on to that provider.

            Same result, no other ISP will roll out a service.

            Third option is the ISP not contracting to the body corporate, and absorbing the cost themselves. Great, other ISP’s can do the same, and the site ends up with multiple NTU’s in the “basement”. Second one there wont get 50% of the service, because there will be a leadin time from when the first group has finished, and the second one does – no chasing each other down the streets this time.

            So, they get 33% or 40% of the population. Is that worth the cost? Quite possibly not, so in a lot of locations the result will still be the same – one ISP to rule that location.

            Thats how cherry picking works – first in get the most fruit, and effective control of the location.

            These companies can talk about competition as much as they want but in reality, thats going to be the result. If they are rolling out infrastructure at their own cost, they will want a profit in return.

            Consumer level competition of wholesale products is why we’re in this mess in the first place, and these companies are wanting to repeat that lesson, because thats where they will make the most profit. And I cant see where that helps the consumer, when customer service is secondary to profit.

          • The only solution I can think of is that once the FTTB is built, that provider must allow any other provider access to it at the same cost the CBN is charging. You certainly can’t build more than one basement node per building, and locking that building into a single retailer would hinder competition. So force all those who would build it to allow access at a fixed and regulated price…

          • No option is “on the table” Renai. The best, the correct, the right thing to do would be to go back to, not “Labor’s”, but “our” fibre NBN. But doing so is not “on the table”. Because you’re a realist, right? Doing anything else is also not “on the table”, so what’s your point? Do any of us have a say as to what can be done unless we collectively fight for what’s right? You seem to have fallen for Malcolm Turnbull’s line about “fibre zealotry”, and want to try to make it clear that you’re not a “fibre zealot” like the rest of us, no, you’re “rational”, you’re providing “balance”, and you’re a “moderate”. You seem not to understand how you’ve been manipulated. You seem not to understand that your “moderate” position is a complete fallacy. It even has its own Wikipedia article.

            The only competition here would be a race to see who can connect an MDU first. In what way does that provide the best outcomes for consumers? That is not a rational argument. If you can somehow explain a) how having thousands of separate monopolies is really competition, and b) how that will result in the best outcome for consumers, I’m all ears. I can’t quite seem to make that logical leap myself without the appropriate training though.

            In response to “So how is it a good outcome for consumers…?”, you say “That is not the govt’s problem … it is the problem of those companies investing their own money.”
            Somehow you have it entirely backwards. What is a good outcome for consumers IS the government’s problem (hence the ACCC, ACMA, TIO, etc.), and what is a good outcome for consumers IS NOT the problem of those companies investing their own money. What money is wasted becomes the consumer’s problem, because the cost gets passed on to them – the company’s got a monopoly, they can charge just about whatever they’d like. Whenever free market ideology meets reality, Government always has to step in to clean up the mess.

            Your view, and the view shared by many misguided or misguiding others, isn’t one of “economic conservatism”, as you like to put it, so much as it is about taking the side of companies and investors against consumers and ordinary people. Why not just take it a step further and call for social Darwinism?

            The NBN is dead, long live the accounts of private shareholders.

          • “The only competition here would be a race to see who can connect an MDU first.”

            What’s to stop multiple FTTB connections in a single MDU? Nothing that I can see. In fact, all of the providers have discussed rollouts in precisely this context. In ADSL world, getting a DSLAM in an exchange first didn’t guarantee that all the customers in that exchange area would be permanently locked into that provider. Getting FTTB into an apartment block first is just the start of infrastructure-based competition — not the end, as far as I can see. Happy to be corrected if I’m wrong.

            In terms of going back to the FTTP NBN, of course I would prefer that, but that’s not an option being discussed by the Government or NBN Co at this point.

          • “getting a DSLAM in an exchange first didn’t guarantee that all the customers in that exchange area would be permanently locked into that provider”

            Two problems that I can see (and I too am happy to be corrected)…

            1. It isn’t just the DSLAM, it’s the fibre line coming in as well…one for each telco.
            2. Very few MDUs that I have seen have room for more than one DSLAM (if that), so if iiNet, Telstra, and TPG all installed, there would be a lot of finger pointing and ongoing issues. Remember that DSLAMs are currently always controlled by Telstra because they own the exchange, which is not true in the case of FTTB.

          • Further to Chas’ point about space limitations are the rollout costs and maintenance costs.
            If (and that’s a big “If”) 3 monopoly companies roll out to a MDU, then the customers of that MDU will have to pay (in higher base-line subscription) for the rollout and maintenance of all 3 networks!
            So there may be competition (between the 3 suppliers), but at a higher price than if the customers were only paying for rollout and maintenance of 1 network with the added benefit of likely more than 3 suppliers (ie MORE competition) competing to supply service over that network.

          • People have said Vectoring; people have said Space.

            I think the real issue is scale. You would spend 10 thousand dollars rolling a fibre, and 20 thousand dollars commissioning a ADSL dslam for a thousand potential customers. (how many homes are connected to your typical telephone exchange?).

            You wouldn’t spend 10 thousand dollars rolling a fibre and 5 thousand dollars rolling a VDSL dslam for 50 or 100 potential customers.

            The costs don’t scale to the basement nicely.

            A way to illustrate my point.
            There are many ADSL dslams that are at capacity. They have reached maximum return on investment. They could invest more; but they are already at the maximum amount of money they could possibly reach with the current investment.

            I can’t even imagine a situation in which a VDSL dslam would ever hit capacity in a FTTB rollout. BEFORE competition. After a competitor rolls in (who would have to be a lunatic) well, I can’t see you ever ever achieving capacity.

            So the scale of the investment are completely different ADSL vs VDSL, and it is a very poor comparison.

          • “You wouldn’t spend 10 thousand dollars rolling a fibre and 5 thousand dollars rolling a VDSL dslam for 50 or 100 potential customers.”

            And yet, if private sector telcos want to do that, why would we want to prevent it? It’s their money. They should be able to invest it as they choose, unless a radically better solution is being provided by the Government (FTTP).

          • “And yet, if private sector telcos want to do that, why would we want to prevent it?”

            Because the private sector telcos can use their effective monopoly position to force users to purchase their other higher level services. It’s the equivalent of Channel 9 installing your MDU’s communal antenna then requiring everyone in the building to only watch Channel 9.

            AFAIK nothing in the current rules stops the private sector building such networks. The rules just require the network builder be structurally separated and offer a wholesale only service on it – hence precluding it being done by TPG, Telstra, Optus.

          • ” the private sector telcos can use their effective monopoly position”

            What effective monopoly position? Why can’t more than one telco get into an apartment building? That’s what they’re all discussing doing, after all … it seems Delimiter readers are the only ones saying that each building will only have one FTTB supplier. The industry seems to believe it won’t be an issue having multiple FTTB suppliers in each building. And that’s not even counting HFC, which is already in many buildings …

          • I cannot think of a single example where a non-monopoly infrastructure did not end up in disaster.
            The Cable Wars should be a great indicator, and that was on a small scale. Even in the US, they have divided up the areas (no AT&T or Google Fios where there is Verizon, and vice versa). The relegating of infrastructure to industry is ALWAYS a bad move (at least I can’t think of an exception).

          • “Mobile networks”

            You may think so at first blush, but let me ask you…if the mobile networks were all under a single large infrastructure and access was retailed from that structure, would it not be FAR cheaper and create even more innovation in the final product? Think about Kogan on a National Mobile Network…

            Telstra has far less innovation required in pricing and plans because of there ubiquity…if it were an even playing field, these guys would be fighting tooth and nail.

          • “if the mobile networks were all under a single large infrastructure and access was retailed from that structure, would it not be FAR cheaper and create even more innovation in the final product”

            I’ve been a telco journalist for 10 years, and I’m going to say no. It was competition from ‘3’ which forced Telstra into doing Next G, which in turn forced Optus and Vodafone to do 3G. It was competition from Telstra which forced 4G.

            Sol Trujillo saw a massive chance to make a stack of mobile cash for Telstra and he took it. A centrally regulated single wholesaler mobile network would never have done that.

            You can argue all you like, but I was there and reported on it daily. I saw why and how it happened. As did the ACCC.

          • > What effective monopoly position? Why can’t more than one telco get into an apartment building?

            Leaving aside the technical reasons, there are microeconomic reasons. For small enough MDUs, they are a “textbook” natural monopoly . The main cost for a telco of getting in there is the initial fibre setup then the DSLAM, with the marginal costs of adding new users negligable. How profitable this is depands almost entirely on the number of subscribers the first telco gets.

            If a telco needs 50 subscribers to break even, it makes sense to deploy to an 80 premise MDU. But if an equally efficient telco overbuilds, then at most only one of the two could service the site profitably.

            In such a market there are only two reasons for a telco to deploy there:
            1) To achieve a monopoly for yourself by getting in first.
            2) To predatorily attack an incumbant in the hopes of achieving (1) down the track.
            The can be no middle ground by the nature of the cost structure.

            In terms of protecting their investment, it makes sense for the first telco to do everything it can to prevent anyone else even contemplating direct competition. In fact it would be irrational for them not to.

            This is not to say I agree we should just nationalise everything or abandond facilities competition completely, just recognise these markets need to be structured in some way to ensure competitors are competing on efficiency, not on obstructionism. Easier said than done, obviously.

          • “I’ve been a telco journalist for 10 years, and I’m going to say no. It was competition from ’3′ which forced Telstra into doing Next G, which in turn forced Optus and Vodafone to do 3G. It was competition from Telstra which forced 4G”

            I understand and respect your experience, but you are only describing the case under the existing framework, and it was and is still very inefficient (IMHO), you are not looking at/comparing the hypothetical NMN I mentioned.
            Under a National Mobile Network, could we not still continue to upgrade the systems? Do you think that competition is the only way to do so effectively? Surely Telstra, 3 and the rest did not invent or innovate 3G or 4G, they merely deployed it. Kogan on the other hand did indeed innovate a very good marketing scheme and business synergy, and this is a far more proper use of capitalism.
            In addition, the upgrade of a single National Mobile Network would be FAR cheaper than the cost of upgrading all the combined networks, and that total cost is always passed on to us at some point.

            If we give our businesses the proper tools and infrastructure, there is very little we cannot do…but asking industry to self regulate and to use the capitalistic model on basic infrastructure has never ever worked in the long run.

          • Why would we want to prevent it?

            We don’t. But here’s the problem. It won’t happen.
            They won’t compete. Because they aren’t stupid. The market creates the most efficient outcome. But, the efficiency is on the business side. It turns out; leaving everyone to their first-claimed monopoly is the most efficient way to run a business. You get to charge your customers huge amounts, and without even colluding you can choose not to compete.

            Look at the USA, carved up nicely with barely any overlap. Where there is overlap; the densities are through the roof.

            Your later example of Mobile networks is exactly the same flawed comparison as ADSL dslams are to VDSL dslams.

            1 Mobile tower covers between 1000-100,000 people.
            1 ADSL dslam covers thousands of homes each.
            1 VDSL dslam covers hundreds at most.

            The market is not stupid; you don’t compete where you can’t possibly make money it is a bad investment. If you try? Someone goes bankrupt. Guess what – going bankrupt is the feedback mechanism the market uses to prevent that action happening again.

            So the only outcome can be single providers per MDU in hundreds of small monopolies. There will be outliers, there will be the odd MDU that gets some overlap (just like in the USA). But, this still wont result in lower prices, because there just isn’t the granularity in the business operations.

          • “Hey mate, so what’s your solution to this overall issue? And bear in mind that solution can not be “Return to Labor’s FTTP plan”, as that option is mot on the table”

            The Libs should go with the Nationals plan of rolling fibre out in the regions, and letting the city look after itself. This is the only way to seriously minimise the probability of a massive digital divide being entrenched by the governments current “policy”.

            The Nats are (supposedly) part of the Coalition, so Turnbull could say they took input from the Party that is supposed to know the regions the best, and create the appearance of not having egg on face whn he backflips. He also gets to pretend like he has some future vision. The regions were very much looking forward to fibre, and having options not controlled by Telstra. He could provide both.

            If the govt are going to have to spend massive amounts subsidising second rate broadband in the regions over a long period, why not instead spend that money up front on a proper solution. From an economic standpoint this would reduce ongoing maintenance costs, etc and from a social policy stand point encourage decentralisation, better health services for areas with easy access to specialists, etc. Its a win-win.
            The government aren’t doing Labors plan – they are doing the Nats. Private sector gets to save the day for the over serviced city folk, as Turnbull has long said they should. Telstra could still be separated.

            How does this not make sense at the point we are today?

          • The solution could be to allow other companies to build their own infrastructure. But then extract a certain amount of tax from them for each connection, which is used to subsidise the uneconomic remote connections.

  3. This is a land grab, Renai.

    Of course Infrastructure owners want this. So does the ACCC, because they’ve already set the precedent.

    Which in the case of MDUs will seldom be physically possible and where VDSL and vectoring is in use, illogical and financially unviable as it’s reliant on having control of the entire bundle to optimise conditions.

    It’s not competitive infrastructure unless more-than-one enters the same premises (or in the case of FTTB the same MDU).

    We have ample real-world example of the results when it’s a single provider offering a wholesale service.

    • > We have ample real-world example of the results when it’s a single provider offering a wholesale service.

      Do you mean the incompetence of NBNCo in rolling out the network because of a lack of competition or were you referring to Telstra?

      • Please, Mathew, enough with the “leave Telstra alone! down with NBN!” attitude.

        There are numerous examples of pricing that is directly affected the moment physical competition exists. Telstra is not alone in this – they are simply a good example because of their originally dominate position.

        As more providers enter a space, it creates pressure to gain or retain market share. I am not stating anything that isn’t already abundantly obvious.

        In the case of FTTN, FTTB the same conditions do not exist; there are no central exchange buildings with considerable floor space & regulations pertaining to their use.

        MSANs and similar infrastructure deployed by Telstra typically do not support multiple suppliers in the same cabinet (as an example).

        Infrastructure competition, is not the same as retail competition, any more than it is the same as wholesale competition.

        The ACCC is presuming multiple suppliers will compete and build duplicate infrastructure cabinets, or multiple suppliers will roll into MDUs despite considerable scale differences.

        An exchange may have several thousand or tens of thousands of potential customers & moderate capacity for multiple suppliers for an infrastructure owner.

        An MDU may have several hundred. Or less. To presume the same basic competition can and will exist, is flawed thinking.

        • > Please, Mathew, enough with the “leave Telstra alone! down with NBN!” attitude.

          Telstra are evil and in my opinion NBNCo were heading towards the same monopolist behaviour patterns.

          > An MDU may have several hundred. Or less. To presume the same basic competition can and will exist, is flawed thinking.

          I agree that there are likely to be significant challenges. That is why my preferred option is separation between wholesale & retail providers.

          • Can someone please tell Mathew, that there was an election six months ago, and the government changed. He seems to have missed that, and hence keeps posting irrelevant and inaccurate posts.

          • + 1…

            I was at least going to commend him for finally letting go of his odd, almost daily and at multiple blogs… groundhog day spiel…

            Then I scrolled down *sigh*

            :/ Amazing

          • “Telstra are evil and in my opinion NBNCo were heading towards the same monopolist behaviour patterns.”

            Ummm…the only evil monopolistic behavior I have seen Telstra exhibit is to use their infrastructure monopoly in support of their retail division. Can you explain how NBNCo are doing that? (seeing as they HAVE no retail division…)

            BTW, I think that any company that provides infrastructure should be barred from supplying retail as it is a conflict of interest to the public.

          • > Ummm…the only evil monopolistic behavior I have seen Telstra exhibit is to use their infrastructure monopoly in support of their retail division. Can you explain how NBNCo are doing that? (seeing as they HAVE no retail division…)

            I’d suggest that the stronger driver of Telstra was maximising profitability at the expense of consumers. For example:
            – Cancelling the stopping the long-reach ADSL program to force customers on to 3G
            – Prices on backhaul where Telstra was the only provider (e.g. Bass Strait, Adelaide to Darwin)
            – Blocking access to exchanges

            At one stage it was cheaper to have ADSL connections terminated in Adelaide than buy the equivalent backhaul (without the ADSL) to Adelaide.

            Without competition and an opaque relationship between cost and wholesale pricing, NBNCo could easily be just another monopoly.

          • ” Cancelling the stopping the long-reach ADSL program to force customers on to 3G”

            That would be a retail level issue…It has no similarity with NBNCo.

            “Prices on backhaul where Telstra was the only provider (e.g. Bass Strait, Adelaide to Darwin)”

            Again, this is just causing pain for ISPs that they compete with…in other words they are using their monopoly infrastructure to bolster their retail position. Not an issue with NBNCo…

            “Blocking access to exchanges”

            You keep making my point (thanks)…the “evil” you speak of is only viable for a company that has both a retail and a monopoly infrastructure arm.

  4. so you end up with either that certain providers equipment with a gun to your head and a super long non compete contract, or no upgrade at all if you don’t sign. and I bet $100 bucks we will go right back to only the 3 major cities getting it, and nobody outside of these cities getting squat.

    Damn liberal government and the idiots who voted them in.

    Its now getting to the point where moving to the other side of the pond (NZ) is becoming a serious option for not only broadband, but many other reasons.

    • While I do agree with your sentiments regarding the Coalition, the current situation with the CBN and the fact that NZ is so much better at this than us, I do feel it necessary to point out that nobody is going to hold “a gun to your head” and force you to use a certain provider’s equipment. If, for example, you have the choice of sticking with the CBN’s shotty infrastructure versus say Telstra’s superior FTTB/H/etc service at a premium price, the choice ultimately becomes yours with regards to which one you go with. You can either choose to have options of ISP and go with the CBN, or you choose to sign up with Telstra for a vastly better service at a much higher cost. It just ultimately depends on which you hold as more important – reliable and fast or a lower cost.

      Do I think that’s fair given what Labor’s vision promised? No of course I don’t. The idea of an open, ubiquitous FTTH network is infinitely superior to the prospect of having a CBN made up of mixed inferior technologies, with superior networks owned by private companies that charge through the nose for them. But we have to accept that that the true NBN is dead and gone for good. Even if Labor wins the next election (which is still far from plausible at this stage) the odds of them being able to restore their NBN vision are very, very slim.

      • I can already see the future and it is the below:

        The government will get put into a position where private companies will push the loophole clause of fttb, and the government will finally get its chance to “destroy the nbn” and leave it all to the corporates, and as such will sell the nbn to Telstra, but will not separate Telstra like it should. Another overbuild of infrastructure will happen in only the largest of places where cherry picking can maximize profits. Nothing but a token place or two will get built outside of the largest cities and we will be back to where we were 10 years go, a competition locked set of places and the rest lingering in the dark ages until the next government in 10 to 15 years gets the balls to try this again.

      • Actually it’s more a case that infrastructure competition is limited by the very technology in use, when it comes to FTTN and FTTB.

        In many cases, should Turnbull amend legislation that allows infrastructure owners to compete, there will be a rush to secure space and market. Understand in a FTTB, or FTTN situation, neither are conducive to multiple infrastructure owners in the same location.

        You would see, for example let’s pick TPG, retailing over it’s own service, and wholesaling at whatever rate it can get away with, unless legislation flattened the market into a universal structured offering.

        Unless everyone had to operate under the same rules as NBNco; that there’s a push to relax legislation suggests this may not be the case.

        This would basically make NBNco commercially unviable as it’s lumped with being ‘provider of last resort’ – and thus forced to deploy to generally un-profitable areas, because everyone else is securing the profitable ones.

        You end up with a fractured market, typically with single provider per building and a pretty complex structure with any number of constraints impacting consumers.

        Without sensible legislation this will turn into an absolute free-for-all. If Telstra and or Optus also get involved, it’ll be a legislative cluster-f*ck.

        • You forget the Holy Grail of the Market and the private sector and their belief in their own entitlement.
          Privatise the profits and socialise the losses. As a result the Conservatives are the most Socialist Government of all
          Taxpayer subsidies and handouts for the unprofitable sectors.

          All the while arguing that broadband is not infrastructure, but purely a commodity. Try cutting all of Australia’s internet and all broadband links in and out of Australia for a month

  5. I think it’s worth noting that, in principle, the ACCC is supportive of infrastructure competition, in the sense there are multiple suppliers serving a market.

    That is, multiple wholesalers all going gang busters trying to compete for business. Typically this creates forces in a market that will shift prices down (unless there’s hijinks in the form of collusion, in which case..).

    Right now this works for ADSL, because you typically have 4-5 infrastructure owners in an exchange; ergo they all have to compete to get your $ spend. Granted there are some exceptions, but the majority of cases there’s the same owners in each exchange (where there’s stuff deployed at all) as far as I am aware.

    You also have multiple retailers, whom use those services, competing with each other as well.

    But, much like the situation where there is zero direct infrastructure competition within Telstra MSANs (i.e. street cabinets) there would realistically only be indirect infrastructure competition in FTTN, FTTB.

    In that there are multiple owners, just not necessarily in the same physical location. Sure, you still have retail competition, but without at least duplicated infrastructure build, there’s no wholesale competition.

    And that is where, imho, ‘infrastructure competition’ breaks down. It only really works when there’s more than one supplier in any one location.

    I honestly don’t agree with the ACCC on this. It’s far too open to abuse without some really solid legislation. Legislation that Turnbull is under pressure to change.

    We need things to happen. Now. But not at the cost of repeating the same mistakes all over again.

  6. Given NBNCo is now free to implement FTTB, and is *supposed* to fund it’s non-commerical operations from super-profits from low cost/high margin users – why isn’t NBN rolling out to these high value MDUs first?

    • > why isn’t NBN rolling out to these high value MDUs first?

      I’d suggest for the same reasons that the NBNCo FTTP rollout was years behind schedule.

      • > for the same reasons that the NBNCo FTTP rollout was years behind schedule.
        Which is what exactly?

  7. “The ACCC considers that explicit subsidies to non-commercial areas are preferable and more transparent than internal cross-subsidies.”

    This sounds like the case for removing the regulations that give Australia Post its special position. Or variable premiums for Medicare coverage.

    How does the ACCC feel about competitive police forces, defence forces, public (free) schools and fire brigades?

  8. I support the single wholesale provider. Otherwise the have nots will be forever assigned to the broadband backwater. Subsidies will not work. There will always be pressure to reduce subsidy costs. There will also be inconsistent carrier choice and pricing.

    • > I support the single wholesale provider. Otherwise the have nots will be forever assigned to the broadband backwater.

      Under Labor’s NBN, the Corporate Plan predicted 50% of fibre connections would be in 12Mbps (April 2013 figure was 47%) so under Labor the have nots were already receiving a service that was half the speed of FTTN.

      Secondly because of Labor’s FTTP or Wireless ideological position many rural towns were going to have their existing ADSL services replaced with wireless. Clearly in these communities where the majority of premises are close to the exchange, a FTTN solution will deliver much faster results.

      > Subsidies will not work. There will always be pressure to reduce subsidy costs.

      It depends on the model chosen for subsidies. Would you prefer to pay significantly more for your connection and have the cross subsidy hidden? At least with explicit subsidies we can see where the costs are.

      > There will also be inconsistent carrier choice and pricing.

      The same existed under Labor’s failed plan because RSPs could choose to connect to only some PoIs.

      • “predicted 50% of fibre connections would be in 12Mbps”

        Which is turning out to be wrong…funny how you believe that prediction but nothing else about Labor’s plan.

        “Clearly in these communities where the majority of premises are close to the exchange, a FTTN solution will deliver much faster results”

        Actually the opposite is true…

        “Would you prefer to pay significantly more for your connection and have the cross subsidy hidden?”

        If it’s the same price all across the country, why does that matter?

        • >> “predicted 50% of fibre connections would be in 12Mbps”
          > Which is turning out to be wrong…funny how you believe that prediction but nothing else about Labor’s plan.

          Do you have evidence of this? The last numbers I saw on fibre take-up were published in the NBNCo Corporate Plan (2013 Draft) and the percentage was 47% on 12Mbps. One of the few thing that Labor were close to correct on, and many wish they were wrong.

          >> “Clearly in these communities where the majority of premises are close to the exchange, a FTTN solution will deliver much faster results”
          > Actually the opposite is true…

          Can you provide evidence to backup your statement? If the premises is within 500m of the exchange I would expect significantly better performance than the current wireless solution.

          >> “Would you prefer to pay significantly more for your connection and have the cross subsidy hidden?”
          > If it’s the same price all across the country, why does that matter?

          It matters because that price might be significantly higher than necessary because of inefficiency.

          • “Do you have evidence of this?”

            Sure…since 12/1 is not just an internet connection speed, it is also the classification for a phone-only residence. Beginning next month, areas with FTTP start turning off the copper, and FTTP 12/1 is what those phone-only folks will be using. Currently the number of households using internet are at 78%, so 47% * 78% is only 36.7% of users choosing 12/1 for internet access. Also, that number continues to fall each year…
            The number of high-end users is almost double the predictions of the Corporate Plan, so using it as a guideline for actual use is a very silly thing to do. Just like any plan, it is not written in stone and will drastically change as circumstances do.

            ” If the premises is within 500m of the exchange I would expect significantly better performance than the current wireless solution”

            You are posting one thing but thinking something entirely different…what does wireless have to do with FTTN?

            “It matters because that price might be significantly higher than necessary because of inefficiency”

            The service is not delivered on an at-cost per area basis…in that model, for adsl those who are living next to the exchange would be paying less than those who live a block down the road because it is cheaper (less copper). It’s a ridiculous assertion…

          • > Sure…since 12/1 is not just an internet connection speed, it is also the classification for a phone-only residence

            Great so we are building this 1Gbps network for some people to just use it as a phone line? If an exercise is going to be considered nation building then it needs to be done in a way that actually fulfils the promises, not leaves many people behind.

            > Currently the number of households using internet are at 78%, so 47% * 78% is only 36.7% of users choosing 12/1 for internet access.

            Did you know that NBNCo are expecting to connect only 70% of premises passed by fibre?

            > You are posting one thing but thinking something entirely different…what does wireless have to do with FTTN?

            In rural communities of less than 1000 premises, Labor’s plan was to only offer wireless. Clearly in these communities FTTN would be faster, but Labor’s ideology prevented them from offering that as a solution.

            >> “It matters because that price might be significantly higher than necessary because of inefficiency”

            The inefficiency comes in because of bloated bureaucracy, through the lack of competition. Under Labor’s failed model, if NBNCo costs rise, then wholesale prices are adjusted to match. Secondly Labor’s plan was to privatise NBNCo as soon as possible.

            > The service is not delivered on an at-cost per area basis…in that model, for adsl those who are living next to the exchange would be paying less than those who live a block down the road because it is cheaper (less copper). It’s a ridiculous assertion…

            Let me be clear. I’m not against universal pricing for the internet. For example GPs are paid additional medicare benefits to provide services in rural communities, but the cost to the patient remains the same. However I prefer the direct subsidy approach where multiple companies can compete to provide the service rather than an opaque monopoly.

          • “Great so we are building this 1Gbps network for some people to just use it as a phone line?”

            Partially, yes…it’s obvious that the copper has been breaking down for quite some time now (hence the $1 Billion/year+ cost of maintenance). The FTTP deployment replaces that with far greater capability and far less maintenance cost. The TCO (Total Cost of Ownership) for FTTP is massively lower than continuing with copper…

            “Did you know that NBNCo are expecting to connect only 70% of premises passed by fibre? ”

            Which changes none of the math whatsoever…that was a per capita assessment.
            BTW, 70% is for the CBN only…it may indeed increase again at the next election.
            (that CBN mention was specifically for you Renai…every little bit helps) :)

            “In rural communities of less than 1000 premises, Labor’s plan was to only offer wireless. Clearly in these communities FTTN would be faster”

            Again, so what?
            1. What does that have to do with the exchange?
            2. FTTN is LESS practical in low density areas than any of the other methods…

            “The inefficiency comes in because of bloated bureaucracy, through the lack of competition”

            This makes absolutely no sense…how does cross-subsidization increase bureaucracy?
            How could competition in infrastructure POSSIBLY make the overall cost lower?
            Just as with the cable rollouts, when there is infrastructure overbuild (multiple companies building the same infrastructure) the net cost to the consumer is always, always, always higher…no exceptions.
            If you can think of a single exception, please list it…

          • “How could competition in infrastructure POSSIBLY make the overall cost lower?”

            This is the bit that really gets me about the whole infrastructure competition thing, how can running two (or more) networks along side each other be considered efficient? The only benefit from it is consumer choice, everything else about it is wasteful and expensive…

      • Mathew, 12Mbps is far better than I get every weekend and weekdays after dinner. And if I can get it for $30-50 a month, I’m gonna bloody take it. Those on 12Mbps ARE the haves, compared to the rest of us ADSL plebs – we’re the have-nots. Your argument is ludicrous anyway, because these people are CHOOSING 12Mbps when they could have 100Mbps if they so wished. Let me tell you though, if I could only have either a 12Mbps fibre connection for $50 a month or an “up to 24Mbps” ADSL connection for $70 a month (what I’m paying for now), fibre would be the clear winner.

  9. What planet are the ACCC on. You’re just going to have a lot of cherry-picking and a lot of small discrete monopolies (apartment block by apartment block). It’s like allowing private companies to build whatever roads in Sydney they want and then charge for their use. Total disaster.
    What a joke.

  10. I disagree with tpg. me personally, iv used tpg before. they sucked. if I moved into a unit building and tpg were the provider, and lets be honest, it would be the only provider, id move out again.
    this is going to lessen competition.
    fttp/fttn I don’t really care. at least with nbn I have my choice of provider.

  11. @Mike & Others – In all fairness to the ACCC, I don’t think Renai’s article quite make the ACCC’s full position clear enough to avoid people jumping to some of the conclusions they have. Most of the quotes of the ACCC’s submission are taken from a context of considering whether or not TPG or other should be allowed to overbuild NBNCo’s network.

    The ACCC has a very different view in the case where “Non-NBN Co network operator as the sole (monopoly) supplier: … in such cases that the non-NBN Co network is subject to wholesale-only and open access requirements similar to those that apply to NBN Co.”

    Note that their view does not only apply to new networks as the current regulations do (existing networks may be extended within reason without needing functional separation – the potential loophole TPG want to exploit), but to *all* networks.

    That means a big *no* to the TPG MDU project from the ACCC unless:
    – NBNCo builds in there as well
    – TPG meets the same/similar conditions as NBNCo: which ATM means TPG (as currently structured as a retailer) isn’t allowed to.

    The conclusions of Renai’s article do seem completely correct though: a concensus is developing that NBN’s non-commercial operations should be subsidised directly to allow 3rd parties to compete with NBNCo on a level playing field. I guess it shouldn’t be surprising because this is essentially the industry saying that taxes to fund the non-commercial rural users should fall on someone else :-).

    • > I guess it shouldn’t be surprising because this is essentially the industry saying that taxes to fund the non-commercial rural users should fall on someone else :-).

      Currently the Telecommunications Universal Service Service Management Agency (TUSMA) is partly funded by “a consolidated industry levy with contributions made by telecommunications carriers based on eligible revenue”. One would expect that this could be easily extended to Internet access.

    • “The conclusions of Renai’s article do seem completely correct though: a concensus is developing that NBN’s non-commercial operations should be subsidised directly to allow 3rd parties to compete with NBNCo on a level playing field.”

      And who is going to fund the subsidy? We’re removing the income source to allow for competition.

      Also in this instance, we are talking about legislatively allowing commercial interests to carve up the market in profitable areas, destroying any value in the NBNco and degrading it to a last-resort provider.

      TPG are claiming they would have little impact. But it’s not just TPG. It’s potentially a number of ISPs. All trying to cherry pick.

      The same potential situation exists in NZ. Where the government there is seeing exactly the same pressure to allow direct infrastructure competition; which would destroy business case and profitability of the Chorus network in the process. Thus far, they are standing their ground and getting on with the job.

      We could learn something from that.

      • “And who is going to fund the subsidy?”

        The Government.

        THAT’S WHY IT’S CALLED A SUBSIDY.

        Look, mate,

        I’m kind of getting tired of explaining this stuff to people in the comments underneath this article. I encourage all readers to engage with this debate on a high level, instead of this sort of gutter-level discussion. I will ban people or even start closing comments if people don’t stop debating what a subsidy is and how it is going to be funded (FFS) and start discussing the actual regulatory and competition issues here.

        The argument that NBN Co could move from a cross-subsidy situation to a direct subsidy situation is not a niche argument. It’s being made by the ACCC itself, FFS. So let’s stop belittling the whole concept and start engaging with it seriously.

        • Please, I am not belittling the situation.

          Of course the government is. It was a rhetorical statement.

          As soon as you remove cross subsidy and make it a direct subsidy it becomes a) a direct cost and b) immediately at risk of future governments de-funding or changing the commitments. Either works.

          But the latter means future funding is reliant on government continuance.

          ACCC have always been in favour of direct infrastructure competition; in principle if everyone competes it’s ruled fair. They have made exemptions in the past though. Thus I am hoping they release a more formal statement.

  12. So sad, ‘welcome to your new building, if you want internet service there’s only one option. enjoy!’

    Welcome to America ladies and gentlemen…

  13. There is a reasonably simple alternative. The ACCC PoI decision effectively created 121 separate networks. Tenders should be let for each of the 121 networks to install and provide a wholesale service at current NBN pricing for 10 years. In profitable areas, companies will pay for the rights to provide the network while in loss making areas, companies will request a subsidy.

    This will give us the innovation and efficiency of private companies with the benefits of universal access.

    • > There is a reasonably simple alternative. …

      I fail to see how this is substantially different to NBNCo as it is currently constituted – other than wholesale CVC rates get fixed for 10 years. ATM NBNCo tenders out pretty much all of the components of it’s service provision, just not on a full fibre access area basis.

      The issue with NBN’s CVC pricing is it doesn’t reflect the underlying cost of providing the service. There are effectively no price signals directing investment or usage. An inevitable consequence would be a (continued) under-investment in backhaul capability in our urban centres where the price is held artificially high to serve some other policy objective.

      • > I fail to see how this is substantially different to NBNCo as it is currently constituted – other than wholesale CVC rates get fixed for 10 years.

        The difference is you have several companies competing and innovating. In addition to the “standard pricing”, I would support wholesalers offering alternative pricing models (e.g. abolishing the speed tiers).

        > ATM NBNCo tenders out pretty much all of the components of it’s service provision, just not on a full fibre access area basis.

        All the evidence suggests that NBNCo did an appalling job on those tenders.

        > The issue with NBN’s CVC pricing is it doesn’t reflect the underlying cost of providing the service. There are effectively no price signals directing investment or usage. An inevitable consequence would be a (continued) under-investment in backhaul capability in our urban centres where the price is held artificially high to serve some other policy objective.

        How do you calculate the underlying cost? Should CVC be just the cost of routers to move the bits and not consider the fibre install? I would argue the AVC pricing is discounted because Labor wanted to keep the cheap plans the same price as ADSL. I think there is a reasonable argument that CVC pricing should be higher, and AVC cheaper to encourage more people to connect.

        The basis of wholesale pricing financial model that NBNCo developed under Labor’s direction to balance the books and have 12Mbps plans cost the same as ADSL. Labor’s model is very reliant on increased usage driving up the ARPU price. The NBNCo Corporate Plan has a couple of graphs showing prices falling over time, but what it doesn’t make clear is the significant increase in usage required for prices to fall (e.g. ARPU rising from $20 to $100+).

        By having competition in the infrastructure space, different providers will be able to innovate with different services. You may be familiar with ADSL pricing prior to Internode installing it’s first DSLAM. Telstra wholesale provided 3 speed tiers, maxing out at 1.5Mbps when the theoretical limit was 8Mbps. Internode didn’t impose artificial speed tiers at the same price as a Telstra’s middle tier (512/128Kbps). Who knows what Telstra would have done in the absence of competition, but history shows that even with competition Telstra still capped ADSL with speed tiers for many years.

        • > How do you calculate the underlying cost? Should CVC be just the cost of routers to move the bits and not
          > consider the fibre install? I would argue the AVC pricing is discounted because Labor wanted to keep the
          > cheap plans the same price as ADSL.

          The cost of the AVCs are (bearing in mind I have no special insight into NBN’s finances) fairly constant across all users, regardless of where they are. Everyone needs and ONT, a drop cable, local fibre (except large MDUs), a port in the splitter box and distribution fibre. The biggest variance (other than required civil works I ghuess) is the distance the FSAM is from the OLT, and as that cable is shared by thousands of users, it’s length isn’t a big part of the total cost of connecting a user.

          With NBN’s 2.5GPON system & 1:20 split limit each user could conceivably get 2500/1500 burst and 125/75 guaranteed minimum and this would not cost NBNCo a cent more to provide. NBN’s AVC pricing is entirely about throttling users to achieve price differentiation, something that only a monopoly supplier can achieve.

          CVC pricing is highly dependant on where the FSA is in the network. If the ONT is co-located with the POI, and – very roughly I think that’s about 20% by number and at a semi-educated guess 30% by users – then the cost to NBNCo of backhaul is zero. But the further the FSA is from the POI, then the more NBNCo has to fork out in backhaul. And Connection Service Areas can have multiple remote FSAs. RSPs purchase CVC capacity per POI, but NBNCo may need to provide that ISP with that capacity over multiple different backhaul links to every FSA connected to that POI.

          The CVC charges are where the cross-subsidiation occures. For inner city networks connecting MDUs TPG, Telstra and the like could easily outcompete NBNCo RSPs on price because they wouldn’t need to cover CVC costs – because they’re nill.

          • > The cost of the AVCs are (bearing in mind I have no special insight into NBN’s finances) fairly constant across all users, regardless of where they are.

            Wrong. Compare the cost of AVC to a tower of apartments, medium density (250sqm) or semi-rural where blocks may average 2000-10000sqm. Clearly the amount of fibre to be laid is significantly longer in the semi-rural situation.

            > CVC pricing is highly dependant on where the FSA is in the network.

            It depends on what you consider comprising the CVC costs. . Your argument is that is everything from the FSAM, but I would argue this infrastructure requires construction regardless of the amount of data transferred, so therefoure I would consider the cost of CVC infrastructure to route the bits rather than fibre. What it does point out is that the opaqueness of the financial model.

            In today’s ADSL market there are a variety of plans that users can pick based on their requirements trading off data for higher performance or reliability. This is what competition provides. NBNCo’s charges make up the majority of an RSP’s costs which means we are returning to the years shortly after the turn of the century when plans were very similar.

          • > > The cost of the AVCs are … fairly constant across all users, regardless of where they are.
            > Wrong.
            Fair cop on that re housing densities (but bear in mind a lot of the Layer 1 cost is in splicing, enclosures and connectors, so passing every 20m isn’t twice the cost of passing every 10m)). What I really meant was access costs at Baulkum Hills were not substantially different to Broken Hill.

            With backhaul the the costs are *very* different though.

  14. Installation of competing infrastructure by the now 4 Telco’s NBN, TPG, Optus and Telstra in a giant rollout race is absurd it just leads to 4 times the level of capital expenditure for the zero sum game of a fixed market in sales.
    This isn’t about selling bananas!

    “This kind of competition is what the ADSL wars of the 2000′s were all about, as those same companies and others like iiNet frantically competed to fill up telephone exchanges with their own DSLAMs, delivering the broadband most of us enjoy today. If Telstra, Optus and TPG have their way, that battle would now extend to FTTB hardware in apartment basements.”

    Rubbish, where were these “competitive Telco’s” prior to the NBN Co staring up, they were doing their usual jackshit and delivering nothing. It’s why the whole NBN idea came into being.
    I didn’t see any DSLAM’s from anybody in Katoomba just the incumbent Telstra.
    If you go to an exchange in the city say Chatswood there will be DSLAM’s from iiNet, Internode, Optus, TPG, this competition argument just produced multiple suppliers in cherry picked areas competing on the zero sum game of fixed customers. It’s absurd, it’s no way to run any sort of telecommunications network.
    These networks need to be designed by engineers and built in the most efficient manner, not designed by politicians and bean counters.
    The end result of this “competitive approach” was the lucky few got better service the vast majority got nothing.
    Now it’s the unit owners in Pyrmont and Green Park that will be in the favoured few.

  15. This is the end-game for the Coalition Broadband Network..
    Another “let’s sell off Telstra in it’s entirety” moment.
    Everyone wins, provided you’re a Telecommunications Corporation.
    The only losers are the Australian taxpayers and consumers.

    Even if it were possible to have multiple providers in the one MDU building (which I believe it is not – ie ZERO competition), the cost of each network being built to the MDU has to be factored into the price that the users pay. If you’re building 3 networks, the users have to pay for 3 networks in inflated subscriptions…
    Only in crazy world is paying for 3 networks a cheaper option for the customer than paying for 1 network with multiple providers competing to supply service over that network!
    Even in the worst case where the single monopoly network supplier costs three times as much to build, it’s still cheaper cause you’re only paying maintenance costs on one network!

  16. It’s utterly ridiculous to think that a single structurally separated monopoly provider with open wholesale arrangement (ie. NBN) even if unefficiently unrolled would cost more than duplicating, triplicating or more a infrustructure rollouts, even if each is done so efficiently.

    Frankly it amazes me that people really think infrustructure competition makes economic sense or leads to decent customer outcomes.

    Surely it’s obvious that building something capital intensive like infrustructure once (with equal wholesale) makes more sense than building it 2,3,4 or more times. Surely……..

  17. Why don’t we overbuild the road network as well? Companies will be able to build competing roads above or below the existing government provided roads.

    And electricity distribution networks as well, and why not competing sewerage and water networks running alongside each other.

    Of course not! It is a stupid idea! Why would fibre optic telecoms networks be any different. It’s not as if badnwidth is a constraint that would be alleviated by building antoher network.

    • You can build competing telco infrastructure next to one another without significant disruption … the same cannot be said for roads, water, sewerage and so on. I would have though that this would be obvious. Most major cities already have a strong degree of competing telco infrastructure running alongside each other, especially in the CBD.

      • Sure.

        However, there are some non-trivial modifiers that do not make it black or white for MDUs:

        – buildings require floor space for multiple provider MSANs or similar DSLAM hardware
        – vectoring requires control of cable bundles to optimise services

        Whilst infrastructure competition is possible for FTTB, it’s going to be one supplier in the vast majority of cases, MDUs aren’t exchanges and don’t necessarily have tens of thousands of consumers.

  18. Renai

    Every time you have asked what is to stop multiple providers the main response has been Vectoring requires only one provider could you provide evidence that this is not the case?

    • Why does vectoring only require one provider? We’re talking about copper cables running inside an apartment block with fibre to it. It doesn’t seem like it’s that complex of a situation.

      • The following is provided by Alcatel-Lucent, one of the vendors in Telstra’s trial, I believe.

        http://www2.alcatel-lucent.com/techzine/boosting-vdsl2-bit-rates-with-vectoring/

        “Vectoring enables these gains by canceling interference between copper lines, which is one of the most significant factors limiting the achievable bit rate. In a dynamic process, vectoring continually measures and cancels this “crosstalk,” so that all lines can operate at much higher capacity —

        Because sophisticated noise cancellation is Central Processing Unit (CPU)-intensive, vectoring works best for the smaller number of lines (few hundred) typically found in Fiber to the x (FTTx) deployments — and where measurements are available from all lines. This means that the lines all need to be under full control of a single service provider for optimal performance gains.

        It’s not so much that competitors can’t all cram into a building, it’s that Vectoring is potentially rendered less effective.

        • That article is mainly talking about FTTN deployments … with copper loops measured in the hundreds of metres, not the dozens of metres (max) as would be common inside apartment buildings. Then too, one would imagine it would be trivial to deploy in-building copper as shielded cables or even just Cat5/6, rather than sitting the cables next to each other.

          I’m sorry, but we’re talking about in-building cabling here. It’s a whole different ball game when you get to that point. I’ve watched people deploy modern cables in apartment buildings. There is very little similarity between that and what happens when you look at how Telstra’s cables are deployed in the street.

          • “I’ve watched people deploy modern cables in apartment buildings.”

            I guess the keyword there is “modern”. The whole NBN/MDU mess started with NBNCo saying they had problems getting fibre in to existing MDU, didn’t it? I guess the real question is “How many modern apartment blocks are there, and how many ‘older’, more difficult to cable ones exist?”.

            There is nothing stopping anyone from running multiple networks in to an MDU (“dirty deals with body corps” aside), but it doesn’t seem very efficient/productive IMHO. Malcolm’s really messed on this :(

          • Once you have fibre to the basement then If “it would be trivial to deploy in-building copper as shielded cables or even just Cat5/6, rather than sitting the cables next to each other” then why not deploy cheaper more efficient fibre all the way instead & not require vectoring?

      • Renai and Brendan, Have you read the appendix in Communications Alliance’s submission to the Vertigan review? This explains in gory technical detail exactly why vectoring requires a single provider to work well. The paper talks about why this is necessary in MDUs as well as for FTTN, and makes some interesting comments about the implications of having MDUs within FTTN areas.

  19. Vectoring requires unbundled loops because “vectoring” is allocating frequency bands to each pair in cable to reduce noise to adjoining pairs, it requires ownership of the whole cable and originating and terminating equipment..
    DSL is an FM signal, Noise from adjoining pairs slows transmission speeds.
    It also requires multiple visits to customers to set up, and very reliable cable records.

    • We’re talking about in-building copper cabling. You can do whatever the f*ck you want with it. There is no “unbundling”, there is no connection to the wider network, this is cabling from your apartment to the building’s basement. Am I missing something here?

  20. The noise reduction strategy by the vectoring equipment requires the whole cable to set up, are you assuming that in a build in that from the distribution box everybody in the building is routed it’s own separate 2 pair wire.
    If that were the case we wouldn’t need vectoring, there would be no noise from adjoining pairs.
    You may have been looking at buildings that are brand new if you have cat 5 or 6 there won’t be any vectoring.
    They can be 25 pair cables running from a junction box on the 23rd floor which is connected to a 60 pair cable. The single pairs generally terminate at the exterior of each unit from various size cables 25 pair or 60 pair, some really old blocks have a single pair cable running to each unit.

  21. Be very careful of letting TPG do anything. This is a company based on greed and low quality everything.They will undermine quality service for profit and we will all be the losers eventually as they will take the cream and leave the milk for NBN Co to deal with, and we will all pay forever.

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