news The chair of the competition regulator has repeated his view that the NBN company should ultimately be broken up into chunks that would compete with each other, in comments that appear to run directly contrary to the complementary network design model currently being pursued by the company.
Speaking to the Australian Communications Consumer Action Network Conference in Sydney this morning (see his speech here), ACCC chairman Rod Sims said that in telecommunications markets, the ‘gold standard’ for developing healthy competition between different players was infrastructure-based competition.
Infrastructure-based competition focuses on the idea that different telcos would build their own networks rather than deploying services on top of networks belonging to other companies.
“Where this is efficient – often in highly populated areas – it leads to the best outcomes in terms of prices and quality of services for consumers,” Sims said.
Infrastructure-based competition has worked well in Australia’s movile market, with Telstra, Optus and Vodafone all owning at least some of their own infrastructure locally. However, up until now, Australia has seen relatively low levels of infrastructure-based competition in the fixed telecommunications market, compared with some other countries.
In a number of other first-world countries throughout Europe and the Americas, traditional copper-based telephone networks have been overbuilt by HFC cable networks. This has meant that customers are able to choose between different styles of broadband and telephone services at their premises.
A good example would be the UK, where incumbent telco BT is upgrading its copper-based network with Fibre to the Node technology, to compete with HFC cable player Virgin Media. Customers have a choice of broadband technologies.
However, in Australia this model has largely failed, due to the fact that neither the ACCC nor the Federal Government took action to restrain incumbent telco Telstra from deploying its own HFC cable network in competition with the HFC cable network deployed by Optus in the late 1990’s and early 2000’s. This dual deployment meant that Optus rapidly stopped investing in its HFC cable network, leaving Telstra with strong control of both types of platforms.
The NBN policy first developed under Labor and now continued (in a heavily modified form) under the Coalition will see a switch away from the infrastructure-based competition model and towards a unified model, where retail telcos such as Telstra, Optus and TPG will all use the fibre, copper, HFC cable, satellite and fixed wireless infrastructure provided by the NBN company to provide their own services over the top.
These different networks are viewed as complementary. The NBN company, for example, is not planning to upgrade Telstra’s copper network in areas where the HFC cable networks it is buying from Telstra and Optus already exist.
However, in his speech this morning, Sims said as Australia headed into the “NBN world”, he wanted to continue to advocate for infrastructure-based competition.
“I am on the record as an advocate for NBN Co putting in place measures that will facilitate future infrastructure-based competition,” he said.
“In particular, NBN Co should put in place arrangements that provide for the future separation of NBN Co at an appropriate time into separate businesses that can compete with one another, for example based on delivery technology.”
Such a model could mean, for example, that the NBN company could be separated out into a number of different companies. One could sell services over the HFC cable networks, one over Fibre to the Premise or Fibre to the Node networks, still others through the satellite and wireless networks, for example.
However, Sims did not address the issue of whether this would lead to actual infrastructure-based competition between these slices of the NBN company. Currently, the company’s plans do not include overbuilding its own networks. This would mean, for example, that the NBN company selling HFC cable would enjoy a monopoly over local infrastructure in its market, the fixed wireless NBN company would enjoy a monopoly in its own market and so on.
It’s not the first time Sims has made similar comments — for example, in November 2014 he expressed a similar view.
Sims also addressed other aspects of Australia’s telecommunications market in his speech — including the ACCC’s decision to approve TPG’s acquisition of rival broadband player iiNet, the gradual downward trend in pricing and issues relating to competition in Australia’s media sector — including the emerging Internet television streaming sector. You can read the full speech online.
Opinion/analysis to be posted separately.
Image credit: ACCC