Competition continues to be a hot topic in every NBN debate about developments of the NBN, in relation to both the current government’s position and to Coalition policies.
The current debate very much revolves around the Special Access Undertakings (SAUs). We analysed this situation a few months ago, at which time we said that the underlying problems with the SAU is the flawed longer-term NBN Co business model. This model depends entirely on old-fashioned telecoms income and does not take into account the wider economic and financial benefits that will be delivered by the NBN. Because of its national importance to, for example, healthcare, education and government services, over time cost of access to the NBN will go down and not up – but that reality is not yet reflected in the NBN Co business plan.
On the Coalition’s side there is still that lingering promise of infrastructure-based competition, which of course involves another rather flawed assumption. This assumption is all the more remarkable as it was under a previous Coalition government that infrastructure competition – between HFC and ADSL networks – failed completely. How on earth they plan to revive a national level of competition remains a mystery. It would, however, be very dangerous to develop policies on the premise that infrastructure-based competition can work. The window of opportunity for such a level of competition has clearly passed and there is no way that this can be revived; duplicated infrastructure will simply end up on the scrapheap of stranded infrastructure.
Instead BuddeComm suggests that what we need to keep a much closer eye on is the dominance of Telstra in this new environment.
The unfortunate selection of 121 POIs instead of the 14 initially proposed by NBN Co severely limits the opportunities of large-scale retail-based competition. Only two or three wholesale/retail operators can afford to build out national services on top of the NBN, which would require them to install their own equipment in all of those 121 POIs.
Narrowing that down even further, among these two or three Telstra is by far the most dominant player.
Add to this the lucrative deal it already has with NBN Co and it is evident that a cash-rich company can easily outcompete others in, for example, the mobile spectrum auctions that recently took place. Give the build-out of services on this new spectrum a couple of years and we will see that Telstra will also be totally dominant in the mobile market.
So far very little debate is taking place on what this will mean for the overall level of competition in the market.
The next concern is that if the Coalition indeed wants to make some serious changes to the foundations of the NBN they will need the cooperation of Telstra, and that telco has already very clearly indicated that it will only make changes that would be in the interest of its shareholders. In other words, Telstra needs to be better off under any deal that the Coalition needs from them.
So if the Coalition does want to make any significant changes it will have to make Telstra a very attractive offer. With or without an NBN Telstra has little or no interest in investing in copper- and HFC-based infrastructure, so if the Coalition wants it to invest in those old technologies they would need to take the risks of such investments. Furthermore, Telstra would be the only one who would be able to deliver on the Coalition policy to prolong the life of copper and HFC; and so, beside the money issue the regulatory issue will need to be addressed – and, again, without any associated incentives Telstra would be very reluctant to move in this direction. So, whatever way you look at it, changes to the fundamentals of the NBN would undermine competition in Australia even further.
So far the Coalition has mainly spoken about competition in relation to the position of NBN Co, and there certainly is a need to keep an eye on that. Nevertheless at this point in time the dominant position of Telstra continues to be the greatest threat to competition.
While Telstra has changed considerably, for the better, it remains very dominant, and tough regulatory policies will be needed to ensure good and viable ongoing competition in Australia. Any government that places itself in a vulnerable position vis-à-vis Telstra will find it hard to negotiate those very essential tough deals.
- Australia – National Broadband Network – Telstra
- Australia – National Broadband Network – Wholesale and Competition
- Australia – National Broadband Network and the Opposition
- Australia – National Broadband Network – Policies and Regulations
We invite your comments: Comments Off on NBN and the competition issues