A tale of two NBNs

For the true believers in Fibre-to-the-Home (FTTH) services delivered by a National Broadband Network (NBN) model it has been an unhappy couple of weeks.

Firstly, the heavy defeat of the Labor Party in Australia’s Federal Election saw the end of the line – for now at least – of the FTTH dream with new communications minister Malcolm Turnbull set to deliver a re-designed Fibre-to-the-Node (FTTN) dominated model.

Secondly, and perhaps more worryingly, have been developments in Singapore where market giant SingTel has moved to take full control of OpenNet, the joint-venture company which is building the country’s Next Generation National Broadband Network (NGNBN).

Under the terms of the deal, SingTel would sell its 30 per cent stake in OpenNet to NetLink Trust – a fully owned SingTel entity – for $S38 million with OpenNet’s other shareholders, Singapore Press Holdings, Canadian firm Axia and SP Telecommunications, selling their 70 per cent stake to NetLink for $S88 million.

In addition, SingTel has also requested to the Infocomm Development Authority (IDA) that it be allowed to extend the deadline for reducing its stake in NetLink to below 25 per cent by up to four years.

The move has been furiously opposed by rival operators M1 and StarHub, Retail Service Providers such as MyRepublic, SuperInternet and ViewQwest as well as Nucleus Connect – which operates the active infrastructure on the NGNBN – who are all urging the IDA to reject the deal.

In their submission to the IDA the opponents of the deal say that there are, “Grave concerns….over the competition issues raised by the proposed consolidation, including the potential of discriminatory treatment and a lack of independence by OpenNet.”

The non-SingTel sections of the market have long been critical of the performance of OpenNet in deploying services into the market, claiming that the firm was deliberately slowing down the installation of the NGNBN to office buildings in order to protect SingTel’s dominance in the enterprise market.

Therefore, the move by SingTel to take full control of OpenNet has SingTel’s rivals hugely concerned that the market giant will use its full control of OpenNet to ensure that its own interests – rather than those of the wider industry – are protected via the NGNBN deployment.

To prevent this from happening the opponents of the deal are calling for safeguards to be imposed to make sure OpenNet offers services on a non-discriminatory basis – possibly by appointing new independent directors to the board of OpenNet and penalising the company for missing rollout targets.

The incumbents that refuse to die

The common link between the Singaporean situation and latest developments in Australia is a very simple one – the incumbent telcos are refusing to go quietly into the night like they were supposed to when NBN plans were drawn up.

SingTel’s attempted takeover of NetLink – giving it 100 per cent ownership of the network operation side of the NGNBN – is a clear demonstration that the market giant has no intention whatsoever of giving up a single iota of its market dominance without one hell of a fight.

Similarly, while Telstra has not attempted anything like what SingTel has done the firm is still shaping up to be a huge player in the new Australian NBN landscape – although the exact nature of its role remains unclear.

The struggles of NBN Co to get the FTTH network deployed over the last four years – with only two per cent of the FTTH network completed and some analysts estimating the network is now two years behind schedule – has led to calls from many that Telstra should be brought into the project as a builder of the network.

Telstra is keeping its counsel on the issue but some lucrative construction deals on the NBN could be a nice sweetener for the company as it negotiates with NBN Co. over supplying access to its last-mile copper network.

Moreover, the announcement that Telstra has been conducting vectoring trials on its copper network with key NBN vendor Alcatel-Lucent has also sent concerns through its industry rivals that Telstra might still be a key network player for a while yet – something which the former government’s NBN plan was supposed to prevent.

Indeed, given that the new Coalition government wants to see greater investment in infrastructure by private providers it is quite possible that Telstra – taking the lead of others like TPG Telecom – might deploy more of its own high-speed broadband networks in profitable urban areas.

Depending on the position taken by the new Coalition government we might even see Telstra continue to operate its HFC network for broadband access – which was due to be turned off under the former NBN plan – albeit that it might do so under an open access basis.

So, if there is one thing we can learn from the NBN experiences in both Singapore and Australia over the last couple of years it is this, no matter what the politicians or regulators might like to say or plan that powerful incumbent players simply do not fade away, but actually rage fiercely against the dying of the light.

An open access network model might look good on a white board and it is clearly a desirable outcome for the broadband access market but getting it to happen whilst incumbents maintain control of critical industry assets is another matter altogether.

Tony Brown is a senior analyst with Informa Telecoms & Media. He is a key member of the Broadband and Internet Intelligence Centre team, covering the broadband and Internet markets of the Asia Pacific region.