NBN BUZZ: ACCC's broadband leveller

NBN Buzz is a weekly wrap up of everything that's going on with Australia's largest infrastructure project. For previous editions and the latest news visit our NBN Buzz page.

Bringing copper and fibre closer

The Australian Competition and Consumer Commission (ACCC) is hogging the limelight this week after it finally decided to do something about Telstra's vice-like grip on ADSL infrastructure. But amid the talk about cheaper retail prices and an unhappy Telstra refusing to play ball with NBN Co on their $11 billion deal, what we really have here is the regulator preparing the telecom landscape for the NBN, where the playing field is dictated by resale-based rather than infrastructure-based competition.   

The ACCC decision to set the prices Telstra can charge its competitors for wholesale ADSL has understandably ticked off the telco because it's going to mean less revenue flowing into its pocket. The interim determination, (the final decision is still six months or so away), has set a monthly per user access charge of $25.40 a month in CBD locations (Zone 1) and $30.80 a month for regional, rural and metro areas (Zone 2). Telstra currently charges $30 per user for wholesale access in CBD areas and $37 per user in rural and regional Australia.

Telstra may have been a bit surprised by the prices set by the ACCC but it would have had an inkling of what was in store even during its negotiations with the ACCC. Regulation of the Wholesale ADSL market was always on the cards once Telstra's revised SSU came into play and the telco is unlikely to rock the boat before the ACCC hands down its decision in a week or so. So, the $11 billion deal is not in jeopardy for the time being because Telstra can soothe the temporary pain by looking at the millions headed its way thanks to the NBN.

With regards to whether the move will lead to cheaper retail prices, the jury is still out. The general expectation is that with ISPs saving money on wholesale access charges that's going to naturally translate into cheaper plans for customers. However, not everyone is convinced with Telsyte analyst Chris Coughlan saying the deal may help ISPs compete more effectively on the existing pricing but dropping prices is unlikely to be on their agenda. “It might drive more availability but is it going to drive retail pricing down? I don't think so,” Coughlan says.

The one thing the decision does do is bring the wholesale pricing close to what NBN Co is eventually hoping to charge for access down the road. As Ovum's David Kennedy points out, the ACCC is trying to bring an alignment between the existing copper network and the fibre network that will replace it. The alignment isn't perfect because the regulator has geographically de-averaged the per connection charge while NBN Co will charge a nationally averaged price. Wholesale ISPs are expected to pay a minimum of $24 per month for the most basic plan.

There is no doubt that the decision to regulate wholesale ADSL will help competition and once the final determination is made Telstra's infrastructure will become a template akin to the NBN. That means the old days of infrastructure-based competition is on its way out and the regulator is looking to promote resale-based competition. That's how things are going to be when the NBN is ready and Kennedy adds that the old paradigm of promoting DSLAM investment and alternative infrastructure as a means to promote competition is “slipping into the background.”

A dose of roll out urgency

Moving to other notable NBN news, NBN Co boss Mike Quigley fronted another Senate Estimates hearing which provided a glimpse into the nature of the attacks that may be headed NBN Co's way. As The Register's Richard Chirgwin points out, the hearings may have been mostly a non-event but there was one area that could potentially cause Quigley some headaches in the near future. That one area, which the opposition will no doubt look to exploit, is the speed of the roll out and the fact that NBN Co is running behind schedule. NBN Co is looking to get over 750,000 homes connected by the end of this year with eight more towns and cities to be given access to the NBN over the next 12 months. Quigley told the senate committee on Tuesday that the plan is to get 758,100 premises on the NBN by January 2013, an increase of 191,300 from the initial schedule released in October.

However, the problem for Quigley is that NBN Co is currently running behind on its target of rolling the fibre past 259,000 homes by June this year.

So far only 18,263 homes have seen the roll out with 5000 connected. This target was published in the 2010 corporate plan, which Quigley was at pains to point out to the committee is outdated, and based on the premise that the Telstra deal would have been done by now. As mentioned earlier, the Telstra deal should to see the light of day once the SSU get the nod at the end of this month, but after that NBN co will have to shift up a few gears.

NBN Co needs to get a substantial roll out done before the federal election comes along in 2013 and let's not forget the leadership hoopla taking place in Canberra right now. The opposition will only grow bolder the further NBN Co falls behind its schedule. However, don't expect it to come clean with its alternative anytime soon. With elections 18 months away, barring some dramatic events in Canberra,  Tony Abbott and Malcolm Turnbull have absolutely no incentive right now to release anything and will be much more inclined to wait and see what contractual and regulatory arrangements it might have to live with.  

Satellite settles

One of these contractual agreements that a Coalition government will have to live with is the $620 million satellite deal that prompted the automotive analogies from Turnbull. The opposition is not convinced that spending millions on new satellites is worthwhile when we already have an interim service that could be upgraded. However, that argument has been blown out of the sky by Optus boss Paul O'Sullivan who said earlier this week that its Ku-Band satellites are not a viable alternative to the Ka-Band satellites that Space Systems/Loral will build for NBN Co. Optus is already providing interim satellite broadband services for the NBN after signing a $200 million deal with NBN Co last year, but as O'Sullivan pointed out,  the NBN satellites are purpose-built to carry broadband traffic and there are significant differences in capacity, economics and speed between Ka-Band and Ku-Band satellites. I suspect that the opposition is unlikely to revisit this issue in a hurry.