NBN Co's plan to take on its rivals

NBN would compete with rival private operators head-on under radical proposals to bolster project's business case.

The company building the Nat­ional Broadband Network would be allowed to compete with rival private operators head-on under radical proposals to bolster the business case for the $41 billion project as its monopoly comes under threat from companies targeting the most lucrative internet users.

The proposals, put forward by NBN Co, could see it freed up on key issues such as the prices it can charge different internet providers and the way it offers ser­vices, and would mark an enormous shift away from it being regulated as the monopoly provider of wholesale ­superfast internet services.

The Australian can reveal that the NBN Co has told a high-powered government-­appointed panel led by former Victorian Treasury official ­Michael Vertigan that if the project was thrown open to infrastructure compet­ition, it should be put in a ­position where it could properly fight its rivals that were less regulated.

TPG Telecom plans to build its own high-speed links to the most lucrative internet users in inner-city apartments and buildings.

Other networks such as Telstra and Optus may follow suit with fibre-to-the-basement networks if TPG is able to proceed with its plans.

NBN Co says this undermines its ability to pay to build broadband in unprofitable rural and regional areas, a flashpoint for the Nationals.

In a new submission, it has told the Vertigan panel that such ­activity would “obviously have a material impact on NBN Co’s business case” and its ability to deliver on the government’s broader objectives for the nation’s biggest infrastructure project.

The Vertigan committee is considering whether to allow infrastructure-based competition or close a legal loophole in the “cherrypicking” policy introduced by Labor that was supposed to prevent other operators from competing with NBN Co. “To the extent that the panel is considering the issue of infrastructure-based competition, it is important to note that the ­existing regulatory arrangements are premised on the ­assumption that NBN Co will operate as a monopoly wholesale provider,” the submission says.

“Any change to that assumption would require the panel to reconsider the appropriateness of the entire regulatory framework that governs NBN Co.”

The submission is likely to rile telcos and internet service providers that have been pushing for a tightening of restrictions on NBN Co.

It also creates a dilemma for Communications Minister Malcolm Turnbull.

The one-time chairman of early internet giant Ozemail is pro-competition, but also wants to boost NBN Co’s viability so the government can continue to treat the cost as an off-budget ­investment.

The new submission says: “If NBN Co is to face infrastructure-based competition, including of the kind NBN Co potentially faces from TPG, NBN Co submits it follows inevitably that NBN Co itself should not be regulated as a ­national monopoly wholesale-only provider.

“For example, there arises a compelling case for removing the non-discrimination obligations in their entirety and for removing the obligations requiring NBN Co to supply only declared services.

“And if NBN Co is subject to regulation, then other competing providers should face the same regulatory framework as NBN Co, in order to create a level playing field and ensure that the long-term interests of end users continue to be met.”

The “non-discrimination obligations” ban the NBN Co and other wholesale superfast networks from discriminating between internet retailers in the price and non-price terms and conditions on offer. Offering more favourable terms to a few providers would usually fall foul of the requirements.

Legal exceptions to these obligations were removed in the Senate after independent senator Nick Xenophon warned the NBN Co could give volume discounts to big customers such as Telstra and Optus, marginalising smaller providers.

It is understood NBN Co is not pushing to be able to directly supply new entities such as government departments, as this would require a backflip on a longstanding view in Canberra that the new network should be a wholesale-only service.

Rather, the NBN Co is arguing that not all of its services need to be “declared” — that is, regulated. Being “declared” means they are subject to strict oversight by the Australian Competition & Consumer Commission and subject to supply requirements.

The latest submission comes as new NBN Co chief executive Bill Morrow has led a series of manoeuvres to try to stop TPG from building its rival network.