Telstra's Wi-Fi play demands stricter scrutiny

The telco's bold plan to build a national Wi-Fi network may seem innocent enough but it raises some vexing issues for its rivals and regulators.

Telstra’s nationwide Wi-Fi network is a bold venture at a time when Australia’s telecommunication companies are looking for every opportunity to grow their market share. For many the telco's plans to build a national Wi-Fi network utilising customer broadband connections and Wi-Fi access points located at payphones is another demonstration of its prowess.

But Telstra's ambition does raise some interesting, and perhaps vexing, issues for its rivals.

The telco is set to become the largest Australian Wi-Fi provider at a time when demand for internet access is growing exponentially and Wi-Fi provides a handy opportunity to off-load traffic from the mobile cellular network, providing mobile customers with a better user experience.

At first glance Telstra Wi-Fi looks innocent enough but closer inspection raises a number of very worrying questions that merit scrutiny from the likes of the Australian Competition and Consumer Commission (ACCC), the Australian Communications and Media Authority (ACMA) and the Telecommunications Universal Service Management Agency (TUSMA).

Telstra has retained the contract to provide the Universal Service Obligation (USO), which safeguards key telecommunication services for all Australians, since deregulation in 1997, and the telco has received significant funding over past decades to provide USO services.

Telstra has argued consistently over the years that the contracts it has had with successive governments to provide the USO has left it with a sizeable annual bill, but Telstra continues to provide the USO because there is a realisation that only its network is capable of providing the national coverage necessary for the USO.

A crucial piece of the Wi-Fi puzzle

Payphones, which are part of the USO, are a unique asset because they’re located throughout cities and towns around the nation, stand on council land and provide a telephone connection using Telstra’s copper access network.

Telstra uses payphones to generate advertising revenue from billboards and now plans to use payphones as an integral part of its Wi-Fi network.

For a national Wi-Fi rollout payphones are a golden goose because they provide a structure that can support the commercial all-weather Wi-Fi access points at about 2.5 meters off the ground, already have power and a network connection that will support high speed broadband.

But Telstra’s apparent exclusive access to what might be considered to be a national asset paid for by the USO levy will be a concern to other telecommunication companies that are struggling to develop their own Wi-Fi network strategy.

Imagine a service provider such as Optus, iiNet or TPG applying to every council in the nation to be permitted to erect poles that can support Wi-Fi access points at about 2.5 meters above street level, then applying to power companies for connections and then to Telstra to get the access point connected to the internet using the copper access network.

Now imagine five to ten service providers all doing the same thing.

And what happens to the copper access network connections to the payphones as the NBN is rolled past? Will the payphones be transitioned to the NBN or has Telstra asked for payphone connections to be exempted or provided at no cost by NBN Co under the USO?

It's a pertinent consideration at a time when NBN Co is mulling its options on bow to expand its own horizons.

Is Telstra’s Wi-Fi network anti-competitive?

To find out the answers to the questions posed by Telstra Wi-Fi a letter has been sent to the ACCC chairman Rod Sims, the ACMA chairman Chris Chapman and TUSMA chairman Mark Darras.

The text of the letter follows.

On November 19 2014 it was reported in the media that Telstra has turned on the first 150 Wi-Fi hotspots in Telstra’s national Wi-Fi network that was announced earlier in the year.

In a Telstra blog post by Gordon Ballantyne on September 30 2014 it states “The first Wi-Fi trials will be located at payphone sites in the heart of local communities and in areas people want to connect.”

“Access to Wi-Fi will be free in the trial sites until the network officially launches early next year.”

Telstra’s Wi-Fi network launch raises several questions that should be investigated by the ACCC, ACMA and TUSMA to ensure that

  • funds raised under the Universal Service Obligation (USO) are not subsidising the private commercial use of telecommunications infrastructure for a purpose beyond the intent of the funding;
  • the Telstra Wi-Fi network is legitimately utilising infrastructure that is expected to be shifted onto the National Broadband Network (NBN) as the rollout proceeds; and
  • there are no impediments to Telstra’s competitors also using the payphone infrastructure connections for Wi-Fi or other purposes when the infrastructure is connected to the NBN.

The questions that should be answered in the public interest are:

  1. It is anticipated that public payphones, including Telstra’s public payphones, that utilise the copper access network currently will be transferred onto the NBN as the copper access network is turned off. Is this correct, and if not, what is the reason that this should not occur?
  2. Some or all of Telstra’s public payphones are funded either wholly or in part by funds raised under the USO. Is Telstra’s use of the public payphones for the private commercial Wi-Fi network a legitimate use of this infrastructure in accordance with legislation and regulations?
  3. Telstra’s private commercial Wi-Fi network utilises a resource, payphones, that many competitors do not provide or provide in limited numbers due to a variety of reasons. Is Telstra’s Wi-Fi network component that utilises payphone infrastructure anti-competitive?
  4. What access to the payphone infrastructure including conduits, cables, cabinet and so on can Telstra’s competitors gain so that they can utilise the payphone infrastructure for the provision of Wi-Fi or some other purpose?
  5. Payphones are typically located on council land that might otherwise be unavailable to Telstra’s competitors. What opportunity or impediments are there for Telstra’s competitors to utilise the NBN or Telstra’s current infrastructure to, for example, raise a pole near a telephone box, so that they can compete with Telstra’s Wi-Fi network without council preventing this from occurring?

Telstra’s Wi-Fi network will be a major enhancement to Telstra’s product offerings and provides it with a significant competitive advantage, particularly over smaller telecommunication companies. With this in mind it would be reasonable to ask for the ACCC, ACMA and TUSMA to investigate and report on Telstra’s Wi-Fi network from a market perspective, to investigate the competitive nature of Telstra’s Wi-Fi network and to identify how other telecommunication companies can compete, possibly by utilising the NBN and existing payphone infrastructure where the infrastructure is funded wholly or in part by funds raised under the USO.

Telstra has issued the following clarification:

In May, Telstra announced a five year strategy to create Australia’s largest Wi-Fi network. Our network will involve Wi-Fi hotspots in a range of different locations, including Telstra retail stores, our customers’ homes, small businesses, shopping centres and cafes, stadiums and payphones. 

The rollout of Wi-Fi to payphone sites is unrelated to our provision of payphone services. The Wi-Fi solution uses the payphone sites as a physical location for the hotspots. The equipment, backhaul, installation and maintenance of the Wi-Fi solution is separate to the payphone and is entirely paid for by Telstra. 

Wi-Fi is an innovative and fast-evolving market in which multiple providers are already participating and there is ample opportunity for further competition.

Mark Gregory is a Senior Lecturer in the School of Electrical and Computer Engineering at RMIT University.