Devil in the detail for NBN

The Vertigan committee's final report on the NBN proves that for telecoms regulation, the devil is in the detail. For all the answers it provides, it seems to raise more questions.

Breaking up is hard to do

The report makes three major recommendations. The first is that the NBN be split into competing network technologies. Since fibre is by far and away the supreme technology for densely populated areas, this would have the greatest impact in regional areas where free competition should help get the most out of the different technologies.

The trouble is that in the more marginal areas there might not be anyone that wants to provide a service, so it raises the question of who should be on the hook to provide a minimum level of service. The answer, says the Vertigan committee, is that the obligation should fall back on the NBN 'not … in a way that disrupts the planned deployment of the NBN; rather the obligation would come into effect once deployment had been undertaken in a particular area'. This sounds very much like saying 'OK, you can supply your technology in this area, but if you do, then you've got to connect anyone that asks for it', which may not exactly have people lining up.

When is a subsidy not a subsidy?

The second major recommendation is that the current 'opaque cross-subsidy' between profitable and unprofitable (read urban and remote) areas be gradually replaced by 'cost-reflective wholesale pricing, accompanied by subsidies provided directly to vulnerable consumers'. This, says the committee, would enable the better targeting of subsidies, removing for example 'perverse redistributions … from low-income consumers in low-cost areas to wealthier consumers in high-cost areas'.

Again this seems to make good sense – at the same time as opening a large barrel of worms as to how the system of subsidies will be operated. One of the committee's suggestions is to write down the NBN's assets, upon which user charges are calculated, with the taxpayer thereby taking the hit for the initial excess cost of development; another is a 'broad-based industry levy covering both voice and broadband services'; but both approaches sound pretty close to an opaque cross-subsidy with an arbitrary number attached to it.

Pulling down barriers, digging up roads

The third major recommendation is that the rules preventing competition with the NBN by alternative super-fast networks in urban areas be abolished and replaced by a system under which a telco could lodge undertakings with the ACCC about any planned network development, with the ACCC obliged to accept undertakings that were in the long-term interests of end-users. This effectively endorses the fibre-to-the-building (FTTB) roll-out currently being undertaken by TPG Telecom and, if implemented, would no doubt encourage others to follow suit.

That might help us get the best possible data speeds, but it won't do much for traffic jams if our roads need to be dug up to allow TPG, the NBN, Telstra, Optus and anyone else to lay fibre down our streets. Whether this would be taken into account in determining whether a development was in the long-term interests of end-users isn't clear, but it is undoubtedly a case of more detail and more devil.

The truth is that there are a range of structures that could deliver high-quality broadband across Australia at fair and reasonable prices – the hard bit will be in sorting out the finer points.