The National Broadband Network (NBN) is on a “knife edge” unless spending and pricing costs are regulated by the Australian Competition and Consumer Commission (ACCC), according to Optus chief executive officer, Paul O’Sullivan.
Speaking at a Committee for Economic Development of Australia (CEDA) event in Sydney where the company also celebrated its 20th anniversary, O’Sullivan said the NBN could either be a major success or a huge failure.
According to a report from UK-based consulting firm, SPC Network, commissioned by Optus, the NBN must have clear rules and regulations if it’s going to deliver quality services at the lowest cost.
“Based on the report and our own analysis, we believe the ACCC has a crucial role to play in policing the NBN,” O’Sullivan said. “There are five issues that need looking at.”
The first of these is spending. O’Sullivan pointed out that NBN Co has asked for limits on the ACCC’s ability to scrutinise its initial capital build.
“I’m sorry, but as an infrastructure monopoly, someone has to make sure this thing’s spending is efficient or consumers will end up paying for it,” he said.
Another concern is pricing. The report recommended there should be a cap on the price changes NBN Co could make.
The third issue is efficiency. For example, O’Sullivan said that if the ACCC found NBN Co was operating inefficiently, it should have the power to order it to outsource some activities. “In other words, if it can’t do something well it should face competition,” he said.
NBN Co also needs quality of service and innovation targets. According to the report, its current wholesale terms provide little or no service performance guarantees.
Finally, O’Sullivan called for the NBN Co to have a transparent decision making process. “There should be a register of contact between the government and NBN Co, to limit undue influence,” he said. “The minutes of NBN Co board meetings should be published, and there should be public consultation before major changes to its corporate plan.”
O’Sullivan then turned to rival telecommunications company, Telstra, and its structural separation undertaking (SSU). This is an agreement to separate its last mile infrastructure from the rest of the Telstra network.
“This separation is essential so that Telstra can’t use its existing monopoly to lock down customers as it starts selling NBN services,” he said. “Keep in mind that this process is going to go on for at least eight years.”
He added that the NBN may never be complete in the form that is currently proposed. “Let’s say there was a change in government and the NBN is only half finished,” he said. “In that scenario, we will need strong competitive safeguards.”
According to O’Sullivan, Telstra has accepted the need for an overarching equivalence obligation in its SSU but there is at least 16 qualifications attached to the commitment. The ACCC is currently reviewing the undertaking and working towards a resolution with Telstra.
“We call on the ACCC to reject Telstra’s submission until it meets the test on all measures of equivalence,” he said.
“The ACCC should not compromise. It is too important to the future of the industry, and ultimately the success of the NBN, to concede at this stage.”
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