Backhaul blues: Uncertain future for NBN competition in Tasmania

The island state is serviced by three cables connecting it to the mainland – Basslink, which is owned by Basslink Telecom, and Telstra’s two Bass Strait fibre links.

The ISP perspective

Some in the industry claim the Telstra/Basslink Telecom duopoly has enabled providers to charge high prices to link Tasmania to the rest of Australia.

There are currently six RSPs offering NBN services in Tasmania – Telstra, Commander, iiNet, Internode, Exetel and iPrimus. Optus doesn't offer NBN services in the state.

This compares to dozens of ISPs offering ADSL services in Tasmania.

Andrew Connor, spokesperson for Digital Tasmania, says there is a lack of choice in providers in the Tasmanian NBN, which has an impact on competition in the state.

“Tassie is benefiting from national pricing, but we still may lose out because we don’t have the full spectrum of providers down here and ultimately that means we’re not going to get a full range and full effect of competition,” he says.

However, Ed Willett, commissioner at the ACCC, says the organisation does not have a view as to whether there is currently a lack of competition in the Tasmanian NBN market, with competition dependent on more than just the number of many players in a market.

“It’s a question of looking at the offers in the market, how they compare with elsewhere around the country, taking into account local influences and the sort of vigour you see in price offers. There are a lot of measures of competition that we take into account,” he says.

However, ISPs iiNet and Exetel say it is more expensive to provide NBN services in Tasmania than elsewhere in Australia due to the high cost of backhaul.

James Linton, corporate sales manager at Exetel, says the company may eventually be forced to reassess its NBN strategy in Tasmania and use an aggregator in the future due to high costs.

“It is horrendously expensive to provide connectivity to Tasmania, and due to the duopoly of the Basslink/Telstra cables, [it] means an ISP like Exetel pays over $100 [per megabit] per month for connectivity from Hobart to Melbourne,” he says.

“Compare this to the single digit figures between every other point of Australia, including Sydney to Perth, and this heavily impacts [on] our ability to provide cost effective services to this state, and I’m sure this situation is apparent at all other ISPs.”

Steve Dalby, iiNet’s chief regulatory officer, says backhaul costs vary across Australia, with Tasmania a state with particularly high backhaul costs.

“It costs us more for backhaul in Tasmania but as iiNet is a national service provider, we offer uniform retail pricing to all our customers no matter where they live. When determining retail pricing, we base it off national average costs rather than location,” he says.

Expensive backhaul costs is also deterring one satellite service provider from offering NBN services in Tasmania.

Australian Private Networks (APN), which trades as Activ8me, made a submission to the ACCC in August this year stating the requirement for satellite providers of the NBN to connect to the closest POI (point of interconnect) is making it “impossible” for specialist satellite companies to provide services in “all but a few selected areas”.

APN said only having two suppliers for backhaul services from Tasmania to Melbourne does not ensure competition or that costs are kept low and argued backhaul costs versus access costs could be significant.

“Backhaul costs from Tasmania are prohibitive and cannot be avoided if the current proposal to connect satellite customer[s] to their regional POI (points of interconnect) were to be retained,” APN said.

Willett says the ACCC is aware of the issue and it monitors backhaul prices around Australia to assess whether the original FAD remains appropriate.

“I haven’t heard of much since [the FAD was released], but we’re always open to people suggesting that improvements need to be made. It’s a difficult area, of course, because what we try do in that determination is to come up with some benchmark prices that applied backhaul across the board, and clearly there are different costs associated with different routes and benchmarks in those areas are difficult,” Willett says.

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More about: ACCC, Andrew, APN, Australian Competition and Consumer Commission, Commander, iiNet, Internode, iPrimus, Optus, Telstra
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Comments

rav

1

The providors of the backhaul obviously are not making much of a profit here or there would be several 3rd parties tripping over themselves to invest in a 3rd cable. Since this is not happening the profit margin must be pretty slim and there is obviously no demand for better services so if anything it sounds like the ACCC has made the backhaul costs to cheap to promote competition rather than the other way around.

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