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.

More cables?

Vocus' Spenceley says the government needs to step in and help the backhaul problem in Tasmania. He says the government should subsidise an undersea cable from Tasmania to Melbourne to stimulate more competition in the market.

“In the telco world, two people sit happily in terms of price. A third one comes along and you actually get some level of movement, so like the government did with the ... Regional Blackspot program, they need to get capacity out to Tasmania and also out to these other POIs that are going to be effectively stranded islands in terms of cost,” he says.

Otherwise, Spenceley says RSPs will limit where they provide services and will choose not to enter markets where backhaul will be costly, such as Tasmania.

“I would imagine you would probably have two or three ISPs in a lot of locations, rather than what I think the whole case for the NBN actually being pro-competition would be to have 20 or 50 – a large number of RSPs,” he says.

“Any one bottleneck there in terms of pricing is going to discourage people from going there.”

Connor also says another cable link is needed or NBN customers in Tasmania could end up paying more due to ISPs needing to make up for the extra cost of providing services in the state.

“Even if customers aren’t paying directly, they’re paying in a way because their ISP has to pay more [or] they may not choose to service [Tasmania] or provide full plans … Some providers like Optus never touched Tassie with ADSL to customers,” he says.

“What we’ve been calling for for a couple of years now is another Bass Strait connection, and we hope the state or federal government will back such a project.”

However, he concedes the chances of the government backing another Bass Strait fibre link is “slim”.

The ACCC’s FAD remains in force until December 2014, with an inquiry into a new FAD to commence six months prior to the expiry in December. However, Willett said the ACCC could possibly review backhaul prices prior to 2014 if there was an “extreme or a marked issue” with pricing and force backhaul providers to reduce prices if they were found to be excessive to cost prices.

There is the argument, however, that dropping the cost of Bass Strait fibre links could further constrain the backhaul market in Tasmania.

Lara Giddings, the premier of Tasmania, said in a submission to the ACCC in 2011 that if prices were too low for the link from Hobart to Melbourne, it could force Basslink Telecom out of the market, leaving Telstra as the only Bass Strait fibre connector.

A spokesperson from NBN Co says it still early days for the NBN and “it is yet to be seen how the market may respond to the opportunity created as more residents and businesses in Tasmania opt for high-speed services”.

However, a price review of backhaul in 2014 could come too late for some ISPs.

“We thought prices would have fallen much more than they have to date, and if they continue as such we probably won’t continue offering services in Tasmania, but will likely use the services of an NBN aggregator [at POI locations which have minimal Exetel customers],” Linton says.

“If you see Senator Conroy, can you please ask him why he did not solve the inherent flaw in connectivity to Tasmania?”

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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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