Open access networks and the NBN – the winners and losers

Some in the industry argue open access networks will erode NBN revenue and create an unlevel playing field

A Coalition NBN could allow more private companies to develop networks that compete with the National Broadband Network (NBN), with TPG announcing this week that it was launching fibre-to-the-basement (FTTB) plans.

Current legislation for the NBN prevents companies from building broadband networks that offer speeds greater than 25 Mbps unless they make them open to access on a wholesale basis. Extensions of the network must also be less than 1km.

However, the Coalition has indicated it would allow new high-speed networks to be built. These networks would compete with the NBN, but Turnbull has stated they would be required to be available to “access seekers on non-discriminatory terms and wholesale prices equivalent to the NBN Co's wholesale price caps”.

Report: Retaining HFC network for the NBN would stifle competition: Telstra competitors

High speed non-NBN open access networks could include hybrid fibre-coaxial (HFC) and FTTB. Several telcos already have their own HFC networks, which cover an estimated 30 per cent of Australia, including Telstra, Optus and iiNet.

However, some in the industry argue other open access networks shouldn’t be allowed to compete with the NBN.

Rod Tucker, laureate professor at the Institute for a broadband-enabled society at the University of Melbourne, has stated that facilities-based competition could undermine the NBN’s business model and have implications for taxpayers.

Advice received by the Treasurer in 2011 said that if cherry picking was not prevented, returns would drop to 5.4 per cent. This would require an additional $1.7 billion equity injection from the government.

The Competitive Carriers Coalition (CCC) has also previously criticised using HFC as a key element of the NBN because it could create an “unlevel playing field” where Telstra would have a substantial amount of market power.

CCC spokesperson David Forman says that if companies are building their own high-speed networks, they should offer open access on the same terms and conditions as the NBN. He says this avoids some parts of the country being cherry picked or consumers finding “themselves owned by a particular retailer”.

“We need to have real structural separation, not a part of the country that’s trapped in the world of 1997 or worse and part of the country that’s benefiting from structural reform,” Forman says.

Mark Gregory, senior lecturer at RMIT, doesn’t believe companies like TPG will be forced to open up their networks on a wholesale basis.

He says this will result in clear winners and losers in the broadband market, with large telcos that have their own networks having no requirement to develop those networks beyond urban areas.

“It’s just going to be a free-for-all, and it’s going to be a nasty free-for-all and there are going to be a lot of losers,” he says.

“Ultimately we’re going to lose that small [sphere] of specialist low-priced companies in all of this. The ACCC is going to have a very busy time, I would say, over the next three years.”

Fibre-to-the-basement

TPG announced this week it would provide FTTB plans offering up to 100Mbps for $69.99 per month. The teclo said it would target Sydney, Melbourne Brisbane, Adelaide and Perth.

FTTB runs fibre to the basement of buildings and uses existing copper within the building to deliver the last mile connection.

Mike Quigley, outgoing chief executive at NBN Co, has previously said NBN Co looked into delivering the NBN via FTTB and placing a DSLAM in the basement to connect multi-dwelling units (apartment blocks) to the fibre optic network.

“There’s no question there’s a saving to be had by not [doing all] fibre [in] a multi-dwelling unit, but there are some other issues that need to be dealt with, such as how do you ensure you get analogue voice, which is a tricky issue,” he said.

As part of its Implementation Study, the government examined delivering the NBN via FTTB for multi-dwelling units (MDUs). However, the study found there were trade-offs to FTTB, including the reliance on copper for the last mile connection and not having clear upgrade paths like FTTP.

“As FTTP electronics are upgraded, premises activated on FTTB are likely to fall behind in performance. Retrofitting MDUs from FTTB to FTTP would erode the initial cost advantages of FTTB,” the study said.

My Telecom Holdings has been rolling out FTTB in apartment buildings in Victoria for six years using Cat5 Ethernet.

Graeme Allen, the company’s director, says the main challenge with delivering FTTB to apartments is the connection from the basement to each individual premise. Duct access can also be problematic, he says.

“Really I think it’s the practical constraints of dealing with the in-building copper. A private company has no mandate to walk into an existing building and rip out the copper lines to every apartment – there are legal implications of doing that because there’s going to be existing telecommunications services on those copper lines,” Allen says.

“The issue surrounding the serviceability of copper absolutely remains [as well]. The MDF rooms of high rises are generally in a pretty torrid state of disrepair.”

Allen says there can also be issues with putting DSLAMs in basements because technicians “are less than careful in choosing their pairs”, which can result in service outages.

He says there are challenges with commercialising FTTB plans, but concedes the TPG FTTB plans have signaled a shift in the market.

“This process of churning is very difficult. The bundling which has become pervasive in the last few years has made customers [stuck] to their current provider – getting them to move is not easy,” he says.

“To achieve a return on FTTB, there needs to be considerable take-up in each building, which is far from assured. Competitors will also know which buildings are in play and respond aggressively.”

Tags TPGNational Broadband Network (NBN)iiNetoptusTelstra

More about ACCCiiNetOptusQuigleyRMITTelstraTPGUniversity of MelbourneUniversity of Melbourne

3 Comments

Franky Malone

1

Under the essential services act that governs domestic communications, HFC networks do not meet the minimum standards for essential services such as 000 and medical alerts.
When Optus rolled out its HFC network it was only under the provision that the copper network was always maintained for people to have access to a network that meets the minimum standards for essential services.
If Coalition is to maintain the HFC networks it will need to be in parallel with the copper network.
FTTH in populated areas is cost effective and the suitors are all lining up. This will leave the NBN with a network that is not financialy viable and it will be a burden on the taxpayer forever, instead of a money making business it was designed to be.
Cut, Cut, Cut, they will destroy this opportunity we have to move forward together as a nation.

Terry Turnball

2

I live in an underground serviced area only serviced by Telstra. I have always used Bigpond HFC for my data because I don't have a choice. I have been complaining to the ACCC for 10 years about open access and unfair competition on Telstras HFC Network. The ACCC has been on Telstra for 10 Years and they claim to have demonstrated that open access is not viable on HFC.
The Coalition better get this right because I havnt hade any choice or competition for 20 YEARS!

David

3

This is a critical time for the NBN and telecoms in Australia. Unless Malcolm Turnbull leads from the front, and looks at the big picture, the country will be left with a fragmented network, with various companies cherry picking higher margin city areas, and country folks left stranded. Right now we have a once in a generational opportunity to get things right.

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