ACCC report calls for government to get ready to split up NBN

Government needs to get ready for disaggregation of NBN, ACCC says

The Australian Competition and Consumer Commission’s (ACCC) final report into the state of the nation’s communications market has called for the government to plan for the future disaggregation of the NBN into competing networks.

The ACCC has previously endorsed the potential break-up of NBN into separate entities, as has a major government-commissioned review of the National Broadband Network rollout.

Fresh from its victory in the 2013 federal election, the Coalition government commissioned a panel of experts led by Michael Vertigan to conduct a cost-benefit analysis of the NBN rollout.

The third and final report of the Vertigan panel, released in late 2014, called for the eventual break-up of NBN Co into separate entities that could then compete with each other.

The report recommended “the disaggregation and divestment of NBN Co’s transit, satellite and fixed wireless business units, along with associated obligations, including with ongoing subsidies if they prove to be necessary”.

If NBN Co was successful in acquiring the hybrid fibre-coaxial (HFC) networks from Optus and Telstra — which it eventually was — the Vertigan review recommended that a non-NBN Co entity take charge of it.

“While disaggregation of NBN Co's business units (as the panel recommends) after the network is complete cannot be ruled out, now is not the time,” said a statement issued by then communications minister Malcolm Turnbull in response to the recommendation.

A formal government response to the report’s recommendations was released in December 2014 and said that disaggregation over the short-term would be a distraction for NBN Co’s management.

“However”, the government’s response said, “optionality for future restructuring or disaggregation should be retained, to provide future governments with greater policy and financial flexibility.”

“To this end, NBN Co will be required to maintain separate accounts for its satellite, fixed wireless, FTTx, HFC and transit networks,” it said.

“It is the Government’s preference that NBN Co develop operational and business support (OSS/BSS) IT systems that are readily separable by business unit so that these systems do not become a barrier to any future disaggregation.

“This may involve high costs, however, and so the costs of implementing separable OSS and BSS systems will be investigated by an independent party. This work will commence promptly with a view to it reaching a conclusion no later than 1 July 2015.”

NBN Co should be broken up into separate entities before it is privatised in order to promote competition, the head of the ACCC, Rod Sims, advocated in a November 2014 speech.

“It will be strongly in Australia’s long term interests for, say, three separate entities based on delivery technology to be sold that can provide a platform for future infrastructure based competition,” Sims said in his speech.

In September 2015, the ACCC chairperson reiterated that in his view NBN Co “should put in place arrangements that provide for the future separation of NBN Co at an appropriate time into separate businesses that can compete with one another, for example based on delivery technology.”

The final report of the ACCC’s communications sector market study says that the commission understands that NBN Co “has introduced separate accounts for the different lines of its business, which it provides to the Government”.

“In addition, we understand a report was commissioned by NBN Co on OSS and BSS separation and provided to the Government, but neither the report itself nor its findings have been released publicly,” the report states.

The ACCC noted that the government “does have a policy objective of disaggregation of the NBN once the rollout is complete” but warns: “In our view, it is imperative that actions be taken to provide further detail and planning for this. We are concerned that if measures to help facilitate separation are not put in place at an early stage, such as separate OSS and BSS, it will become more costly to implement later on, which could be used as a basis for not proceeding with the separation of NBN Co.”

The report recommends that the government should continue planning for the future disaggregation of NBN and “ensure that measures are in place to enable the NBN to be split into competing networks, to provide a market structure that will facilitate greater infrastructure-based competition”.

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