Two key NBN Bills are due to be debated in Parliament:
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the National Broadband Network Companies Bill 2010 (Companies Bill)
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the Telecommunications Legislation Amendment (National Broadband Network Measures – Access Arrangements) Bill 2011 (Access Bill).
On Wednesday 23 March, Senator Stephen Conroy, the Minister for Broadband, Communications and the Digital Economy, circulated some last minute amendments.
The Minister's press release states "...the Bills ensure the NBN operates as an open-access, wholesale-only network, to support vigorous retail-level competition for Australian consumers".
How will the Bills (if amended) impact on the retail carrier and service provider market?
Government policy position
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The Bills
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Impacts on carriers and service
providers
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NBN will offer wholesale only services
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The Bills try to ensure this by mandating that a NBN company
may only sell services to a carrier or carriage service provider,
with the exception that services may also be sold to utilities and
certain transport authorities where they are sold on the basis that
the utility or transport authority will not resell them.
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A large company or state government may be able to establish
itself as a carrier or service provider and thereby become eligible
to purchase services on a wholesale basis for its own use.
Utilities and transport authorities will be able to purchase
carriage services at a wholesale price and use these services to
establish their own communications systems.
NBN Co will be entitled to sell wholesale services to a
service provider in which it has an interest provided the interest
is not a controlling interest.
There do not appear to be any current restrictions on a NBN Co
wholesaling international carriage services (which fall within the
definition of "eligible services"). Presumably this will
be enforced through a licence condition.
The retail market may therefore be shrunk or otherwise
affected by large customers establishing themselves as
carriers/carriage service providers so they can access wholesale
services for own use, utilities choosing to purchase wholesale
service from NBN Co, NBN Co being indirectly involved in the market
through a service provider which it does not control and NBN Co
offering wholesale international carriage services in competition
with existing suppliers.
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NBN will supply wholesale services on a non discriminatory
basis
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The Access Bill prohibits NBN Co engaging in price
discrimination style="FONT-WEIGHT: bold">except where
the discrimination "aids efficiency", each access seeker
in the same circumstances has an equal opportunity to benefit or a
volume discount is offered in line with published terms.
Any volume discounts offered by NBN Co must be set out in a
Special Access Undertaking that has been approved by the
ACCC.
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The scope of NBN Co's right to engage in price
discrimination where it aids efficiency is uncertain and unclear.
Whose efficiency must be aided? What type of efficiency must be
achieved? Who will make the decision as to whether efficiency will
be aided – presumably NBN Co? How will the identified
"efficiency" be translated into a cost-justified price
discount? This exception leaves room for NBN Co to offer
"efficiency based discounts" to particular carriers and
service providers potentially to the detriment of other market
participants.
The volume discount exception, while now subject to ACCC
oversight, could still result in NBN Co allowing existing large
carriers (such as Telstra) access to basic carriage services at
prices more favourable than those offered to smaller
carriers.
This is likely to mean that large carriers such as Telstra
will have an input price advantage in the retail market. If
significant volume discounts are made available by NBN Co it is
likely that the discounts will give extra impetus to the
consolidation of smaller carriers.
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Other carriers will be prevented from building networks to
cherry pick the market
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The Access Bill applies special technical and open access
requirements on carriers who build or upgrade fixed line superfast
access networks after 25 November 2010.
The provisions seek to prevent other carriers building
superfast access networks (25 Mbps plus) in profitable locations
(eg high density areas and high income areas) which, if permitted,
would undercut the NBN as its fibre offerings will be priced on an
Australia wide basis.
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The cherry picking provisions do have a potential to:
1. establish NBN Co as a monopoly provider of broadband access
services;
2. force any potential competitors of NBN Co to satisfy NBN
technical specifications and open access requirements if they want
to roll out a competing network; and
3. potentially encourage investment in wireless
networks.
By discouraging the development of competing networks the
legislation may risk discouraging innovation in the deployment of
future broadband infrastructure.
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NBN Co must offer multiple points of interconnect to its network to facilitate connections by other carriers. | A total of 121 POIs have been agreed. However the Access Bill allows the NBN Co to decline to install further POIs in future, even if the ACCC considers additional POIs are warranted to encourage competition. | There is no guarantee that NBN Co will establish any further POIs (outside the agreed 121). This may force carriers to use the NBN rather than their own infrastructure to deliver services to certain locations and prevent carriers connecting to customers lower down in the network. |
NBN Co has announced in December that it wishes to offer service bundling. | The Access Bill allows NBN Co to engage in service bundling. NBN Co may decline to offer a carrier or CSP an access service if the carrier or CSP declines to purchase one or more other access services as bundled by NBN Co. | The ACCC has sought for some time to get Telstra to unbundle its fixed line services on the basis this was pro-competitive. The Access Bill will allow NBN Co to bundle voice and data services. If NBN Co is able to refuse to unbundle access services, carriers and CSPs may find it difficult to diversify their product offerings or enjoy cost savings by relying on the use of their own facilities. |
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.