In-depth: Summary of NBN regulatory submissions
- 04 July, 2008 10:53
The federal government published this week submissions it had invited from industry players, public interest groups and concerned individuals on regulatory issues associated with the National Broadband Network process.
The government received no less than 80 submissions from a broad range of participants including major telco providers, ISPs, disability access groups, telecommunications consumer and industry groups, telco experts, academics and individuals.
Computerworld explored each submission and here we provide you with the key points outlined in each proposal from the major players. In most cases, the views are lifted verbatim from the submission.
"Some argue that the NBN provides an opportunity to impose yet more regulation, such as separation. However, it is inconceivable that such a large, risky project as the NBN could be successfully undertaken facing even more regulation than applies to today's fixed network, which was rolled out long before regulation came along.
We need new thinking focused on the fundamental issue: how do we create an environment that enables the NBN operator to earn a rate of return on its investment commensurate with the risk of the project while also ensuring open access and while meeting the social equity goals for the NBN?"
Telstra claims the ACCC has comprehensively failed to make any adjustment to its thinking to reflect the profound changes that come with a NBN. "Its blueprint for next generation network regulation, set out in the G9 SAU Draft Decision, looks more like a 'drag'n'drop' from the legacy PSTN world, including positions OfCom has rejected as outmoded for a next generation world.
"The ACCC treats the transition to FTTN as its chance to achieve the 'fixes' it has been advocating for problems it perceives with competition in the current legacy world. If the ACCC had taken a more forward looking, open minded approach, it would have seen (as Ofcom did) that many of the perceived problems will either be resolved or irrelevant in a next generation world, and that a whole set of new challenges will instead demand regulatory attention."
AAPT put its submission to the Minister as an access seeker to the NBN, calling the current regulatory framework one of "significant anti-competitive conduct, gaming and uncertainty." AAPT said Telstra's refusal to accept arbitral outcomes regarding wholesale price of ULLS and LSS has lead to greater costs to access seekers and in turn higher costs for consumers.
Primarily AAPT is calling for a level flaying field in which the NBN owner will provide products and services on a truly equivalent basis so that access seekers are receiving the same wholesale products, at the same time, at the same prices, and using the same processes to acquire these products and services. This means maximizing traffic on the network in order to recover investment costs and reduce prices for consumers.
AAPT also cast doubt over the ACCC's ability to enforce a level playing field. It called for more resources and power for the watchdog, whose chairman Graeme Samuel admitted before a Senate hearing that the current operational separation of Telstra and arbitral processes were not conducive to effective competition.
Ultimately, AAPT is calling for the structural separation of Telstra, as "regulation alone of what will continue to be a monopolistic market structure is not sufficient and structural remedies are required".
"The focus of this submission is deliberately directed at the reforms that would need to be made to the regulatory framework should Telstra be chosen to construct and operate the NBN. That is, it consciously contemplates the "worst case scenario" for competition. Optus makes no apologies for this approach. It reflects our overriding concern that the new regulatory regime must be robust enough to withstand the serious threat to competition posed by an NBN operator which is also the dominant provider of retail voice and broadband services to consumers. It also reflects our belief that fundamental reform to the regulation of fixed line services is required regardless of whether the NBN proceeds - a position which is consistent with the emerging trend in many other jurisdictions.
"The experience of the last eleven years has demonstrated that a vertically integrated, non-separated Telstra, simply has too much market power and it will always use this to undermine competition. In an NBN environment with limited opportunities for facilities based competition that market power is likely to be significantly enhanced. The existing provisions under Part XIB of the Act have failed to constrain Telstra to date and they are thoroughly ill-suited to an NBN environment. Government must, therefore, deal with the issue of market power at its source. This requires structural separation."
Alcatel-Lucent's submission examines the different degrees of separation that have occurred in the national telecommunications networks of various European countries, concluding that there is no one clearly proven or preferable model of separation. Unlike many of Telstra's Australian competitors, Alcatel-Lucent does not explicitly call for any form of separation of Telstra, stating that "the most advanced implementation of separation, that of the UK, provides no evidence that separation has accelerated or facilitated investment in Next Generation Access". However, it contends that the design and implementation of a future proof, resilient and reliable NBN will be impeded by the distraction surrounding unresolved separation speculation.
Australian Telecommunications Users Group (ATUG)
ATUG's submission on regulatory issues is based on Member Forums, conference discussions and on its assessment of global developments and trends. Like Alcatel-Lucent, ATUG is calling for clear policy objectives for the NBN regulatory framework that must include the long-term interests of end users. Affordability and accessibility to all Australians is of paramount importance. Regulation must support cost effective building of the NBN, and to promote effective competition which is the "strongest tool for delivering affordable prices... Only designs that promote competition should be accepted".
ATUG calls for clear separation between wholesale and retail units, and the creation of "a new pro active facilitating and oversighting independent body, NBN Australia, with the task of implementing the Open Access and Equivalence Frameworks for Australia's NBN as well as establishing appropriate consumer safeguards".
Communications Alliance (CA)
Australia's peak telecommunications industry body said Australia should be "striving for the realisation of a time when broadband is as common and easy as turning on the light switch at home. A time where download and upload speeds are irrelevant - it just works. A time where broadband infrastructure is as essential and integrated in the home as electricity, water and gas."
CA called for an open access network with a regulatory framework that promotes competition for consumers and access seekers alike. "Consumer protections and safeguards are important. There is significant scope to reform consumer policy framework in Australia. Communications Alliance supports the development of a national generic consumer law and a review of industry specific consumer regulation that would consider harmonisation where appropriate... The National Broadband Network should not impose overly burdensome compliance costs on industry. We consider that there is considerable scope to reduce red tape and streamline regulatory compliance while still implementing and effective and efficient regulatory regime. The National Broadband Network presents an opportunity to review unnecessary and outdated regulation."
"Structural separation is the only way to remove incentives for the proponent (Terria) to engage in anti-competitive discrimination or cross-subsidisation in downstream markets. Structural separation ensures that the proponent has an appropriate incentive to make a reasonable return on its investment in the NBN as a standalone investment by maximising utilisation of the NBN rather than inhibiting, preventing or deterring competition by those who compete with its downstream interests. It also provides an appropriate incentive for the NBN owner to respond to access seeker demand for products and allow them to innovate and compete. Operational separation and/or ring fencing rules and imputation tests can assist in reducing these incentives, but experience has shown that they cannot effectively remove them."
The summary objectives of the NBN regulatory environment must include structural separation between any access provider and all access seekers, as it is unreasonable to expect a listed corporate entity to put the interests of its competitors, the broader industry or government policy ahead of its fiduciary obligations to its shareholders. The independent owner/operator of the NBN must have its own corporate structure responsible for building maintaining and repairing the NBN, with a CEO who reports solely to and directly to the Board of the NBN. A NBN Access Guarantee Board should be established to monitor report and advise on the delivery of the genuinely open access network with a specific focus on the provision of equivalency of access.
iiNet also called for streamlined and strengthened dispute resolution, as the existing regulatory regime has a number of shortcomings which are easily identified by parties wishing to 'game' the regime. This has resulted in, for example nine years of dispute over the cost of the regulated ULL service, with no conclusion in sight for even the most basic commercial term - the price. All parties must have incentives to conclude negotiations quickly and reasonably priced. Transitional arrangements are essential and should be aimed at meeting public policy objectives rather than shoring up anti-competitive structures. Migration to an NBN should not be enforced prior to five years from the commencement of NBN services in a given location.
BT submitted that Telstra's position as the dominant provider of services over the local copper loop and its presence in the downstream market is one that gives the incumbent the opportunity and incentive to discriminate against its competitors. BT stated that "the combination of upstream dominance and vertical integration has the potential to restrict the growth of competition in the Australian market".
BT believes that "the creation of a genuinely competitive communications market is dependent on the opening up of bottleneck assets through the establishment of equivalence of input for appropriate products for operators with significant market power. Indeed, the success of the NBN may be dependent on the establishment of appropriate separation remedies for the Australian market as a whole and not just the new NBN... Imposing a form of operational or functional separation which adequately addresses the incentive of operators to discriminate should be an essential part of the new regulatory regime in Australia. "
Competitive Carriers Coalition
The Competitive Carriers' Coalition is an industry association representing the interests of non-dominant carriers in telecommunications markets in Australia. CCC has been one of the most vocal opponents of Telstra and is a supporter of structural separation of the NBN owner/operator, believing that if Telstra were to build and operate the NBN it would result in discrimination against access providers, less competition and ultimately higher costs for consumers
"The CCC notes that in recent days there have been a number of comments by Telstra that the CCC interprets as representing Telstra's position with regard to appropriate regulatory arrangements for an NBN. The CCC understands the main points of this position to be claims that Telstra requires:
"It is clear that Telstra intends to ignore the conditions set out in the national broadband network request for tender documents, and to ignore the overwhelming community demands for stronger competition rules in order to secure better choice, prices and services for all Australians. The Government cannot allow this to occur."
Communications Experts Group
"Proposed changes to the regulatory environment include: introduce functional separation for the provision on telecom links and expand the scope of activities that service providers may undertake. Introduce a new mediation and dispute resolution organisation to resolve the conflicts that will occur in the transition to fully functional separated entities.
Provide exemptions to local governments in the provision of telecom infrastructure such as ducts, conduits and masts. Encourage local governments to be more proactive in planning and providing telecom infrastructure to reduce the cost of building the NBN, and enable service providers to distribute free to air TV to local communities. A Fibre to the Premises [FttP] should the ultimate goal, however financial, practical and regulatory considerations make a Fibre to the Node [FttN] solution a desirable and feasible stepping stone to a fully developed Fibre to the Premises network."
"In the view of Primus the Expert Panel must ensure than any NBN proposals received for consideration are based on a structurally separated foundation. This is the only way to ensure that decisions around the design and construction of the NBN, as well as its ongoing operation, are made to protect and advance the competitive outlook. This framework has been successfully introduced in the gas and electricity industries in Australia, and has been implemented in relation to telecommunications infrastructure in overseas jurisdictions. Primus sees this current process as the one chance to get the structure right in the communications and broadband industry in Australia. Primus urges the Expert panel to take this decision, for the good of competition, and for the good of consumer interests in Australia."
Hutchison's primary submissions are that every telecommunications provider should have the right to obtain wholesale access to the services provided by the NBN on equivalent terms and conditions, and that the Government should mandate structural separation of the NBN. "This principle applies regardless of whether the successful Proponent is currently the owner or operator of wholesale or retail operations. That is, the NBN regime must be future-proofed," Hutchison said. "If existing infrastructure, including Telstra's sub-loops, is used by a successful proponent to satisfy the Government's objectives for the NBN, that existing infrastructure should be transferred to the NBN to ensure there is a single wholesale access regime...The Government should seek further submissions on the access arrangements once it selects a Proposal since the detail of the access regime will depend on the content of that Proposal." Hutchison cited the UK, Singapore and NZ as three overseas markets where structural separation has been endorsed.
Acacia, a consortium of Melbourne-based businesses, is calling for a utilities-based NBN to be managed by a public-controlled entity, similar to Telstra before it was privatised. It is calling for a standalone, independent NBN provider which does not face any incentives to discriminate in favour of a related retail entity, thereby promoting the highest level of competition among retail service providers. Acacia wants an NBN that is a utilities-based asset in the hands of the public, available to all Australians across all technology platforms.
"TransACT believes in clear separation of retail and wholesale operations although this is not a requirement of the NBN RFP. The NBN will result in ubiquitous fixed broadband within 5 years and this will fundamentally change the game. This means that current regulatory paradigms (and Australia is not alone) will have to shift their current focus from infrastructure competition as the end goal. Since there is a clear natural monopoly on fixed services with the NBN, the Long Term Interests of End Users (LTIE) are better served by encouraging open access on the transport layer (NBN) and stimulating the development and provision of innovative services. TransACT's proposed utility model for the NBN pipe suggests that we should now look to the kind of retail competition that is seen around other utilities - not the kind of access competition seen now around ISPs and mobiles."
AXIA's submission contends that in order to accomplish the government's objectives in creating the NBN, the network must be a fibre grid that inter-connects "ALL Australian communities - not just those communities that are geographically or demographically attractive to the incumbent telco".
The NBN must offer a truly open access infrastructure available to all parties at the exact same rates, terms and conditions without conflicts of interest: "A single rate structure should apply on the entire network. NBN bandwidth rates and services must have the same price within any community on the network regardless of whether that community is metropolitan, regional or rural." AXIA submits that the NBN must not have distance or usage charges, as "it is the 'tyranny of distance' that creates the digital divide".
It called for the NBN to be owned and operated by a specialty company "whose sole profit motive is to supply wholesale NBN services on a truly unconflicted open access basis". Strict structural separation must preclude the NBN owner/operator from participating in the local access and retail telecommunications business.
Google suggests several key points that the Government should consider in both selecting the operator of the NBN and designing the best regulatory environment to achieve the Government's vision for 'broadbanding' Australia:
To unlock the full potential of the NBN and the Internet access it will deliver, Google believes it is crucial to implement policies that maintain the Internet's fundamentally open, neutral, non-discriminatory nature. Universal access and affordability for all Australians, and high symmetrical speeds are crucial. It is essential that if the winning bidder for the NBN also operates retail services of its own, it should offer such services on a wholesale basis to competitor independent providers on equivalent, non-discriminatory terms achieved through strong, independently enforced functional or structural separation.
Consideration should be given to promoting a regulatory environment that protects user choice, competition and innovation on the Internet. Google is concerned to ensure that the Government's well-intentioned investment in the NBN does not inadvertently lead to decreased competition and access to broadband services in the short term. For example, if exchanges with existing copper-based competitive infrastructure are converted to fibre-based technologies early in the NBN rollout period, Australia may in fact see a net decrease in broadband service availability and competition, with corresponding price impacts for consumers. Similar to the analog-digital television switchover strategy, it may be necessary to undertake a phased conversion of Australia's broadband infrastructure from copper wire to fibre optic cable. It is essential that existing ADSL 2+ and similar competitive copper wire based broadband services continue to co-exist with the NBN, at least during a defined transition period."
Google is also concerned that without major developments in the international capacity market, Australia's investment may not translate into the kinds of cost reductions and speed improvements users deserve. "Australia could end up with a superhighway to the node, but if we only have a few expensive roads with high tolls connecting Australia with the rest of the world, Australian users won't be traversing the worldwide web at the promised superhighway speeds at reasonable prices".
Access Innovation Media
Access Innovation Media develops and delivers media access solutions with a core focus on the needs of the 3.5 million Australians with hearing and vision impairments. Access Innovation Media believes no other delivery platform can match the flexibility, reach and opportunities offered by universally available broadband, and is calling for a universally accessible NBN that will significantly enhance the quality of life for those with vision and hearing impairments.
Regional subscription television provider AUSTAR sees the NBN as an opportunity to address underserved regional areas of Australia and provide a competitive retail environment for consumers and access seekers. AUSTAR believes separation of the NBN operator from any downstream business units and access to wholesale services, and service equivalence on all terms and conditions, are minimum requirements to restrain the market power of the NBN operator.
"We believe structural separation is the preferred path for a national government funded asset", AUSTAR said in its submission. "Further, given Telstra's active pursuit of content rights for the BigPond service and the important role of content services in driving demand for the services of any access seeker, if Telstra is the winner of the NBN bid, consideration must be given to whether it should continue to own a signficant stake in Foxtel. This is particularly relevant if structural separation is not achieved."
AUSTAR accused Telstra of overstating the uncertainty of consumer demand for the NBN, stating that the government's $4.7 billion contribution "should go a long way" to offsetting that uncertainty.
All submissions can be viewed in their entirety on the Department of Broadband, Communications and Digital Economy Web site here.