Much of the debate about the National Broadband Network (NBN) so far has been about whether we even need it, but as construction continues the focus is likely to shift onto just how it should be regulated and run. Optus CEO Paul O'Sullivan argues that there's lessons to be learned from, of all places, overseas TV networks, but it's a messy and complicated issue.
Picture by Alex Kidman
For a CEO, O'Sullivan makes relatively few public appearances, but he gave the opening speech at the Kickstart IT media conference at the Gold Coast over the weekend. His topic was the issue of how the NBN should be regulated and run, to ensure that there's maximum competition between providers and avoid repeating the scenario we currently find ourselves in, where Telstra effectively controls access to network resources.
"The big mistake is to believe that just rolling out the NBN itself is going to ensure that there is real choice in those households. The first thing to do is ensure that there is full transparency in the deals done. In terms of making sure competition is protected, we need a much greater level of transparency."
A particular concern of O'Sullivan's is what Telstra will do with the $11 billion or so it will receive as compensation for selling its existing copper network infrastructure to NBNCo. While that was never going to happen without compensation, O'Sullivan believes that if Telstra directly spends the funds it receives as lines are decommissioned to market directly to customers moving onto the new network, it will effectively destroy competition on the NBN. "The way these payments are structured is that Telstra will get a payment as lines are decommissioned. "Clearly, that distorts the economics compared to everyone else. These payments to Telstra will greatly distort the market in its early stages." He argues that rules must be put in place to prevent cross-subsidisation in this scenario.
"There will be a land grab in the first years of the NBN. It will be stickier for customers than any previous service. Our major concern is that the economics of acquisition will be strongly distorted by any deal between Telstra and NBNCo. We cannot afford for the NBN to become the British Rail or the Telstra of the 21st century."
I can't help but think that when the full details of the Telstra/NBN transfer arrangement emerge, those kind of arguments will get buried under proclamations of the rights of shareholders, but O'Sullivan raises an interesting point. If one of the aims of the NBN is to ensure a competitive, open environment, then those problems will need to be addressed.
The TV trick
I'm not quite as convinced by another idea O'Sullivan raised: how the operating company for NBN, which will sell access to telcos and ISPs, should be operated. He suggested that this might be done by companies which apply by tender to operate the business, with state or geographical boundaries rather than a single national operator. That logic isn't being pursued for the network itself — as O'Sullivan put it, "an NBN can only be built by a single operator because the country isn't large enough to support multiple operators" — so I'm not sure how that works any better at the management level.
When I put this to O'Sullivan, he gave the example of commercial TV networks in the UK, which have to reapply for their local licences on a regular basis. The reason I don't think that argument works particularly well either is that the UK television seen has a very strong government-subsidised player in the form of the BBC, which essentially guarantees that there'll be some form of service in place even if commercial organisations decide that running a TV network isn't viable. The same almost certainly wouldn't apply to telecommunications services in remote areas.
What steps do you think need to be taken in regulating the NBN? Share your thoughts in the comments.
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