Can NBN Regulation Learn From Television?

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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Comments

    great article

    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 Telstra

    should this read

    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

      Yep, it should. Fixed now.

    What the hell has it got to do with Mr O'Sullivan what Telstra does with it's money. Best he looks after Optus and concentrates on giving consumers better service. Also, it should get interesting with the Greens now running the NBN Co.

      It has everything to do with him - how would you like it if you were working hard on creating a competitive company to a government-created goliath company, only to have the government essentially turn over all your efforts and force you to start from scratch in that war of competition?

      Removing the competition from the NBN will remove lower prices and better deals for customers via competition in the marketplace...it's not only O'Sullivan that should give a damn, but it's any consumer that wants to use the fruits of the NBN in the next 15-20 years.

    I'm not sure of the exact arrangement as to who will be wholesaling / retailing NBN services. I heard that after a period of time the wholesaling of the NBN was planned to be privatized. But anyway, if Telstra ever gets into a position where it has too much control over the NBN it will be a disaster for the consumer. Telstra is the single worst telco in Australia by a long shot, their only strength is their inherited monopoly on a good deal of regional services; every service they offer is significantly worse value than any other player.

    If Telstra gets control over retailing NBN services expect high prices and low quotas.

    Anyway, as i said i dont really know much about the structure of wholesaling and retailing the NBN, just felt like ranting about how terrible Telstra is :D

    Look we all have our barrows to push and our financial and business agendas to promote but let us try to be honest and factual.

    For years Telstra opponents have cried wolf and demanded Telstra be split wholesale from retail. This has now been done and instead of the Telstra competitors accepting fair and open competition on the new level playing field they continue to call for unfair regulation to be placed on Telstra.

    It is to be hoped that Senator Conroy and the ACCC will see this call to restrict Telstra by the Optus demand that Telstra cannot invest in new plant and equipment(to the advantage of the Australian consumer)and the Senator and the ACCC will tell Optus to get its systems in order and compete fairly and openly with Telstra.

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