Two key NBN Bills are due to be debated in Parliament:

  • the National Broadband Network Companies Bill 2010 (Companies Bill)

  • 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?

Set out below are some brief observations on five key issues – the wholesale only requirement, the prohibition on price discrimination, the cherry picking provisions, the POI requirement and NBN Co's right to insist on offering bundled services.
 
Government policy position
The Bills
Impacts on carriers and service providers
NBN will offer wholesale only services
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.
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.
NBN will supply wholesale services on a non discriminatory basis
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.
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.
Other carriers will be prevented from building networks to cherry pick the market
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.
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.
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.
 
For more information on how these proposed changes may affect your business, please contact the author of this eAlert!, Mark Feetham.

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.