“It’s going to be a hell of a debate in a few minutes” Primus CEO Rhavi Bhatia predicted. But in the end a public confrontation between Telstra the ACCC and the Minister for Broadband produced more amusing sniping than real fireworks.
At a session entitled ‘The Broadband Impasse’ at the New Agenda For Prosperity conference in Melbourne many of the speakers stuck to familiar ground. Telstra chairman Donald McGauchie ripped into the ACCC and anyone who dared to disagree with him while subtly overstating available network speeds. ACCC chairman Graeme Samuel noted the “chilling effect” Telstra potentially had on the rest of the industry but refused to rise to the bait of questions about current regulatory regimes. Minister for Broadband Senator Stephen Conroy promised that details of the National Broadband Network (NBN) would be available “soon” but admitted it could take more than five years to build. And Bhatia argued that the NBN would only work if it was comprehensively separated from existing operators a concept McGauchie loudly dismissed as “utterly preposterous”.
Perhaps the fireworks would have been louder a year ago. As event chair Jennifer Hewitt (a journalist for sponsor The Australian) noted: “Relationships between Telstra and the Rudd government are not nearly as poisonous as they turned out to be with the Howard government at the end.” It turned out that they remain pretty poisonous between Telstra and the ACCC however.
“These geeks invented YouTube”
First speaker off the rank was Conroy who wasted no time reminding everybody just why we’d reached a poisonous broadband impasse in the first place. “Over the past 11 years there have been 18 different broadband plans proposed yet our international performance has continued to slip.”
That slowness is in stark contrast to the rate at which Internet applications develop Conroy noted. “Two years ago people were saying to me ‘Nobody will want to move video around the Net’. Then these geeks invented YouTube.”
Labor’s solution of course is the $4.7 billion National Broadband Network. Conroy admitted even he gets sick of repeating the number but noted that it was Labor’s biggest election commitment outside of tax cuts: “bigger than health bigger than education”. “The NBN will rival the Snowy Mountains Scheme in its scale and significance to Australia” he opined grandly at one point. (Of course the previous government attempted to privatise the Snowy Mountains Scheme as well.)
The key criteria for the NBN will be open access and the ability to upgrade; technology itself is not the prime criteria. “The government would welcome a fibre-to-the-home proposal but the business case has to be made for those proposals.”
The request for proposals will be released “shortly” and the period for submitting proposals will be “short but reasonable” Conroy said. “The timeframe recognises that the industry has been waiting for this opportunity for some time.”
Not ending up in a replica of the current situation (where Telstra holds most of the reins) is also a key priority Conroy said. “The operator of a new national network could gain considerable market power.” The solution? “The network will facilitate competition through open access arrangements.”
“Ducts and trenches”
Running those arrangements will likely be the job of the ACCC and Samuel was up next to explain how. Or rather he wasn’t: a consummate public servant he refused to commit to anything that might be deemed as a position during an informal public gathering though he cheerfully described himself as “the grim reaper”.
This was very evident during question time when Samuels declined to comment on how the current operational separation system (which in theory stops Telstra from advantaging itself in access to the national network was working). Frowning he added: “I think you’ll have picked up from my facial expressions that I have certain views on that which I won’t express publically.”
In response to the same question Conroy was a tad less discrete: “The existing operational separation structure is completely useless.”
Perhaps mindful he was going to cop a serve from McGauchie in his speech Samuels emphasised the role competition had played in building what broadband infrastructure we have. “Entrepreneurial access seekers were the first to introduce high-speed ADSL2+ services in Australia. Those entrepreneurial companies have driven larger companies such as Optus and Telstra to respond.”
Samuels also noted the industry habit of boasting about services well before they’re actually available pointing the “frequent announcement and somewhat less frequent deployment of fibre” in various contexts.
Despite that is there a major problem with broadband? “There is really no impasse with respect to the current generation of broadband services” he said.
The NBN is a whole other issue though. “We are all facing a common set of challenges around how those networks will be regulated so as to maximise the welfare of our nations. The underlying principles don’t change he said but “there is uncertainty of how those principles will be applied to the next generation of broadband networks”.
One likely point of argument will be access to existing exchanges and other street-level services a perennial source of complaint for current broadband providers. “Access to ducts and trenches may be needed and pricing of access to this structure will be critical.”
Telstra’s McGauchie up next managed to say precisely nothing on that subject other than suggesting there were already “stringent laws” in place preferring to rant at some length at how unfair it was that Optus could purchase cable network access from Telstra for less money than it cost to maintain the equivalent Optus network.
His defence of Telstra’s conduct rested as usual on an appeal to the shareholders. “We cannot contemplate making investment if we can’t be comfortable that we are going to be able to return to our shareholders a return which is commensurate with their expectations.”
According to McGauchie the ACCC is a major barrier to this goal. “The current regulatory regime actively discourages and distorts investment in telecommunications infrastructure.” Later he got even narkier: “The telecoms regulatory regime is a shambles. It has become characterised by regulatory overreach to the extent of micromanaging the industry.”
As evidence McGauchie pointed out that on the unregulated Next G network speeds of 14.4 megabits were now possible. “By the end of the year that system will be upgraded to 21 megabits and it will be put up to 42 megabits by the end of the following year.” He then conceded that “it’ll take some little time to actually put in place” thereby replicating the behaviour Samuels had noted earlier regarding fibre networks: claim early and deliver later. For all that perhaps McGauchie’s wildest claim was that the Internet was “practically unknown” in 1997.
“Five years is very ambitious”
Returning to earlier themes Primus’ Bhatia wasn’t very happy with his duct access either. In his view the regulatory process amounts to giving Telstra cheap loans by forcing higher prices to be paid for wholesale services until the ACCC intervenes. “The end result is that Telstra receives low-interest loans from access seekers” and those companies can’t invest in infrastructure he said. “The regulatory regime offers Telstra little incentive to comply with standard access obligations or even the spirit of the obligations.”
One problem which no-one else seriously addressed was how much companies can charge for high-speed services. “There is serious consumer resistance to retail prices higher than the $30-$49 range” Bhatia said. Businesses meanwhile want to upload as well as download large amounts of data and thus need a symmetric service.
No-one should anticipate a service of any description in a hurry. Conroy said that delivering the NBN in five years was a target but perhaps an unlikely one. “Five years is very ambitious given the capacity constraints of the economy. Perhaps seven years.”
“The actual time consuming part of the operation is splicing every single one of those phone lines in Australia. You don’t have to say we’re only going to start in one spot. This is something that can be done street by street. This actually works as a progressive build-out.”
Conroy was coy about the future of the OPEL regional high-speed network which Labor had been dismissive of prior to the election saying that he wouldn’t comment specifically because of legal concerns. “We said that we would honour any existing contract. What we’re examining at the moment is OPEL’s implementation plan If that meets the contract they’ll get the money.”