Infrastructure Australia plan backs NBN split up, USO reform

The Australian Infrastructure Plan endorses the eventual break up of NBN into separate business units as part of the process of privatising it.

“Over the medium term, the Australian Government should transfer NBN Co to private ownership,” states the report, released today by Infrastructure Australia.

In line with the third Vertigan panel report and comments from Australian Competition and Consumer Commission chairperson Rod Sims, NBN should “be split into distinct business units to encourage infrastructure competition, promote private investment, and allow for specialisation in managing different networks”.

Two possible options for breaking up the company include splitting it along technology lines, as recommended by the Vertigan report, or along geographical lines.

“NBN Co could be split along technology lines: one company selling services over the Hybrid Fibre Coaxial cable networks (technology developed by the cable television industry), one over Fibre to the Premises or Fibre to the Node networks, and others through the satellite and wireless networks,” the report states.

“Alternatively, NBN Co could be split along geographical lines: for example, by major city. Remote and regional services covered by satellite services could be managed separately through CSOs [community service obligations], where there is insufficient commercial appetite to deliver services through a private model.”

In order to prepare for a potential break up as part of a future sell-off, NBN needs to ensure that it doesn’t “enmesh” different technologies “in a way that cannot be separated later," the report states.

“Accordingly, NBN Co could establish separate internal business units in anticipation of creating a more competitive network,” it states.

In the near term the government should commission a scoping study to assess options for privatising NBN, it recommends.

Mobile backhaul

“The NBN is investing in backhaul infrastructure as part of delivering broadband infrastructure in the regions,” states the report.

“This infrastructure could also be used by mobile network providers, in appropriate circumstances, to expand their coverage in more regional areas at relatively low cost.”

NBN has been trialling a cell site access service that provides connectivity between mobile towers and the National Broadband Network Points of Interconnect (POIs), the report notes.

The latest edition of NBN’s Integrated Product Roadmap lists the cell site access service as scheduled to launch in March 2016, with the trial due for completion some time next month.

“The Australian Government should work with the NBN and business to develop a viable framework to deliver low-cost backhaul,” the Australian Infrastructure Plan states.

“This would involve a relatively minor change in its scope but could improve mobile services in regional areas and deliver significant long-term benefits to consumers and businesses.”

On a similar note, the report endorses ensuring NBN fixed wireless towers are available to mobile network operators.

The government should also encourage greater co-location of mobile network infrastructure, the report states.

It notes that the mobile blackspot program includes as a condition for funding that mobile operators be given the opportunity to co-locate on funded base stations (the second round of the blackspot program is currently underway).

Universal Service Obligation overhaul

The government should consider phasing out the current Universal Service Obligation scheme, the report argues.

The scheme, which is co-funded by the government and the telecommunications industry, subsidises the provision by Telstra of fixed-line telephony services and payphones in regional areas.

“[T]he relevance of fixed-telephone services – and this obligation – is declining,” the report states.

“Fixed-line services are gradually becoming redundant. More people are choosing to forego fixed voice services and rely on mobile services alone.”

Instead the government should consider diverting the funding to improving mobile coverage in regional areas.

“This could involve introducing a technology-neutral USO to support mobile services, in conjunction with existing programs,” the report states.

The current USO has been criticised by Optus and Vodafone.

Vodafone’s CEO, I?aki Berroeta, earlier this month described the scheme as “hugely inefficient” and “obsolete” and repeated the telco’s call for a technology-neutral successor to the USO.

Copyright © 2016 IDG Communications, Inc.

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