Broadband competitors seek to level playing field with NBN

The NBN should heat up telco competition in a broadband market that has been dominated by Telstra, said Optus, Vodafone and iiNet officials on a panel at the Australian Communications Consumer Action Network (ACCAN) conference in Sydney. However, they said the national network won’t resolve all inequities in the telco industry.

With more choice for customers through NBN, “competition will be about differentiation,” said Optus regulatory affairs vice president, David Epstein.

The NBN means Optus can serve twice the number of households it does currently, Epstein said. The NBN provides an opportunity for competitors to take customers from Telstra, agreed Vodafone Hutchison Australia general manager of public policy, Matthew Lobb.

However, to fully take advantage of that opportunity, the new choices must be communicated to broadband users, he said.

For iiNet, the NBN means “the same strategy on a new platform,” said iiNet chief regulatory officer, Steve Dalby. “It’s not about gigabits and megabytes for us. It’s about the experience and it’s about the customers and it’s about what they do with it.”

The NBN opens the door for new players to compete with telcos, said Commissioner Edward Willett of the Australian Competition and Consumer Comission (ACCC). The big competitive threat for telcos is going to be the over-the-top players like Google and Apple, he said.

The role of telcos is changing, Lobb said. “The over-the-top players and the app world is where all the action is.”

Telcos “have to change” to grow in today’s market, Epstein agreed. Optus started out only providing Internet access, and “will continue to look at ways and means of expanding outside the core to do more and more and more.”

Telstra appeared relatively unconcerned about over-the-top players. “There’s a lot of hard stuff that sits between Apple and the NBN ... that our industry is a specialist in,” said Telstra group managing director of corporate affairs, Tony Warren.

The NBN may have the effect of binding telco competitors together on certain issues. The NBN has heralded a “profound period of industry collaboration over the last year,” Lobb said. “As an industry, we’re getting used to agreeing with Telstra on various regulatory issues.”

All telcos should be wary that the NBN Co is a monopolist service provider, Epstein said. Telcos seek NBN regulations that “give carriers some assurance that we’re not going to just have to rely on the nebulous transformation of the cultural environment in our relationship with the wholesale provider. Also, that we don’t need day-to-day regulation from the ACCC.”

Some competition regulation is called for, Lobb said. “The NBN is a profound shift in the underlying structure, but Telstra is still the dominant player in an unhealthy way across all the facets of our industry.”

Telstra continues to find regulatory advantages, he added. "For example, Western Australia recently gave funding to Telstra to build out its network there. “It certainly improved coverage, but it also delivered improvement to the most powerful telco in Australia’s market position.”

Meanwhile, Dalby complained that the government has paid Telstra and Optus to join NBN, for example by paying Optus for its HFC network. “Telstra and Optus are being paid to connect their customers to the NBN,” while iiNet is “being charged to connect our customers to the NBN,” he said.

Despite the complaints, all four ISPs said they hoped to avoid regulatory “gaming” to gain advantages on competitors. That type of behavior provides no benefit to Australia, said Dalby. “It’s just pure waste of a lot of people’s time.” Telstra’s Warren agreed: “Whilst we might have all cut our teeth on [regulatory gaming], I don’t think any of us are looking forward to a rerun.”

The NBN provides an opportunity to move beyond gaming, said Epstein. With one broadband infrastructure wholesaler, competitors to Telstra can “stop walking around with a victim mentality,” he said.

According to Dalby, a change in government from the Labor Party may not be able to stop the NBN’s momentum and a policy change could happen overnight.

“If you had to renegotiate with Telstra and Optus on the deals that already have been done, that’s not going to happen in the blink of an eye,” he said. "Also, a new government would probably take eight to 12 months to think about its broadband strategy.

“You’re probably talking two or three years out, by which time the [fiber to the premises] and the NBN as we know it today will make a fair amount of progress. If there is a change in government or change in policy, we’ll work as constructively as we can,” Willett said.

Also, the ACCC commissioner said he doesn’t “see any technology on the horizon” that can beat the NBN’s fibre networks, Willett said. “Like electricity distribution networks, NBN will be an enduring natural monopoly.”

Follow Adam Bender on Twitter: @WatchAdam

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Copyright © 2012 IDG Communications, Inc.

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