ACCC decision on NBN/Optus economic 'travesty'

Deakin University Research Professor of Public Policy , Michael Porter, has labelled the Australian Competition and Consumer Commission (ACCC) decision to decommission parts of the Optus network in favour of the NBN as a travesty of economics, undermining a competitive pro-investment strategy for broadband in Australia.

The Commission has allowed NBN Co to make payments for 20 years to SingTel Optus to transfer Optus' High Fibre Cable (HFC) customers to the NBN and decommission parts of Optus' HFC network.

It argued the benefits of the arrangement would be clear and quantifiable and would avoid the costs of Optus operating a HFC service that the NBN could provide and allow Optus HFC subscribers to migrate to the NBN at a lower cost.

But Professor Porter from the University's Alfred Deakin Research Institute said the decision was short sighted and political.

"Legislation can change," he said.

"Just as legislation from government was anticipated as inhibiting competition, so new legislation from the next government could reverse the trend.

"Note for instance the 10 year plus NBN rollout, which could all be called into question within a year, following an election.

"We need all assets allowing competition to be available, unless there is an overwhelming case the other way."

Professor Porter said allowing assets to be used solely for all time for one purpose was deeply inconsistent with the charter of the ACCC.

"The heart of competition in information provision is competition, for instance allowing Telstra to use assets for the provision of pay TV but not allowing others to use it to provide broadband prevents competition," he said.

"There may be huge commercial scope to switch pay TV over to NBN fibre cable, but the people who will be paying for it will be those living in metropolitan areas who could or should be able to obtain cheaper services via the same cable.

"Rolling HFC clients over to the NBN early is not a priority nor a necessity, as experience in the United States and Europe and from Cisco has shown."

Professor Porter called for an area by area tender of information assets - the mass of cable, copper and wireless options - and for maps of exactly where fibre and cable is in Australia to be made public.

"Allegedly these maps are kept secret on security grounds but these maps are key to ensuring effective competition," he said.

"Tendering out information assets by area could slash broadband costs because the technologies aren't overbuilding, but instead are complementing each other.

"This will allow packaging and linking together.

"The criteria for such a tender should be broadband speed, asset leasing or purchase cost.

"It should not be dictated by the technology used.

"With digital data, you don't need grand central station - the NBN - to get data around, this is why some of the worst governed areas of the world still have fast broadband at consumer level."

Professor Porter said relaxing the commercial imperative for the rollout, allowing the use of the Optus HFC and all tendered assets, as well as area-by area tenders would have made it easier and affordable for the NBN to prioritise remote, slow or dark areas of broadband service.

"They could skip my street and many others in metropolitan Australia who have HFC cable capable of getting to 500Mbps or even one gig," he said.

"Yes the HFC model requires investment as cable broadband and usage expands, but that is properly a commercial matter, where the NBN will and should experience competitive tension."