The Turnbull Government's Regional Broadband Scheme aims to partially fund NBN Co's loss making fixed-wireless and satellite services. In InnovationAus the outcomes of this industry levy are discussed and how it will remove the need for NBN Co's existing cross-subsidy.

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The Turnbull Government has released draft legislation for an industry levy called the Regional Broadband Scheme (RBS) that will partially fund NBN Co’s loss-making fixed-wireless and satellite services. This removes the need for NBN Co’s existing cross-subsidy from its profitable fixed-line services.

The draft legislation includes a show bag full of ideological changes to the framework supporting the National Broadband Network (NBN).

Whilst the poorly framed omnibus legislation might satisfy the demands of the largest carriers, the result will be increased costs for residential consumers, and other negative side effects that will add to the chaos at the heart of the telecommunications industry.

Under the draft legislation, carriers including NBN Co will be required to pay a monthly charge for broadband connections, provided for all or part of the last month, over local access lines that provide super-fast broadband of 25 Mbps or higher.

The CPI indexed monthly charge includes $7.09 per line and $0.01266 per line for administration costs. As NBN Co is the intended recipient of the industry levy, it will only be required to contribute to the administrative costs of the scheme.

In a joint media release the Minister for Communications Senator Mitch Fifield and the Regional Communications minister Senator Fiona Nash state that “the RBS is estimated to raise around $40 million from eligible non-NBN networks in its first year. Non-NBN fixed-line networks are currently estimated to provide 10 per cent of fixed-line services in operation.”

At first glance, the industry levy seems a reasonable approach to ensure that NBN Co’s competitors do not get an unreasonable advantage by not contributing towards the higher cost of providing telecommunications in regional and remote areas.

But the industry levy is only targeted at carriers providing high speed broadband over local access lines, which is a term found in the Telecommunications Act 1997 (Act) to describe fixed-line connections.

Exclusions to the industry levy include mobile broadband services, fixed-wireless broadband services, satellite broadband services, exchange based xDSL broadband services and inactive super-fast carriage services.

There has been significant growth in the number of companies that have entered the telecommunications market offering 100 Mbps or higher download connection speeds to fill the gap created by the Turnbull Government’s decision to introduce obsolete copper-based technologies into the NBN in September 2013.

It is inexplicable as to why companies offering super-fast broadband using FTTN/B and FTTP to residential customers should be levied, whilst companies offering super-fast broadband using fixed-wireless (microwave) and mobile broadband are not.

The draft legislation and the report that it is based upon are now out of date and have been overtaken by the effects of the Turnbull Government’s shift to a second rate, multi-technology mix NBN.

There is no justification for the mobile network operators to be exempt from the industry levy as they are also competitors to NBN Co that will benefit by not contributing to the provision of fixed-wireless and satellite broadband services in regional and remote areas.

Over the next decade the mobile network operators will rollout 5G and potentially super Wi-Fi providing gigabit connections speeds.

Armed with this technology the mobile network operators will ramp up their competition with NBN Co and in regional and remote areas they will seek to capitalize on their ability to offer gigabit connections whilst NBN Co offers download speeds of between 25 Mbps and 50 Mbps.

The draft legislation has also been overtaken by the call last week from the Productivity Commission for the government to replace the existing Universal Service Obligation (USO) with a new regime that provides “a baseline or minimum broadband (including voice) service to all premises in Australia, having regard to its accessibility and affordability, once NBN infrastructure is fully rolled out”

This government has form when it comes to putting forward half-baked solutions and by attempting to tackle the infrastructure competition and cherry picking that sprung up because of its decision to utilize copper based technologies, the government is going to make it much harder for the USO to be reformed.

In a purely unjustifiable ideological move the Bill would remove small business customers from Part 8 of the Act.

The Department of Communications and the Arts explanatory notes to the draft legislation state that “this means that lines used to supply superfast carriage services to small businesses will no longer be subject to structural or functional separation requirements."

"This creates greater flexibility for network operators in the supply of superfast carriage services to small business customers.”

This is simply nonsense.

Companies focused on supplying super-fast broadband to small business will be able to do so without the need to provide infrastructure sharing and this sets the scene for the larger carriers to be able to target business customers without the need to open their networks to wholesale based competition.

And what of the increasing number of SOHO telecommunications customers? By introducing this amendment to the Act there is a possibility that SOHO customers could find their broadband options limited in coming decades.

The government’s efforts to partition residential and business customers is not logical, the NBN provides the most cost effective way to provide telecommunications infrastructure beyond urban centres.

By introducing a partition between customer types, there is the strong possibility of infrastructure duplication and yet again, an inability of competitors to access that infrastructure because wholesale access does not need to be offered.

The Bill shifts other aspects of the Carrier Licence Conditions (Networks supplying Superfast Carriage Services to Residential Customers) Declaration 2014 into legislation including the removal of the one kilometer exemption, which provided the opportunity for carriers with pre-existing networks to extend their networks by up to one kilometer and thereby potentially compete with NBN Co.

Under the new legislation companies offering super-fast broadband connections with download speeds of 25 Mbps or higher will need to structurally separate and offer wholesale services.

The draft legislation introduces a Statutory Infrastructure Provider (SIP) regime to “connect infrastructure and supply wholesale services on reasonable request from a retail service provider."

"This will ensure that all premises will be guaranteed an infrastructure connection and retail service providers will have access to wholesale services supplied on that infrastructure.”

Initially the SIP will be NBN Co, though it does identify that “in certain other circumstances, other carriers” could be identified as the SIP “for example where a carrier is the sole provider of infrastructure in a new development. The SIP obligation guarantees the provision of wholesale access to broadband infrastructure for retail service providers.”

To nominate a company other than NBN Co as the SIP for “new developments” brings into question how the SIP would connect the new development to the NBN and to other networks.

Is it going to run fibre to the new development, potentially in parallel to existing NBN fibre transit lines? Will the fibre be wholesaled and will the infrastructure in the new development be wholesaled?

Will the SIP be required to pay for the NBN interconnect? If it does then it quickly becomes apparent that only the largest carriers with existing NBN interconnects are likely to seek to become SIPs for new developments.

With small business connections being excluded from the wholesale and structure separation provisions in the Act, it is likely that the small business owners in a new development that is a small business park, for example, could be forced to deal with a single broadband provider offering broadband at higher prices than what is available to nearby NBN customers.

If this legislation is accepted by Parliament, Australia would be face with two separate regimes, one for telephone – the USO – and one for broadband, the SIP.

It does not take a rocket scientist to realise that we only need one regime that combines both roles. It is bewildering that the government would proceed with this draft legislation one week after the Productivity Commission released its draft report into the future provision of the USO.

Having been thwarted in its previous attempts to get ideological changes made to the NBN related legislation, the government has put forward yet another omnibus of unjustifiable legislative changes that would, overall, have a lasting negative impact on the telecommunications market and increasingly undermine the viability of the NBN.

There is a need for an industry levy to remove the need for NBN Co to cross-subsidise fixed wireless and satellite, but the proposed approach put forward by the Turnbull Government is nothing short of an all-out attack on a small number of smaller carriers.

Dr Mark Gregory is a Senior Lecturer in the School of Engineering at RMIT University