NBN Cherry Picking is Bad for Australia

Australian telecommunications policy has been a failure for 30 years and the move to introduce even more cherry picking will be bad for Australia. Today on Technology Spectator NBN cherry picking is discussed in light of the government's NBN reviews and audits.  It appears the regional and remote Australia will be the big losers. Do you want cherry picking to be enshrined in telecommunications competition policy?

Read the article here

The National Broadband Network (NBN) is shaping up to be a major election issue at theupcoming state elections and the 2016 Australian federal election.

The issue will revolve around a failure by the government to provide Australians with the improved competition policy and telecommunication infrastructure necessary for coming decades. Over the past couple of years Australians have come to expect the NBN to provide improved access to business opportunities and services like health, education and entertainment.

So, how will voters react when the Coalitions multi-technology competitive “cherrypicking” approach places Australia behind regional competitors including New Zealand?

How will regional and rural voters react when they realise they’re the big losers?

Councils and state government become FTTP NBN advocates

It hasn't taken long for local councillors and state parliamentarians to realise that a sure fire way to positively raise their public profile with voters is to advocate for the FTTP NBN rollout to continue in their electorate.

The Tasmanian government led the way with a powerline FTTP rollout plan put to Prime Minister Tony Abbott and Communications Minister Malcolm Turnbull by Labor Premier Lara Giddings. Giddings' proposal was a smart move as it placed the NBN firmly on the local agenda and highlighted to voters that she would seek alternate approaches to ensure the Tasmanian FTTP rollout was completed.

She pushed for the network to be rolled out via the State’s power line network.

A minor problem for Giddings' proposal is the $11 billion Telstra agreement for access to the infrastructure, including pits, ducts and traps necessary for the underground FTTP rollout. The agreement includes the requirement for Telstra to carry out asbestos remediation, which has been the cause of significant delay with the Tasmanian FTTP rollout.

So why would Giddings propose utilising powerlines when it is almost certain that Aurora Energy would charge a hefty fee to utilise the powerlines?

Well, she has to position the Labor state government as the champion of a FTTP NBN for Tasmania and has put NBN Co and Telstra on notice that they need to live up to voter expectations.

An equally astute move has been taken by the NSW Gosford City Council, which is dominated by Liberal and independent councillors, when it wrote to Turnbull asking for the NSW Central Coast region to become a “pilot region” for a “living cost-benefit analysis” FTTP NBN deployment.

The council’s general manager Paul Anderson stated in the letter to Turnbull that a commitment had been made by the previous Labor government for the region to be a priority for the FTTP NBN rollout and regional plans and strategies relied upon the FTTP rollout being completed.

You can bet that Gosford is not the only council or shire that has contacted Turnbull and asked that commitments made by the former Labor government be kept.

The NSW Gosford City Council’s very public action will have a flow on effect at the 2014 NSW state election. Does the NSW Premier Barry O’Farrell support the government’s plan for an inferior and equally expensive NBN 2.0? What about your local politician?

Voters and local advocates for a FTTP NBN would be remiss not to ask politicians about their preferred NBN approach and to make this information publicly available in the lead up to forthcoming elections.

Should there be a Royal Commission?

Australian telecommunications competition policy has been a mess for more than 30 years. Successive governments have failed to take the hard decisions necessary to resolve the many problems with the telecommunications sector.

If the Labor party wins the next federal election it is possible that the government’s decision to provide NBN Co with a revised direction detailed in the interim statement of expectationsand any subsequent directions will be investigated by a royal commission.

This will almost certainly be a waste of time but will at least allow Labor to extract a modicum of revenge, by turning the screws on the panels that would have carried out the Coalition's three NBN reviews and the senior executives brought in to implement NBN 2.0.

The coalition’s NBN 2.0 plan has the potential to be the greatest waste of money in Australian history if Labor wins the next federal election. It's possible that as much as $10 billion will be written off by a future Labor government as it moves the NBN back to the original ubiquitous fibre network plan.

The risk of government change at the next election or the one following and the subsequent anticipated reversal back to Labor’s NBN 1.0 should provide caution to anyone involved with NBN 2.0.

Independent reviews and audits failing Australian taxpayers

The term “independent review” has taken on a whole new meaning over past decades because successive governments have been hand-picking review panels and tailoring the terms of reference so that the review outcomes appear to support government policy.

The terms of reference for the government’s 'independent cost-benefit analysis and review of regulation' is an example of how to write a terms of reference to achieve a politically motivated outcome.

The government’s NBN 2.0 plan calls for infrastructure competition including the use of the obsolete Telstra and Optus HFC networks which can be described as examples of infrastructure rollouts that “cherrypicked” urban customers.

But weren’t Telstra and Optus very happy to sign agreements to terminate their obsolete HFC networks and migrate customers to the NBN? So what has changed?

To justify the about turn on use of the HFC networks and to permit “cherrypicking” the terms of reference includes the statement “How should the activities of NBN Co be constrained given its mandate to efficiently build, operate and maintain a wholesale-only access network”.

One way to read this statement is that NBN Co is operating outside its mandate or is likely to operate outside its mandate in the future and therefore should be constrained or sanctioned.

The real reason for the question is found in the sub-paragraph “This should include consideration of the issues associated with infrastructure based competition and the economic benefit of alternatives.”

The terms of reference and particularly this question would bring a smile to Sir Humphrey of Yes Minister fame.

The purpose of the question is to ensure the review panel find that infrastructure competition is beneficial, will reduce the NBN rollout cost, that “cherrypicking” should be permitted and therefore NBN Co should be “constrained” by not rolling out FTTP or FTTN in areas where HFC exists.

The other purpose of the question is to highlight that the review panel should list the changes necessary to the Telecommunications Act 1997 (including removal of the “no-competition” Section 141), the Competition and Consumer Act 2010 and theTelecommunications Legislation Amendment (National Broadband Network Measures – Access Arrangements) Bill 2010 which formalised the anti-competitive regime upon which the NBN’s business case was framed.

Henry Ergas’ argument for unbridled competition

On October 21 2010, Henry Ergas, who is a panel member of the government’s independent cost-benefit analysis and review of regulation, wrote a passionate article arguing against Labor’s plans to limit access network competition, a move necessary to ensure NBN Co would be viable, and said of the NBN Co Telstra agreement “under that agreement, Telstra would not only sell its customers to NBN Co: it would also scrap its hybrid fibre coax network, which would otherwise have many years life ahead of it.”

Ergas also wrote “the result would be a return to the pervasive inefficiencies that for decades plagued our economy”.

Ergas’ statements appear to argue that the HFC networks which targeted “economic” urban areas, which is also known as “cherrypicking”, were positive examples of Australian competition policy.

But what about people living in regional, rural or urban areas deemed uneconomic? What about people living in multi-dwelling units who have lived for 20 years with HFC in the street outside?

HFC is no shining beacon for Australian competition policy. Market forces and competition policy do not always succeed and no amount of tinkering with competition policy by government will bring about acceptable outcomes for the entire nation without government intervention.

A timely reminder of the need for the Universal Service Obligation (USO) is appropriate and it's uncertain why the Ergas article did not make reference to the USO which is an anti-competitive mandatory requirement placed on the entire industry to ensure that all Australians were provided with a basic telephone service. Surely following Ergas' argument the USO should be scrapped?

Why did the Australian telecommunications industry fail to introduce FTTN 15 years ago and why did the Australian telecommunications industry also fail to step up in 2007 when the new Labor government demanded the industry find a way to provide improved fixed access networks?

Surely Labor’s actions would never occur in countries such as Canada, USA and Europe but in the years since the Ergas article we have seen federal, state and local governments in these nations and around the world intervene to bring about the gigabit fibre network race that has now commenced.

There are networks not subject to competition policy such as the water, power, rail and road networks. Government will always be involved in the provision of basic services outside the “economic” urban areas because corporations left to their own devices even with the best competition policy in the world would never provide services in non-economic regional, rural and poorer urban areas.

Lowering the technical requirements

For the review panel to be in a position to provide the report the government seeks it's important that the government lowers the NBN technical requirements to a level where any technology could be reasonably added to the NBN mix, including obsolete technologies like HFC and FTTN.

The challenge for Turnbull, the NBN Co chairman Ziggy Switkowski or the new NBN Co CEO Bill Morrow is to publish a list of technical criteria that NBN 2.0 will achieve and when this will occur.

A list of technical criteria for the NBN, which can be completed by 2021 with two changes to current NBN Co practices, can be found here.

Can you identify what NBN Co would need to do?

Mark Gregory is a Senior Lecturer in the School of Electrical and Computer Engineering at RMIT University