Leading experts slam "anti-competitive" NBN forced HFC shutdown

Stan Beer
Wednesday, 14 September 2011 16:34

IT Policy - Government Tech Policy

Two internationally recognised experts in telecommunications economics have savaged the forced shutdown of the HFC broadband networks of both Telstra and Optus so that they will not able to compete with NBN Co for the provision of broadband services. The leading academics have slammed the plan, which is part of Telstra's Structural Separation Undertaking (SSU), as anti-competitive and will lead to higher prices and less investment in the Australian broadband.

 

In a submission to the ACCC on 'Telstra - Structural Separation Undertaking and Draft Migration Plan', Professors Joshua Gans and Jerry Hausman, who hold chairs at the University of Toronto and MIT respectively, say they were motivated to provide a submission because of their long history and experience of working on telecommunications and competition policy issues. They also stress they have not consulted or acted on behalf of any telecommunications provider in Australia.

Professor Gans holds the Skoll Chair in Innovation and Entrepreneurship at the Rotman School of Management at the University of Toronto and is founder of economic consultancy Core Research. Professor Jerry Hausman is the John and Jennie S. MacDonald Professor at MIT. He has been Director of the MIT Telecommunications Economics Research Program since 1988 where he teaches a course, 'Competition in Telecommunications' each year.

"We examine two aspects of the SSU noting that we believe it is within the scope of competition policy for firms to engage in vertical and other separation activities as the usual presumption is that these will not have adverse anti-competitive effects. Thus, we do not oppose the principle of Telstra restructuring itself to meet new competitive challenges and to ensure continued access to government access rights.

"The aspects we examine are the additional elements to the SSU regarding Telstra's repositioning of its HFC network and its competitive position in wireless broadband. In each case, we believe that the proposals are both wholly anticompetitive in this context and, if accepted, would set an extraordinarily poor precedent for the operation of competition policy and efforts to subvert anticompetitive behaviour in Australia."

As the submission states: the structural separation undertaking requires Telstra to disconnect its copper network and to remove the broadband capability of its HFC network. It will also be prohibited from supplying some fixed line services. Optus have reached a similar agreement with NBN Co. with regard to their HFC network.

The professors are blunt in their negative assessment of the policy in relation to competition and consequences.

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