NBN Co defends against claims of anti-competitive behaviour

Stan Beer
Wednesday, 14 September 2011 20:39

IT Policy - Government Tech Policy

NBN Co has mounted a spirited defence against claims from two internationally recognised telecommunications market experts that the forced shutdown of existing HFC broadband services from Telstra and Optus and restrictions against offering wireless broadband in competition with the NBN amounts to anti-competitive  behaviour.

 

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, 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 also slammed the SSU clause that restricts Telstra from competing with NBN Co using its wireless services for 20 years.

The two professors indicated that the forced shutdown of the HFC networks for broadband services and the non-competition requirements of Telstra's wireless broadband services amounted to anti-competitive behaviour, which would ultimately be detrimental to the Australian market in terms of consumer prices, innovation and industry investment.

However, in response NBN Co has hit back with a statement to iTWire in response to a story published earlier today.

We publish the response in full below:

NBN Co has made a submission to the ACCC in which we indicate how the Definitive Agreements with Telstra contribute to the achievement of government policy and deliver the structural reform of the industry that the government wishes to achieve. Please see link for further detailed information.

Re. Wireless - Telstra and NBN Co have not agreed 'to not compete'. To the contrary, Telstra has simply agreed not to market its wireless services as a direct substitute for fixed services.  Please see sections 5.4 and 9.3 of our submission...

NBN Co believes that the wireless marketing clause will have no adverse effect on competition for wireless broadband services because:

·         It does not restrict Telstra competing with the NBN or from marketing is wireless services on the basis of their inherent features and value proposition; and

·         it does not prevent Telstra from offering end-users a wireless only service.

In relation to the claim that the wireless marketing clause will result in 'less innovation, higher prices and less choice to consumers', to the contrary the complementary nature of fixed and wireless services means that the NBN will drive innovation and lower costs in the wireless market. A case in point, is that the NBN can facilitate the use of Femto Cells, which are very small wireless cells that are installed in the home or office and potentially offer users lower cost mobile data when at home or in the office, facilitating the concept of 'fixed/mobile convergence'.

Furthermore as discussed in our submission to the ACCC, the wireless marketing clause will not result in less innovation because:

·         it provides no disincentive for Telstra to invest in developing improved wireless technologies should it wish to do so;

·         it in no way affects the ability of other wireless service providers to market wireless services a substitute for fixed services.

As detailed in section 5.9 of our submission to the ACCC, claims that the HFC provisions of the Definitive Agreements are anticompetitive are incorrect and fundamentally fail to appreciate the broader policy context:

·         The NBN will operate on an open-access, wholesale-only basis with the aim of encouraging competition at the retail level for the benefit of consumers. The Telstra and Optus HFC networks are not available at wholesale, and as shared platforms they have a number of technological limitations which makes the provision of wholesale services using HFC networks highly problematic. In fact NBN Co knows of no HFC network anywhere in the world which is being used to deliver layer 2 wholesale services which are comparable to the fibre based services which will be provided over the NBN.

·         It is unlikely that Telstra or any other party would be willing to make the investment required to enable the wholesale provision of layer 2 bitstream services over the HFC network.

·         It is also worth pointing out that the overlapping HFC networks together cover only around 30% of the population.

While LTE is on a path to offer higher speeds in the future, the inherent limitations of wireless don't change. The speeds experienced by the user will decrease the more users in a cell and the further they are from the centre of the cell.