Thursday, 16 October 2014 05:56

Turnbull moves on TPG cherry picking Featured


The Government has told TPG it must offer broadband services on the same basis and at the same price as the NBN, so that it cannot ‘cherry pick’ profitable customers.

The Government released three documents yesterday, all relevant to the case:

The last of these is the most interesting. It mentions TPG by name dozens of times, and contains a section on ‘the case for action’:

“TPG’s proposal is not for a limited rollout. It is for an initial rollout affecting up to 500,000 premises, which indicates that it may extend its network further (the Department estimates that TPG’s networks are within 1km of about 1.8 million premises, of which about 1 million are multi-dwelling units or business centres).

“The rollout is of such a scale that a significant proportion of premises in Australia will be affected. There are currently about 10 million fixed-line services in operation in Australia, and TPG’s rollout could therefore have an impact on at least 5% of those services. Should other carriers elect to make use of the statutory 1km exemption, a substantial percentage of the population could then be covered.”

TPG’s plans to take advantage of a loophole in the existing NBN regulations, which allow carriers to supply broadband services to promises where they have existing fibre within 1km, has caused considerable angst to NBN and the Government. NBN Co CEO Bill Morrow and chairman Ziggy Switkowski have both said TPG’s move would challenge the NBN’s business model, by allowing TPG and others to ‘cherry pick’ profitable broadband customers, mostly in cities, leaving the NBN Co with unprofitable customer, with the taxpayer to pick up the tab.

The Australian Competition and Consumer Commission (ACCC) has said it would not oppose TPG’s move, because it was allowed by the regulations. It was criticised, but its job is to interpret the rules, not make them. The flurry of documents released yesterday indicates the rules will now change. Predictably, the ALP and the Coalition have blamed each other for allowing the situation to develop.

Turnbull has now asked for industry and public submissions on the Government’s proposed “carrier licence condition for networks that supply superfast carriage services to residential customers, in which TPG is singled out.

“Following the announcement by the ACCC on 11 September 2014 on TPG's plan to roll out a fibre-to-the-basement (FTTB) network, the Government announced it would consult on a draft licence condition.

“The draft licence condition would require owners of high-speed networks servicing residential customers to functionally separate their wholesale and retail operations, and to provide access to competing service providers on the same non-discriminatory terms as those provided to their own retail operations.

“The Government's aim is to ensure that carriers provide wholesale access to FTTB network infrastructure and remove the ability to favour their own downstream retail operations over other retailers on the network.

“Without such arrangements competition and consumers can suffer. These are equivalent issues to those addressed by the structural separation of Telstra and NBN Co's wholesale-only operation.”

In other words, TPG or anyone else attempting to compete against the NBN will have also have to separate, and the wholesale company would have to offer an identical service, at an identical price, to the NBN. “The carrier's wholesale company would also need to supply a Layer 2 Wholesale Service to other carriers and service providers, with the price of that service set at $27 per month.

The statement says the licence condition would remain in place for two years, allowing “long-term regulatory arrangements for the sector to be settled.”

TPG has not yet responded. Its share price on the ASX today will be a good indicator of how the market perceives the Government’s actions.

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Graeme Philipson

Graeme Philipson sadly passed away in Jan 2021 and a much valued senior associate editor at iTWire. He was one of Australia’s longest serving and most experienced IT journalists. He is the author of the only definitive history of the Australian IT industry, ‘A Vision Splendid: The History of Australian Computing.’He was in the high tech industry for more than 30 years, most of that time as a market researcher, analyst and journalist. He was founding editor of MIS magazine, and is a former editor of Computerworld Australia. He was a research director for Gartner Asia Pacific and research manager for the Yankee Group Australia. He was a long time weekly IT columnist in The Age and The Sydney Morning Herald, and is a recipient of the Kester Award for lifetime achievement in IT journalism. Graeme will be sadly missed by the iTWire Family, Readers, Customers and PR firms.

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