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Monday, 20 December 2010 17:22

ACCC pans NBN Co's 14 point of interconnect plan, wants 120

By

NBN Co's controversial and hugely unpopular proposal that access seekers would have only 14 points of interconnect to the NBN has been rejected by the ACCC. It has come up with a set of criteria that, when applied, results in 120 PoIs.

A small number of PoIs would have made it possible for relatively small retail service providers to connect direct to the NBN without the need to go through wholesale aggregators but would have largely given NBN Co a monopoly over backhaul.

NBN Co had argued that the 14 PoI model would have made it easier to offer a uniformly prices wholesale service across Australia by enabling it to cross-subsidise rural backhaul from more profitable urban services.

NBN Co says it "placed priority on achieving minimum wholesale input costs for access seekers, eliminating any single point of failure above the fibre distribution hub and providing for rapid traffic growth in all backhaul links due to increasing video applications." And it now has to backtrack on much of its network planning which had been based on its preferred 14 PoIs.

However, the ACCC was highly critical of NBN Co's 14 PoI proposal. In the advice given to the government on 30 November, released today, it said: "The ACCC is concerned that the implementation of either a composite or centralised approach [to determining the number of PoIs] would represent a significant degree of 'mission creep' in relation to NBN Co's objective to 'occupy as small a footprint as possible in the overall value chain'."

Further, the ACCC said: "The extension of NBN Co's network beyond the access network (which is generally considered to be a natural monopoly or a 'bottleneck') to also include a transmission network (which otherwise demonstrates competitive characteristics in some geographical areas) would represent a considerable departure from regulatory orthodoxy - namely that regulation should only focus upon markets where competition is not effective."

The new 120 PoI number has been arrived at by NBN Co applying the ACCC's rules for determining PoI locations, namely that PoIs should be located where: it is technically and operationally feasible for NBN Co to allow interconnection; there are at least two competitors with optical fibres within a nominated distance from that location which  connect that site to an optical fibre network which is connected to a capital city and deliver wholesale transmission services which are suitable for use by service providers who wish to connect to the NBN at that location; and there is other evidence that the particular route is, or is likely to become, effectively competitive."

CONTINUED

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The ACCC adds that it intends to further consider how to determine whether a particular route is, or is likely to become, competitive.

The ACCC says an important part of its recommended approach is for an ongoing review of the location of the PoIs in order to: "address any failure by the market to deliver competitive outcomes (for example, through price based competition); and enable competitive transmission to develop downstream of the POI where market conditions change to make new entry feasible."

The ACCC submitted its advice to the Government on 30 November, and says that, since then, it has worked closely with NBN Co "to identify the precise number and location of PoIs in accordance with the competition criteria contained in the ACCC's advice. An Excel spreadsheet detailing all 120 locations is available here.

This list of initial PoI locations will be now subject to a public consultation process where stakeholders will have the opportunity to identify any unintended consequences from the location of a specified PoI. Responses are due by 14 January 2011.

NBN Co's just released corporate plan suggests that it has been proceeding for some time on the assumption that its preferred 14 PoI model would be acceptable, even through there has been continuous and strident opposition to it since it was unveiled. And the plan suggests there will now be some delays to the schedule as NBN Co backtracks to accommodate 120 PoIs.

It says: "Since NBN Co has been designing and planning on the basis of 14 centralised PoIs since May 2010, there is an impact on deployment timing, costs and end-user take-up of moving to a semi-distributed PoI model, which has now been reflected in this Plan."

"The planning of the Tasmanian First Release Sites and for the mainland Second Release Sites is currently being reviewed in light of the move to a semi-distributed PoI model. The availability of the 120 semi-distributed PoIs will impact the current planning for First Release and Release 2 Sites; NBN Co is currently investigating how best to mitigate this impact."

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