NBN: Government must now enforce open network principles

ISP Industry all aboard an open network, except Telstra, who analysts warn will build an NBN more than twice as expensive for consumers than any other bidder

A telecommunications analyst has claimed the burning question for Australia’s ISP industry is not who builds the National Broadband Network, but whether the government defines and enforces a truly open access network model.

Senator Conroy has until now been able to hide behind the gag order on the NBN tender process, but now that bidding is closed telco analyst, Paul Budde, said the government must define what it means by an “open access” network.

“The best outcome will be that the government enforces an open network. If open access network principles are accepted by everybody, then who cares who builds the network. The ISPs don’t care at all, they just want access on an open network basis to the infrastructure,” Budde said.

“Some ISPs will be happy to do nothing but retailing, others will want total unbundled to build their own VoIP and video or whatever, but you should have that openness and opportunity to do what you want and not be forced as all 700 ISPs are to follow one road, which is the case under the current wholesale regime.”

An open access network is one that separates the physical access to the network from service provisioning. Currently, Telstra is a vertically integrated provider of both wholesale and retail services, which fellow NBN bidder, Axia, labelled a "relic” and “bad for business" as the incumbent competes against and marginalises its own customers.

According to Budde, “the whole world” including places like Britain, New Zealand, France, Sweden, Singapore and the Netherlands have, or are moving to open access next-generation network models.

“Even the Obama team in America is talking about open networks – that is the trend going forward,” he said.

The only problem is everyone is on board the open access bandwagon except Telstra, who is fighting tooth and nail to rollover its current vertically integrated monopoly onto the NBN, he added.

“In general everybody else is far more collaborative and cooperative than Telstra. On that level it will be far easier for ISPs to work with any of the other bidders,” Budde said. “Telstra is pretty well against competition.”

iiNet, for example, warned that the NBN will be a failure with higher fees for customers, fewer ISPs and a decline in innovation and competition if the current access and regulatory regime is not "dramatically reformed". Optus has also made it clear that a single national network with equal access wholesale pricing is key to the success of the NBN.

According to Telstra’s NBN bid submission, it mentioned an entry level broadband service of 1Mbp at $29.95 per month.

“That is totally inadequate, its old world thinking. They are talking about prices that were applicable in Europe in 2003. That is totally unacceptable from Telstra and clearly indicates that it’s not in Telstra’s interests to come up with better prices. They want to maximize their profits and that means ISPs, and us, will pay for it, there is no other way around that,” Budde said.

With Telstra’s desire for a return on investment north of 18 percent, which economists have said will result in Australians paying for the network four times over in lost GDP over its predicted twenty year lifespan, it is seeking true broadband rates of $85-95 per month.

“By comparison Optus talks of a similar service at around $30. Telstra will be at least double the price of what the other bidders want to do,” Budde said.

Now that the tender process has closed and all potential bidders are on board – namely Telstra, Optus and Terria, Axia and Acacia, TransACT and the Tasmanian government – Budde said it is time for Conroy to lift the gag and define what he means by an open access network.

“It was important for Conroy to get Telstra sort of onboard; that was important for his political skin. But now we’re back to where we were a year ago saying ‘what are we going to do now?’” Budde said.

“[The government] has done absolutely nothing and we’ve had no indication whatsoever on what they mean by ‘open network’. The industry has clearly setup the open access principles and everybody has agreed to that except Telstra.

“[Conroy] has to come up with regulation and legislation on what it is all about. We can’t continue for another year or two with nothing happening. In the end it’s the government who sets the rules, not Telstra, not Optus, not Axia, it’s the government – they are the regulator and nobody else."

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