Australian network bidders agree on fibre monopoly

SYDNEY – Australia’s new high-speed National Broadband Network (NBN) will likely operate in a monopolistic, utility-based model, according to telecommunication providers.

Members from the Terria consortium, industry associations and analysts unanimously agreed the model is the most realistic given Australia’s economic and geographic environment.

The speakers divided over the level of regulation required to encourage competition, including fees for network access and whether the NBN operator should be structurally separated.

AAPT chief executive Paul Broad said market pressure will force the NBN operator to structurally split. “When electricity industries were sold in Victoria, investors forced the separation of the industry because they saw grey yield in infrastructure and growth retail and [similarly] in time, Telstra investors will force the company to separate,” Broad said.

“Natural monopolies are the most incompetent, inefficient businesses to run any network you can imagine.

“If I were in [carrier] Telstra’s shoes I would also argue [for a return on capital] but you have to make bold decisions in the marketplace in which you win and lose.”

Construction of the NBN could begin this year.

(In an earlier story, a government official warned against making the kind of infrastructure mistakes the country has made in the past.)

Broad said the NBN operator will have to “bite the bullet” in regards to the risk of investing up to $15 billion in infrastructure, referring to his time as the head of Powertel when it invested $800 million into a Sydney to Melbourne fibre backbone, instead of using Telstra’s networks, and subsequently lost some $140 million.

Terria managing director Michael Simmons said NBN access prices must be regulated in areas without competing infrastructure.

“The NBN needs to be a monopoly by definition because of its size and scale. The party that owns and operates the network should be independent from the access seekers so everyone is treated equally,” Simmons said. “Separation of network was occurring naturally with the local loop unbundling.

“Access pricing needs to be regulated outside metropolitan areas where the network can only operate as a monopoly. It may not be needed in metro markets because separation will happen naturally.”

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