[LINK] NBN and competition

[stephen at melbpc.org.au]

ACCC in a twist to banish NBN's rivals 

By Peter Martin, May 30, 2012. www.smh.com.au/business (snip)
 

The Optus high-speed cable internet network is a national asset. 

Comprising 25,000 kilometres of coaxial cable strung across 550,000 poles 
in Sydney, Melbourne and Brisbane, it provided Telstra with its first 
genuine competition, putting its own wires directly into half a million 
homes. 

What Optus has now is an asset that costs relatively little to operate 
and can deliver peak download speeds of 100 megabits per second - far 
faster anything on Telstra's copper wires. 

Right now it has 496,000 customers. It is within connecting distance of 
another one million, meaning that for very little cost, Optus or a buyer 
of the network could provide a very fast, very cheap internet service to 
as many as 1.4 million households - a service far faster than ADSL. 

NBN Co has asked the Australian Competition and Consumer Commission to 
let it pay Optus $800 million to *shut the network down.* 

Only a seriously confused regulator would allow it to happen.

The only precedent for the destruction of infrastructure on such a 
massive scale is the $4 billion NBN Co is to pay Telstra to rip out its 
copper network, transfer its customers to the national broadband network 
and remove the internet from the cables it uses to deliver Foxtel.

In no other industry would the ACCC approve such an agreement not to 
compete. In no other industry would it permit a bribe to decommission 
working infrastructure.

This week it published a draft decision approving the Optus deal.

In terms of national assets, the Optus decision is arguably worse than 
the Telstra decision. 

Telstra will decommission its copper phone lines street by street as the 
national broadband network cables are switched on. While there will be a 
loss of competition, copper probably isn't able to compete with fibre 
over the long term. 

By contrast, the Telstra and Optus coaxial cables are as good as new. 

They were strung up in the last half of the 1990s. They are already fast 
and capable of being made faster. They cost almost nothing to maintain. 

They are something that should not be destroyed wantonly.

The Telstra coaxial cables won't be. It has only agreed to disconnect the 
internet from them. It could put it back as soon as changed legal or 
political circumstances allowed. 

The Optus coaxial cables are scheduled for destruction. The ACCC's 
decision will have physical consequences. It should not be taken lightly.

And yet the ACCC gives every indication its decision could have gone 
either way. It was "finely balanced", according to the chairman, Rod 
Sims, in Monday's statement.

Its decision to approve the agreement was based on weighing 
carefully "clear public benefits" against "a potentially large but less 
clear detriment".

The main "clear benefit" is odd. 

The commission says the agreement will "avoid the cost of operating the 
Optus network to provide a service the NBN is also able to provide". 

Would we apply it elsewhere? Should Virgin shut down its airline network 
to avoid the cost of operating a service Qantas is also able to provide? 
Should Woolworths shut down its network to avoid the cost of operating a 
service Coles is also able to provide? Of course they shouldn't. We 
normally value competition.

Some will argue that wiring up houses is different. Frontier Economics, 
the consultant used by Optus in its submission to the ACCC, says fixed 
broadband services are a natural monopoly - they shouldn't be provided 
twice. 

But the Optus cable network is already in place. It costs next to nothing 
to keep it in place. It is NBN Co which is planning to duplicate it. 
Given its plans and the rate at which it is duplicating infrastructure 
right now, its complaint against "inefficient infrastructure duplication" 
is simply strange.

In truth, it's competition that worries NBN Co, not inefficiency. It is 
paying $800 million to remove a competitor, not out of a public concern 
about inefficiency.

With its last big fixed line competitor out of the way, the only market 
restraint on its prices and quality of service will be wireless internet, 
and it's on to that as well.

The Optus agreement, given a preliminary tick by the ACCC, prevents Optus 
from advertising wireless data services within the area served by its 
existing cables in a way which is "expressly critical of or makes any 
express adverse statement about the performance or functionality of the 
NBN where such a statement is misleading or deceptive or involves the 
making of a false or misleading representation in contravention of the 
Australian consumer law".

The ACCC waved it through because it is essentially meaningless, 
requiring Optus to do no more than obey the law. But it indicates how 
deeply concerned NBN Co is at the prospect of competition, or as it puts 
it "cherry picking". Competition would force it to provide value, and its 
national pricing structure would force it to provide it to all 
Australians. Its $36 billion cost base won't allow it. That's why it 
needs to destroy perfectly good working infrastructure. It's why I think 
the ACCC needs to think again. 


Read more: http://www.smh.com.au/business/accc-in-a-twist-to-banish-
networks-rivals-20120529-1zhen.html#ixzz1wGky5g7n

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