It was a "dark day" for the Australian Competition and Consumer Commission (ACCC) when it decided to let Optus and NBN Co proceed with their AU$800 million deal to shut down Optus' hybrid-fibre coaxial (HFC) network, according to Shadow Communications Minister Malcolm Turnbull.
The ACCC announced yesterday that it had decided not to oppose the deal that will see Optus shut down its HFC networks in Sydney, Melbourne and Brisbane, and transfer its 400,000 customers onto the National Broadband Network (NBN) starting in 2014.
The regulator came to the view that Optus would not upgrade the HFC network, and that, over time, customers demanding higher speed services would have naturally migrated to the NBN anyway. It argued that the HFC network wouldn't have had much impact on NBN competition, because of the regulatory environment set up around the NBN.
This morning, in a blog post on his website, Turnbull admonished the ACCC for this decision.
"A black day indeed for the ACCC and competition in Australia," he said.
Turnbull compared the deal to the AU$11 billion Telstra agreement, which he said the government had largely forced through via legislative changes. The ACCC had said that other legislative changes prohibiting carriers from expanding their networks in profitable areas would prevent the expansion of Optus' HFC networks, but Turnbull argued that the ACCC should still have blocked the Optus deal.
"The Telstra part of this shabby arrangement was legislated so the ACCC really had no say in it, but they could have and should have blocked the Optus deal."
Turnbull said that the HFC network could compete with the NBN, as already happens in the United States, Korea and Singapore, and the ACCC was underestimating the potential for future technological upgrades for HFC.
He asked why, if Optus was set on shutting down the network eventually, should the taxpayer pay AU$800 million for the company to do so earlier?
"It is Optus that has hit the jackpot. AU$800 million in cash."
In a recent submission to the ACCC, prior to the regulator's final decision, Optus responded to criticism over the value of the deal. Optus estimated that, in shifting HFC customers over to the NBN earlier, and therefore picking up revenue from Optus NBN customers, NBN Co stands to earn back the money it is paying to acquire the customers.
"It is reasonable to assume that the transaction will result in a positive impact to NBN Co's business plan, since the revenue from accessing the Optus HFC customers will exceed the migration payments NBN Co will make to Optus to acquire those customers," Optus said.
Optus estimated that the net benefit to NBN Co (that is wholesale payments to NBN Co, minus the AU$800 million payment to Optus) is AU$317 million.