Vertigan review recommends easing NBN regulations

The first of three reports out from the government's independent review panel looking at telecommunications and broadband access and regulation in Australia has said NBN Co should be allowed to discriminate between its retailers in some cases.

Communications Minister Malcolm Turnbull today tabled the first (PDF) of three reports from the panel, chaired by Michael Vertigan, with the first report focused on telecommunications access arrangements and regulation of the National Broadband Network.

While many of the 34 recommendations called for the government to keep a close eye on how existing regulations were operating, or launch new inquiries into those regulations, a number of the specific recommendations called for NBN competition rules to be loosened or eased up.

One particular point of contention within the industry was the ability for NBN Co to offer better deals to one retailer, but not another. The Competitive Carriers Coalition warned that should NBN Co be able to offer better deals to ISPs with larger customers, it would obviously favour the incumbent telco, Telstra.

The panel weighed the options and said some discrimination from NBN Co would be acceptable.

"Taking the need to achieve such a balance into account, the panel believes non-discrimination requirements should remain in place but should be amended to allow NBN Co to differentiate its service agreements where this provided genuine economic efficiencies or if the ACCC justified it occurring in particular circumstances," the panel said.

"The scope for discrimination should extend to activities related to the supply of services, such as product development, again, where that discrimination aids efficiency."

The panel has said that concerns about larger companies being offered a better deal could be resolved by the differences in agreements being published with the ACCC and allowing other companies to lodge complaints about those differences.

In the longer term, the panel recommended that should NBN Co face sufficient competition, the non-discrimination clauses in legislation should be removed entirely.

If NBN Co then decides to invest in a retail service provider, the panel recommended that restrictions be put in place to ensure that NBN Co, as the wholesale company, doesn't offer better deals to the retail company it has invested in.

The panel rejected suggestions that NBN Co should be allowed to offer services directly to big businesses or utilities. When NBN legislation was first debated in parliament in 2011, utility companies had argued they should be able to get services directly from NBN Co because obtaining services through telcos would over-complicate the services utilities required.

Telcos objected, with Telstra stating at the time there was a market for retailers such as Telstra to provide the sorts of services utilities require.

The panel recommended no change to the existing legislation.

In a blow to TPG's metropolitan network plans, the panel also suggested that any plans for telcos to compete with NBN using fibre-to-the-basement VDSL services should be prepared to offer wholesale services on those networks, similar to that offered by NBN Co.

"It would be preferable for service providers to have access to Layer 2 services such as those that are being provided by NBN Co," the panel said.

"In principle, end-users should not be prevented from having a choice of service provider and should not be forced to change service provider (other than in circumstances where a service provider is no longer willing to provide services). Where exclusivity is efficient at the network layer, this should be facilitated so long as end-users retain the ability to choose their service provider."

There should also be additional oversight into the ACCC's regulatory powers, according to the panel.

"When the ACCC makes decisions of enduring impact, these should be subject to regulatory oversight. Specifically, decisions in relation to access determinations, anticipatory exemptions and special access undertakings should be subject to full and effective merits review, subject only to the limitations in scope and application required to prevent clearly unnecessary delays to regulatory decisions," the panel stated.

In a statement today, Turnbull said the remaining reviews, including the highly-anticipated cost-benefit analysis report will be finalised in the next few weeks.

"The review is the first report of the Vertigan Panel. The panel is continuing with its cost-benefit analysis work and review of broader structural and regulatory issues and is expected to complete these elements over the next few weeks," Turnbull said.

"The government thanks the Panel for its important work to date and looks forward to industry responding to the Review and the broader Vertigan report in due course."