NBN monopoly will mean compo: Optus

NBN monopoly will mean compo: Optus

Summary: NBN Co is killing competition and opening itself up to compensation claims by not proposing enough points of interconnect for the National Broadband Network (NBN), according to Optus and Shadow Communications Minister Malcolm Turnbull.

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NBN Co is killing competition and opening itself up to compensation claims by not proposing enough points of interconnect for the National Broadband Network (NBN), according to Optus and Shadow Communications Minister Malcolm Turnbull.

In a discussion paper released last month, NBN Co proposed 14 points of interconnection (POI) located in Australia's major cities, with the option of an additional 195 POI in other locations around Australia as required.

The POI is where two networks meet and exchange information. For NBN Co it would mean where it passes on data carried over its networks to the internet service providers' networks. Where that is located determines how much backhaul a provider would have to supply themselves in order to connect customers to the NBN. How much backhaul the supplier has to provide has a significant impact on the price of the service it can offer consumers.

Points of Interconnection

Possible POI for the NBN (Credit: NBN Co)

In Optus' response to the discussion paper, provided to ZDNet Australia today, the telco said that the proposal means more monopoly infrastructure than there currently is under Telstra's dominion.

"NBN Co has proposed a highly aggregated model for connecting to the NBN that would see interconnection practically offered at only a very small number of POIs located in each of the main capital cities. Optus is strongly opposed to this proposal since it will have a dramatic adverse impact on current and future investments and competition in the fixed line markets," the company said in its submission.

Optus said that if the POI is limited as has been proposed, it would undermine regional development, result in overbuild for the network, strand significant levels of existing backhaul infrastructure and would likely result in "significant claims for compensation, likely to run into hundreds of millions of dollars, in respect of that infrastructure".

In response, Optus said that — in line with the recommendations of the McKinsey KPMG implementation study — a minimum of 200 POI with the possibility of 400 POI across Australia would ensure greater competition in backhaul, and as a result, lower prices for consumers across the board.

The telco was also critical of the two-week time period the Australian Competition and Consumer Commission along with NBN Co gave to respond to the paper, describing it as "manifestly inadequate". Submissions on the paper are due today.

Optus' response was echoed by Turnbull.

"This hasty process has created regulatory uncertainty for investors in backhaul — particularly in rural and regional areas — which can only reduce capital spending and push up prices," Turnbull said in a statement.

"The National Broadband Network's plan to limit the number of points of interconnect on its network will strand hundreds of millions of dollars of existing private investment in fibre links between Australian towns and cities," he added. "The NBN's proposal will bypass infrastructure that has already been built by private companies. These links will be excluded from carrying fixed line traffic if the NBN's plans go ahead.

"Not surprisingly the owners of these networks have demanded that the NBN offer compensation."

Turnbull said the discussion paper underlined the Coalition's calls for a cost-benefit analysis of the $43 billion NBN project.

NBN Co was contacted for comment but had not responded at the time of writing.

A consortium of greenfield fibre providers has also asked for clarity around the extent of the NBN's coverage.

Topics: Government, Broadband, Government AU, Telcos, Optus, NBN

About

Armed with a degree in Computer Science and a Masters in Journalism, Josh keeps a close eye on the telecommunications industry, the National Broadband Network, and all the goings on in government IT.

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3 comments
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  • There's nothing in Optus comments that aren't already in the report released by NBN - go read it, they talk about the issues with both small and large numbers of interconnects.
    And think about it, Optus wants as many Interconnects as possible.The larger the number, the more expense to provide services, and the less competition from the smaller guys. Only a handfull of ISP's can afford to provision hundreds of POI's.
    gr1f
  • Hi gr1f,

    NBN Co did outline a number of different proposed POIs in the discussion but the one it prefers (the 209 total) is the one Optus and Turnbull are criticising. If you're referring to the implementation study, that's what Optus was pointing to in the comments I included in this article.

    Cheers,

    Josh Taylor
    Josh Taylor
  • Hi Josh, actually if you read it carefully, much of Optus' criticism is directed at option 1 (of the 4 proposed by the NBN Co. in the draft), although there is significant contention regarding the recommendation of option 4.

    Whilst you are correct that the thrust of thier focus is on pushing for option 2, as are a number of other carriers*, the undelying facts they are making are directed at negating option 1.

    Considering the geatest challenge to competition is the future expansion of capacity and one of the greatest impediments to economic efficency is overbuild, when one fathoms that a single strand of fibre is capable of over 600Gbps ( see http://arstechnica.com/science/news/2009/02/terabit-ethernet-becomes-a-photonic-possibility.ars), it tends to accentuate the method by which the long term interests of end users(LTIE) are to be realised.

    In regards to Malcolm Turnbull, although he might fool some people by claiming he is interested in saving taxpayers dollars, the reality is he also has an onus to ensure competition policy is enacted in such a way so as to be of long term benefit to the consumer, as per its mandate. That means he needs to be responsible enough to look beyond his own ideologically based concept of competition for the sake of competition, as his ideology is based upon an inherent logical fallacy.

    Indeed, i doubt very much Malcolm has the cognitive capacity to comprehend that it is regulation, not the type of ownership, that has and will continue to ensure competitive outcomes for consumers in more than just the communications sector.
    (* here is a list of submissions http://www.accc.gov.au/content/index.phtml/itemId/952292)
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