Competition guided by Telstra's heavy hand

What if Shell, Caltex, Mobil and all the other petroleum giants decided tomorrow to stop selling unleaded, and announced that they would only manufacture and sell LPG from now on?

Chaos would, of course, ensue — as would the anger of millions of livid motorists demanding the companies retract the decision or cover the cost of converting vehicles purchased on the assumption that the appropriate petrol would always be available.

This is pretty much what happened with Telstra this week, as the telco's decision to introduce Remote Integrated Multiplexer (RIM) equipment — which increases the number of services an exchange can deliver over existing lines — into its Deakin, ACT exchange brought into sharp focus the dangers of Telstra's continuing monopoly over the country's local loop.

RIMs, aka digital loop carriers, are useful for increasing the density of services that can be delivered from an exchange (in this case, the politician-heavy area immediately west of Parliament House). However, the configuration changes they introduce — essentially, moving the analog-to-digital conversion point closer to the customer so a higher volume of digital data can be bundled over existing copper lines — will apparently render obsolete existing DSLAMs installed at that exchange.

Telstra, of course, won't make the change without ensuring continuity of service for its own customers. Though, other ISPs won't be so lucky: the move is an inconvenience for Internode, TPG, iiNet and Optus, all of which have installed their own ADSL2+ gear in the Deakin exchange. Customers connected to those nodes will have to either wait until their ISPs reconfigure or replace their equipment, start reselling Telstra's ADSL2+, or switch to Telstra's uncompetitive ASDL2+ services simply so they can stay online.

Telstra can return its competitors back to square one, picking off customers while the competing ISPs scramble to regain their footing.

The experience in Deakin has ominous implications for the state of play in the local exchange. Simply put, installing RIMs in any exchange means Telstra can return its competitors in any such exchange back to square one, picking off customers while the competing ISPs scramble to regain their footing in those exchanges.

This result is a punishing blow for choice in Australian broadband and — although we are only talking about one exchange at the moment — a harbinger of worrying times ahead. Little wonder that the chronically anti-Telstra Competitive Carriers Coalition was all over the announcement, branding the whole fiasco an "anti-competitive situation" and calling for immediate ACCC intervention.

While the ACCC can intervene in cases of anti-competitive behaviour, the troubling thought here is that the current situation is occasioned by Telstra simply upgrading its local loop to cope with increased demand — or, at least, that's what Telstra is sure to argue. An ACCC intervention, or at least one blocking the RIM move, could simply disadvantage customers another way.

This incident highlights the ongoing risks of placing the entire future of ADSL2+ in Telstra's hands, but things being as they are there seem to be few viable alternatives for competitors. Fibre would seem to be one way of shifting the bottleneck out of the exchanges, yet with Telstra out of the running for the NBN there is little incentive for the carrier to move in this direction at anything but its own pace.

The NBN would resolve the situation by shifting the bottleneck away from the local exchanges — just as cars that run on solar power alone would be a solution for the suddenly unleaded-deprived automobiles I mentioned above. However, like mass-market solar-powered vehicles, an actual, real, working NBN is still so far away that it's irrelevant to the discussion at hand. All this event does is reinforce the argument that Australian broadband is better off without Telstra's involvement.

With Telstra out of the running for the NBN there is little incentive for the carrier to boost exchange fibre at anything but its own pace.

Those of you with intimate technical knowledge of the systems at hand may have ideas about how this impasse could be resolved — if so, please share them below. At face value, however, it appears that Telstra has once again shown that competition in Australian broadband will only happen as, when and how it allows.

Telstra supporters often chide competitors for under-investing in their own solutions — but how can one blame them? Competitors simply do not have the infrastructure control — or, it is now clear, the infrastructure certainty — to justify broad alternative investments that can be nixed at Telstra's whim. In Deakin, they find themselves at an impasse and reliant on the historically slow, minimally effective intervention of regulators.

One imagines the architects of competition policy, now most of a decade and a half ago, would be rolling in their graves — or their armchairs, as the case may be. Is this really how broadband competition is supposed to work?