Competitors fear Telstra HFC NBN coup

A coalition of Telstra's retail competitors have expressed concern that Telstra is going to be able to add customers on the HFC network before it officially becomes owned by NBN Co.

Allowing NBN Co to build lead-ins to premises it will connect to the hybrid fibre-coaxial (HFC) network while that network is still owned by Telstra will give the company a competitive advantage, the Competitive Carriers Coalition (CCC) has warned.

In December, the government sought feedback on proposed changes to the Telstra migration plan as part of the National Broadband Network (NBN) rollout to account for the change in the definitive agreements between Telstra and NBN Co and the government, which now allows NBN Co to take ownership of the copper and HFC networks to use in the "multi-technology mix" NBN.

The proposed changes to the migration plan have caused concern for the alliance of telecommunications retailers in direct competition with Telstra over the possibility for the company to scoop up all potential HFC customers while NBN Co is preparing the HFC network to be added to the NBN.

In total, the HFC networks owned by Telstra and Optus in Sydney, Brisbane, and Melbourne could cover 3.27 million premises. It is estimated that around 1.5 million of the premises "passed" by the network do not have a lead-in to allow that premises to connect to the HFC network today.

This means that before NBN Co begins switching over the networks in early 2016, the company will need to install lead-ins for those 1.5 million premises.

The CCC said in its submission to the government on the proposed changes that if NBN Co is undertaking "pre-ownership transfer construction work" on the HFC network, there would be a risk to competition.

"It would, in effect, mean the taxpayer was funding an expansion of Telstra's monopoly addressable market for HFC-based services and service bundles. This is at odds with the policy intention, and contrary to the objective of sustainable competition," the CCC said.

"It would also distort the market once the ownership transfer had been completed, because Telstra would have enjoyed a 'running start' in terms of building market share."

The revised migration plan explicitly prohibits Telstra from accepting an order to supply HFC services if it is outside of the network footprint, and any new customer it adds on the HFC network in the interim period must be on a flexible plan with the ability to switch providers once migrated to the NBN.

The Competitive Carriers Coalition said this isn't enough.

"If Telstra is allowed to sign retail customers to connections built by NBN Co before other RSPs [retail service providers], there is no doubt it will benefit from being the incumbent service provider to those locations, and enjoy high market share in those locations for years to come," the CCC said.

"Other RSPs, rather than starting on a level playing field with NBN customers, would have to displace Telstra as the incumbent retailer from customers that Telstra cannot today access based on its own sunk investment."

Telstra could "cement its incumbency" by offering broadband bundled with content on Foxtel, the CCC said, stating that lead-in work should only be completed after Telstra transfers ownership of the HFC network to NBN Co.

In its own submission, iiNet argued that the government should not use the amended migration plans to relax rules about information sharing between Telstra Wholesale and NBN Co. iiNet argued that there should be "effective measures" to ensure that Telstra Retail isn't handed a competitive advantage in knowing where the NBN is rolling out in advance of Telstra's competitors.