NBN HFC agreements could give Telstra a 'head start': ACCC

The ACCC has put in place a number of measures to ensure the agreements between NBN and Telstra on HFC network construction and upkeep do not give Telstra an unfair competitive advantage.
Written by Corinne Reichert, Contributor

The Australian Competition and Consumer Commission (ACCC) has published its report on the competition issues of the contract between Telstra and the National Broadband Network (NBN) company for the former to construct and upkeep the hybrid fibre-coaxial (HFC) network, saying it could give Telstra a "head start" in selling NBN services, preferential service activation and fault handling, and more insight into the rollout.

In December, NBN signed a memorandum of understanding that saw Telstra pick up design, engineering, procuring, construction, and maintenance within the HFC network, as well as undertaking to upgrade the HFC network to DOCSIS 3.1; and in April, NBN awarded Telstra a AU$1.6 billion contract to provide design and management services of the HFC network until 2020.

"The ACCC recognises that the purpose of the parties entering into the agreements is to bring forward the rollout of the NBN. However, while it may lead to the faster deployment of the NBN, the agreements potentially introduce impediments to the emergence of more competitive fixed-broadband markets, which is what the NBN is expected to deliver. In this context, it is important to ensure NBN Co's ongoing compliance with its statutory non-discrimination obligations," the NBN Co-Telstra service delivery agreements: ACCC assessment [PDF] said.

"In the ACCC's view, if this was to occur, Telstra would be in a much better position relative to its competitors to offer superfast broadband services, better target its marketing and lower its customer acquisition costs, and better tailor its customer experience on the NBN relative to its rivals.

"The ACCC's view is that the agreements could still pose a significant risk of distorting or otherwise lessening competition in the supply of broadband services unless all NBN access seekers are equally able to plan the commencement of their services over the NBN, and unless Telstra carries out the activation and assurance work for NBN Co in a way that does not disadvantage other NBN access seekers."

As a result of its report, the ACCC made three recommendations that Telstra and NBN have agreed to: NBN ensuring that HFC connections are simultaneously made available to all retail service providers to avoid Telstra getting a "head start" after it installs them; NBN de-identifying activation and repair work that is allocated be completed by Telstra; and Telstra requiring its field workers to follow non-discrimination rules when attending end-user premises as well as supplying "white label" activation and repair services to NBN.

"The ACCC is pleased at the progress made to date in terms of these agreements, but there's still work to do to address our remaining concerns," ACCC Chairman Rod Sims said.

"We will continue to monitor the relationship between NBN Co and Telstra, and ensure that Telstra's contracts with NBN Co do not give it an advantage over its competitors in providing superfast broadband services over the NBN."

NBN welcomed the report, saying it would fulfil the recommendations put in place by the regulator.

"NBN welcomes the ACCC's report into our service delivery agreements with Telstra, and is pleased to note the ACCC has acknowledged our proposed measures will mitigate risks to competition," an NBN spokesperson said.

"NBN will continue to work with the ACCC as well as all access seekers and retail service providers as we continue to roll out our HFC network."

Internet Australia said the ACCC's report, "further emphasises the need for NBN to develop fair and equitable means whereby RSPs and their customers are better served and which encourage and facilitate increased competition in the provision of fast and affordable broadband."

"Telstra is both an NBN construction partner and an RSP," Internet Australia CEO Laurie Patton said.

"The ACCC is appropriately concerned to ensure a level playing field among all the RSPs."

In December, the broadband company said it would have been too difficult for NBN and Telstra to coordinate on each building out the HFC network, with services possibly disrupted due to the necessary node splits. NBN therefore took a step back to hand over management work to Telstra.

In July, NBN also announced signing multi-technology integrated master agreements (MIMAs) with Lend Lease, Broadspectrum, Fulton Hogan, Downer, ISGM, and BSA to carry out HFC construction from August in a deal that is understood to be worth around AU$300 million for the first year.

NBN last week revealed in its 2017 Corporate Plan that it would be replacing up to 13 percent of Australian premises that were slated to receive HFC with fibre to the node (FttN), despite the technologies having the same cost per premises (CPP), with NBN CTO Dennis Steiger calling the process "reallocation" due to having more knowledge of those network footprints.

Under NBN's base case, 2.8 million premises, or 24 percent, will be covered by HFC.

So far, NBN has launched two HFC networks -- in Redcliffe, Queensland, in June and Ocean Reef, Western Australia, in July.

While NBN said users will be able to order 100Mbps download and 40Mbps upload services from RSPs, a trial of the technology in February saw users attain average speeds of 84Mbps down/33Mbps up.

NBN last month said it will launch DOCSIS 3.1 services, allowing for speeds of up to 1Gbps/100Mbps, on its HFC network during the second half of 2017, while Full-Duplex DOCSIS 3.1 could reach up to 10/10Gbps post-2020.

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