Telcos criticise NBN's ability to discriminate for technology trials

Optus, Macquarie Telecom, and the CCC have said the non-discrimination obligation is 'fundamental to the level playing field credentials of the NBN', including for pilots of new technology.
Written by Corinne Reichert, Contributor

The Australian government has released the submissions that telecommunications companies made in response to its Vertigan Review Bill, with several telcos having used the opportunity to argue against the section lifting the National Broadband Network (NBN) company's non-discrimination obligations in regards to pilots and trials of technology.

The Vertigan Review, commissioned at the end of 2013 and undertaken in 2014, recommended that NBN be permitted to discriminate between retail service providers (RSPs) in some cases.

Communications Minister cum Prime Minister Malcolm Turnbull tabled the first [PDF] of the panel's reports in July 2014, which focused on telecommunications access arrangements and regulation of the NBN, with some recommendations calling for NBN competition rules to be loosened.

One such recommendation would allow NBN to discriminate between RSPs in making deals, with the CCC warning at the time that this would likely favour Telstra. The panel had said that certain discrimination would be reasonable.

"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."

Only once NBN faces sufficient competition should the non-discrimination clauses be removed from the legislation entirely, the panel suggested.

The resulting legislation, however -- the Telecommunications Legislation Amendment (Access Regime and NBN Companies) Bill 2015 [PDF], which was registered in the House of Representatives in December 2015 -- simply contained a provision under Section 152F allowing for NBN's non-discrimination obligations to be lifted for trials of services in order to "promote innovation".

"The government response to the statutory review indicated that NBN Co's non-discrimination obligations would be relaxed to permit NBN Co to better conduct pilots or trials," the explanatory memorandum for the Bill [PDF] said.

"Currently, if NBN Co or a CSP [carriage service provider] wishes to test a new service or technology on the NBN, NBN Co is required in accordance with its non-discrimination obligation to make the same service or technology available to all of its customers. This can act as a practical impediment to product development and also as a disincentive to innovation, because NBN Co must put in place detailed mechanisms to maintain non-discrimination in a trial or pilot environment or a CSP with a new idea would have difficulties developing and testing it with NBN Co without involving its competitors.

"Consequently, the Bill 'switches off' the non-discrimination obligations in relation to pilots or trials, and also provides that NBN Co does not need to publish a Standard Form of Access Agreement for a pilot or trial service (because the service would not be a declared service)."

The submissions on the Bill included statements from Telstra, Optus, Macquarie Telecom, and the Competitive Carriers Coalition (CCC), which is made up of several non-dominant Australian telcos.

The latter three all objected to s152F, saying that there is no reason for this amendment to be implemented.

"Optus is sceptical of this justification; there is no evidence we are aware of that suggests the non-discrimination obligations have operated either to restrict NBN Co's product development or to discourage innovation," Optus said.

The CCC and Macquarie Telecom agreed that no pilot or trial of technology has ever been prevented under the current rules, with debate around the matter having been conducted solely by the government, its advisers, and NBN -- not any real debate by actual industry players.

"This raises grave questions in the industry about what is motivating this amendment," the CCC said.

"The present non-discrimination requirements were arrived at after extensive, constructive discussion with senators from across the chamber over an extended period. They reflect the very significant market power the NBN is in a position to exercise as it becomes the monopoly provider of fixed-line access for more and more households and businesses.

"NBN has never offered an adequate explanation or examples to show that these requirements impinge on its ability to conduct its business."

The CCC added that relaxing the non-discrimination provision would be "highly risky, unnecessary, and supported by no persuasive evidence that there is a problem in existing rules", while Optus went to far as to call the principle "fundamental" to the entire NBN project.

"Optus considers that the principle of non-discrimination is fundamental to the level playing field credentials of the NBN; it should apply as equally to pilots or trials as it does to NBN Co's ongoing service provision," Optus argued.

"Enabling NBN Co to discriminate by limiting participation in pilots or trials could give a single RSP a significant first mover advantage in the market. This could have adverse competition impacts, especially where significant systems, processes or commercial arrangements need to be put in place to bring a product or service to market."

Macquarie Telecom, meanwhile, was fixated on the amendment possibly resulting in incumbent telco Telstra being favoured by NBN in trials and pilots of new technology -- possibly why Telstra made no submission on s152F -- due to Telstra's HFC and copper networks being utilised for the NBN.

"Creating opportunities for individual access seekers to gain some unique advantage in their dealing with NBN necessarily results in a situation where incumbents and larger businesses have a greater opportunity to benefit than smaller and new entrant access seekers," Macquarie Telecom said.

"Telstra is clearly best placed to take such advantage. These risks are many times greater under a multi-technology mix approach that utilises existing Telstra infrastructure and involves Telstra in planning and rollout decisions to a much greater extent than a fibre-to-the-premise access technology approach."

Macquarie went on to call the government's rationale for the amendment "deeply concerning", judging the risks created by the Bill "too great" to be implemented.

The Vertigan Review Bill clarifies interactions for the facilities access regime; mandates that providers must give access to in-building cabling to competing service providers; allows NBN companies to dispose of surplus assets; reduces restrictions on supplying non-communications goods, services, or investments for NBN's business operations; and authorises NBN to restrict its network to certain points of interconnection and to require customers to purchase bundled NBN services in order to drive the rollout of the network, with these authorisations to cease once the NBN is built and fully operational.

The Bill also addresses several roles of the Australian Competition and Consumer Commission (ACCC), requiring the ACCC to consult with relevant parties before making interim access determinations or binding rules of conduct; to use a consistent method in making final access determinations for NBN and others; to specify its necessary and desired changes in accepting new or varied special access undertakings (SAUs); and to provide those submitting SAUs with more flexibility to respond to the changes required by the ACCC.

In addition, the draft legislation increases the probability that the ACCC can accept fixed principles provisions in new or varied SAUs, and ensures a greater consistency in SAU determinations by requiring the ACCC to have regard to its own precedents.

Optus, Macquarie Telecom, the CCC, and Telstra also argued against the "scope creep" being allowed by s22B of the Bill.

The telcos all argued against various amendments to the regulatory functions vested in the ACCC, calling them "entirely unnecessary", "counterproductive", and "a solution in search of a problem".

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