Telcos slam NBN 'scope creep' in Vertigan Bill

NBN should not be allowed to expand into delivering other goods and services, with telcos saying line-of-business requirements are 'a keystone element of the regime'.
Written by Corinne Reichert, Contributor on

Telstra, Optus, Macquarie Telecom, and the Competitive Carriers Coalition (CCC) have slammed the Australian government's Vertigan Review Bill, saying it allows for too much "scope creep" on the part of the National Broadband Network (NBN) company into other industries.

The Telecommunications Legislation Amendment (Access Regime and NBN Companies) Bill 2015 [PDF] was registered in the House of Representatives on December 2, 2015, as a result of the six reports undertaken as part of the Vertigan Review into the NBN.

"The Telecommunications Legislation Amendment (Access Regime and NBN Companies Bill) 2015 will implement, in part, the government's response to the independent cost-benefit analysis and review of regulatory arrangements for the National Broadband Network undertaken by the panel of experts headed by Dr Michael Vertigan AC," the explanatory memorandum for the Bill [PDF] said.

"The government response indicated that the government would introduce legislation in two tranches. This Bill contains measures that respond to recommendations made by the Vertigan panel to fine-tune the operation of the telecommunications access regime and NBN Co's line-of-business obligations."

Under Section 22B of the Bill, the Governor-General is allowed, thanks to s101 of the NBN Companies Act, to specify circumstances under which NBN is not restricted from supplying wholesale non-communications goods and services, and undertaking investment activities.

"The statutory review noted that there could be developments that warrant modifications of the line-of-business restrictions, and a regulation-making power would allow such developments to be dealt with flexibility without needing to amend the NBN Companies Act," the explanatory memorandum notes.

While the submissions from each telco or group varied, they all agreed on one point: That the line-of-business requirement is necessary to protect the market.

"Clear, fixed boundaries around NBN Co's permitted scope of business are needed for all retail service providers (RSPs) to make the substantial investment required to retool themselves for this new model," Telstra argued in its submission.

"Investment certainty is undermined if there is a risk that NBN Co, with its advantages as a government-owned and funded entity, could encroach into areas of competitive activity."

Telstra pointed out that submissions made to the Vertigan Review, predating the Bill, also agreed that NBN should not be allowed scope creep, making it surprising that the government had not considered these prior to writing the legislation.

"NBN Co should continue to be prevented from supplying content services, non-communications services, and non-communications goods except where the goods are used to supply an eligible communications service," TPG had said at the time.

"NBN Co should remain focused on the supply of telecoms services at wholesale. The status quo should be maintained," Vodafone had added.

Optus' submission on the Bill said that NBN should be focusing on rolling out the NBN, suggesting that adding other activities to its business would distract from this.

"NBN Co was established to specifically address a market failure relating to the provisions of last mile access for high-speed broadband services; it should remain focused on that purpose," Optus said.

The CCC, which is made up of several non-dominant Australian telcos, agreed that NBN had been formed for a specific purpose, and should not go beyond this, also using its submission as a platform to criticise NBN's past dealings with Telstra.

"NBN was created for a very specific reason and to provide very specific services. Once it has rolled out in a location, NBN enjoys a powerful monopoly over access to fixed-line communications services to consumers in those locations," the CCC said.

"It was Telstra's systematic exploitation of this power to the detriment of consumers and competition that led to the decision to vest this power in an all-new, wholesale-only network operator. The CCC believes NBN should remain strictly focused on the purpose for which it was created: Addressing areas of market failure in wholesale markets."

Optus also pointed out that NBN is "already pushing the boundaries of its remit" by reportedly looking to develop a POI backhaul service, implement new satellite services, and develop an in-flight communications service in collaboration with airlines.

While Optus stated that "it is unclear why the proposed change is required", Telstra shed some light on why NBN would be looking to expand its remit, pointing towards reports that it needs new sources of revenue in order to fill the gap between government funding and the funding required to roll out its network.

Macquarie Telecom, for its part, said that more information is needed before it can properly judge whether expanding NBN's lines of business is reasonable and necessary.

"If NBN is so constrained that it is, for example, unable to dispose of earth-moving equipment or excess fibre, the restrictions are clearly excessive," it said.

"However, the rationale for the line-of-business restrictions -- to constrain NBN from entering and undermining competitive markets -- remains a keystone element of the regime. Further information about the problem NBN presently faces is necessary before a judgement can be made about the proposed amendments."

Telstra suggested that any changes to NBN's remit should be made using legislative amendments in the future -- or, alternatively, allowing for only minor adjustments to its remit, rather than the "large, open-ended power as is proposed in the amending Bill".

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; provides an exemption for NBN's non-discrimination obligations for trials of services "to promote innovation"; 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.

The draft legislation also 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.

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

Optus, Macquarie, and the CCC also criticised the section lifting NBN's non-discrimination obligations under s152F in regards to pilots and trials of technology.

The Vertigan Review was commissioned at the end of 2013 and undertaken in 2014.

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