Turnbull doesn't need to pass legislation to change the NBN

One of the commonly held misconceptions around the potential change of government is that the Coalition would need to get legislation through the parliament to make any major changes to the NBN rollout.
Written by Josh Taylor, Contributor

As the Australian election campaign draws to a close and it looks increasingly likely that the Coalition will win the election on Saturday, fans of the National Broadband Network (NBN) in its current fibre-to-the-premises design are going through their five stages of grief over the likely changes coming to the project.

At first, it was denial. The Coalition won't win the election, they said; Turnbull's "fraudband" plan will be the end of the party's chances. Clearly, as much as Labor has tried to make this election all about broadband, the NBN will not be the deciding factor for most on Saturday.

Then it was anger. You only really need to read the comments section of any article on the NBN that mentions Turnbull to witness that factor.

Now we're into bargaining. People on Facebook or Twitter over the past couple of weeks have frequently suggested that they have hope that the NBN will remain fibre to the premises because under a Coalition government, the would-be Communications Minister Malcolm Turnbull would need to get legislation passed through parliament, and Labor and the Greens might seek to block it in the Senate.

But the notion that fibre to the premises is some sort of legislated guarantee is more fantasy than reality. While there were a number of pieces of legislation that the government enacted to create the competition and regulatory environment for the NBN and structurally separate Telstra, there is nothing preventing a change in the network design.

The two biggest pieces of legislation that the Labor government worked to get through parliament were amendments around competition law, which required that any network provider building a new broadband network in Australia must be a wholesale provider only, with access terms in line with NBN Co at its wholesale price.

The so-called cherry-picking law was put in place so that fibre providers wouldn't build new networks in places where it is profitable and then be able to undercut NBN Co on the wholesale price, which NBN Co couldn't compete with because there is cross-subsidisation built into the network such that while it is more costly to build the network out to regional areas, people in those areas will still pay the same price as people in metropolitan areas.

The Australian Competition and Consumer Commission (ACCC) last year made a final access determination that the maximum that high-speed broadband wholesale providers like Openetworks could charge for services would be AU$27 per month.

I had originally thought that this would be the only piece of legislation that Turnbull would be required to repeal, if, as he promised, infrastructure-based competition would be allowed to return under a Coalition government. But it seems as though he has all but adopted Labor's approach in this area.

He said yesterday that he is in favour of removing the "barriers to the construction of non-NBN wholesale access networks", but that the competitive networks would need to be available to ISPs on a non-discriminatory term, with wholesale prices equivalent to NBN Co's wholesale cap price.

The other method that Turnbull could use to overrule this legislation is that, like former Communications Minister Stephen Conroy did with TransACT and Telstra, he could, as minister, make exempt certain providers from the legislation.

Allowing new fibre providers to build rival networks presents an interesting conundrum for Turnbull. On the one hand, he has said constantly that he wants to return to allowing infrastructure-based competition, and wants providers like Openetworks to go out and build new networks to compete with the NBN, but they will ultimately target those high-density locations where it is most profitable for them to do so, leaving NBN Co to pick up the slack in the areas that are the least profitable.

If we get to the stage where the NBN has very few customers in the cities and most of its customers in regional locations, it is unclear how the government under the Coalition would begin making its return on investment in the NBN. On the other hand, if an area is deemed to already be adequately serviced, then perhaps NBN Co may skip that area and save on the cost of the upgrade.

Despite the lack of legislation blocking a change in the NBN design, there are two major roadblocks to changing the NBN rollout. Firstly, the existing construction contracts in place with partners like Silcar. But NBN Co rationally only made these contracts run two years at most, with the last current agreement set to expire later in 2014. Turnbull has already indicated that it will take about a year to implement his changes to the NBN. Depending on what method of construction NBN Co under the Coalition would decide to take, these exiting construction partners may be recruited to continue the work with a fibre-to-the-node design, or the company could recruit partners like Telstra to take over large parts of construction.

That brings us to the second big roadblock: The Telstra deal, and the legislation around the structural separation of Telstra. Although the Coalition is currently in favour of keeping the company structurally separated, it's still unclear exactly what Telstra will be gunning for in negotiations with a Coalition government.

Turnbull has repeatedly said that he doesn't expect to pay any more than the current AU$11 billion agreement, which would need to be altered in order to obtain the copper line from the node to each premises under his proposed plan. Leaving aside the question of whether Telstra will ask for more money, if Telstra does agree to do it without asking for more money, what would be the non-monetary benefits for it?

Would the company be brought in to build part of the network, or would it be allowed to upgrade its network in the profitable areas to compete against the NBN?

Turnbull said on Tuesday that "transparency will be the new watchword of the NBN Co" if the Coalition wins government, so these are the questions that will need to be answered very quickly after the strategic review of NBN Co, the proposed independent audit, and the cost-benefit analysis have been completed after the election.

It's inevitable that NBN fans will no doubt reach depression if the Coalition wins on Saturday, but to truly reach the final stage of acceptance, Turnbull will need to quickly prove that his talk of being able to offer fast broadband to Australia in a quicker and more affordable way has been more than just fast talk.

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