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ACCC decides to regulate ADSL despite NBN rollout

The ACCC will continue regulating ADSL services for the next five years despite the increasing use of NBN and mobile services for internet access.
Written by Corinne Reichert, Contributor

The Australian Competition and Consumer Commission (ACCC) has announced a draft decision saying it will continue regulating wholesale ADSL internet services for the next five years in order to ensure any-to-any connectivity, encourage the economically efficient use of and investment in fixed-line infrastructure, and promote competition -- particularly in the face of Telstra's continuing dominance.

The ACCC in July announced its inquiry into deregulating ADSL services, saying it should reconsider the regulation considering the Australian government's National Broadband Network (NBN) rollout, the increasing use of mobile data rather than fixed-line services, and the higher volumes of data being downloaded.

"Telstra retains its dominant position in both the wholesale and retail markets for the supply of ADSL fixed-line broadband services on a national level," ACCC Commissioner Cristina Cifuentes said.

"Continuing regulation will ensure network providers continue to have access to Telstra's copper network at reasonable prices. This will encourage them to continue competing in the retail market to develop and offer different ADSL broadband products to meet the needs of customers as they prepare to shift to the NBN."

"Telstra, as the vertically integrated national supplier, has the incentive and ability to favour its own operations to maintain and grow its overall market share. Declaring the wholesale ADSL service will limit Telstra's ability to do so," the Wholesale ADSL service declaration inquiry: Draft decision [PDF] added.

In regards to the issue of competition, the ACCC revealed that Optus, Vocus Communications, and Macquarie Telecom all made submissions arguing that Telstra is dominant in the retail and wholesale markets, and this dominance could be transferred over to the NBN once rolled out.

"Optus and Macquarie noted that ... Telstra has a wholesale market share of more than 47 percent in relation to wholesale services delivered over the fibre-to-the-premises (FttP) footprint, rising to more than 58 percent in the early fibre-to the node (FttN) rollout footprint," the ACCC said.

"Optus submitted that market power in the provision of ADSL-based broadband is easily transferrable across services supplied over the NBN using FttN/B technologies, due to the use of ADSL-VDSL modems that enable 'automatic' migration of end users.

"Optus also considered that this, combined with Telstra's central role in setting the migration rules and processes, enables Telstra to gain and hold copper-based broadband connections across to the NBN."

The ACCC agreed last month that the AU$1.6 billion contract between Telstra and NBN to construct and upkeep NBN's hybrid fibre-coaxial (HFC) network could give Telstra a "head start" in selling NBN services, preferential service activation and fault handling, and more insight into the rollout.

Telstra and Exetel both argued conversely that there is a "high degree of competition", with Telstra saying regulation could be removed from areas where there is choice between all four of the largest infrastructure providers -- Telstra, Optus, TPG, and Vocus -- and where non-Telstra players have a combined market share of 30 percent.

In regards to encouraging the economically efficient use of and investment in ADSL infrastructure, Optus argued that due to the NBN rollout, absent regulation Telstra would "likely increase the cost of access, thereby limiting the efficient use of existing ADSL-based broadband services".

"The ACCC considers that declaration of the wholesale ADSL service is likely to encourage the economically efficient use of, and the economically efficient investment in, infrastructure," the regulator decided.

"In particular, declaration would not raise any concerns about technical feasibility in the supply of the wholesale ADSL service, given that Telstra currently supplies and charges for the service."

The regulator added that fixed-wireless and satellite broadband services are not a good substitute for fixed-line services, as the expense of plans and data inclusions "are not comparable".

The ACCC is accepting submissions on its draft decision until November 14, with a final decision due early next year.

In July, the ACCC similarly made the final decision to regulate wholesale super-fast broadband service (SBAS) access for the next five years, declaring all pre-2011 non-NBN fibre access networks with speeds of more than 25Mbps.

SBAS services include FttP, FttN, fibre-to-the-basement (FttB), fibre-to-the-distribution-point (FttDP), and HFC networks, with the ACCC excluding satellite, fixed-wireless, and mobile broadband services from the declaration.

The ACCC made the inquiry in response to concerns raised by the Vertigan Review that there was the possibility of smaller monopolies and a lack of competition occurring outside of the federal government's NBN to provide access to high-speed broadband networks.

Under the decision, the ACCC set interim price and non-price terms and conditions that are applicable for the next 12 months. The ACCC will also consider compliance costs over the year.

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