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NBN Co deals foster wireless doublespeak

Optus' recently revealed agreement to talk nicely about the NBN for the next 15 years reinforces the lengths to which NBN Co will go to ensure its network is built in a protective, competition-free bubble. But as ever more-onerous market protections come to light, we have to ask: is NBN Co tilting the field too far in its own favour? And could its caution compromise carriers' return on their LTE investments?
Written by David Braue, Contributor

If pressed, I'd readily concede that my favourite arcade game ever is Raiden, that hyper-manic shoot-everything-that-moves space game that has accounted for more than its fair share of my lunchtime hours, dollar coins and painfully sore wrists.


(Three wise monkeys image by
Simon James, CC2.0)

As in many such games, colliding your ship with anything results in a lost life, and your replacement ship is given a few seconds' grace period in which it can move itself somewhere safe and gather a few weapons before frenetic play resumes. Sometimes, you can be pummelled several times within seconds in the heat of a particularly fierce battle.

This doesn't, of course, play well in the real world: once you throw down your glove to jump into a competitive market, you're facing unrelenting waves of competitors from the moment your feet hit the ground. Yet with today's revelation that Optus has agreed not to say anything bad about the NBN for the next 15 years, it seems our friends at NBN Co may have also been spending a bit too much time at the arcade — and are using their experiences there to flavour their negotiations in ever more-unsavoury ways.

It's not as if Optus is the first company to commit itself to a long dose of NBN Co-imposed happy gas: Telstra's similar agreement, which will see it not market its ever-faster wireless services against NBN Co's fibre for 20 years, is even more onerous because Telstra has been actively pursuing its wireless strategy as a key driver of growth across the board.

Although even long-time NBN sceptics seem to have quietened their silly arguments that the growth of wireless obviates the need for a fixed network, applying thumbscrews to the country's two largest wireless operators seems to be the result of an almost paranoid fixation, on the part of NBN Co and the government, to head off anything that could ever potentially make customers question the need for the NBN.

Sure, NBN Co needs to ensure it ends up with enough customers to make the whole project worthwhile. And sure, it would be the depths of double-crossing for Optus or Telstra to use one hand to take hundreds of millions in cash from selling one's customer base to NBN Co, while using the other to sign up those same customers to a competing service. But by stamping out even the slightest whiff of negative speak before it happens, NBN Co has created a temporary free zone in which it can build its marketing message — and it seems harder and harder to deny that something is being lost in the process. The NBN will breed a new competitive marketplace, but there has to be a point where the network will rise or fall on its own merits; if it can't withstand a few disparaging words, well, what are we to make of that?

...by stamping out even the slightest whiff of negative speak before it happens, NBN Co has created a temporary free zone in which it can build its marketing message.

One issue yet to be clarified is the scope of the agreement: does the requirement apply only to the marketing of Optus wireless services? Or will NBN Co use it to try and suppress real debate about the NBN in other fora? Optus executives, for example, regularly speak at industry conferences in appearances that are, ultimately, a form of marketing and brand-building; many in the audience are no doubt customers of the company's network, so would the company's agreement with NBN Co prohibit it from expressing concerns about the NBN roll-out?

To be safe, maybe those executives should use some sort of code when they're really trying to say something disparaging about the NBN. Perhaps they should cross their legs, right knee on top, pull on the lobe of their left ear and use the word "monkey" with unusual frequency while talking, so we know that it's opposite day and we should mentally reverse the meaning of everything they've said.

While we can speculate about the impact of these contract clauses — and the Australian Competition and Consumer Commission is doing just that, having expressed legitimate concerns they are anti-competitive — we are already seeing their effect in the type of marketing in which Telstra has been engaging in of late. Instead of pushing its emerging long-term evolution (LTE) services as an alternative to the NBN, Telstra has been very careful to stay on-message: LTE is about boosting capacity, Telstra tells us, and nothing more. Any potential fixed-line customers who decide they actually only need what LTE provides, do so at their own risk.

The wildcard in all this is VHA — which, despite losing 375,000 customers in the first half of this year, still has over 7 million customers. VHA, which has famously signed up to sell fixed-line NBN services, is also pushing into next-generation wireless services with its ongoing network upgrade.

Free from the same gag orders as Telstra and Optus, the company can — assuming it resolves its network performance issues — position itself as both supporting and competing with the NBN; the decision as to which network it promotes to customers will ultimately depend on which one offers it a higher average revenue per user and more profit.

The NBN is both necessary and far better than wireless alternatives, but a truly competitive market would rely on customers finding this out for themselves.

It's early to say just how far NBN Co's efforts to protect its network with a Raiden-esque safety bubble will go, but there are legitimate concerns about the arbitrary restriction of competition in any part of the industry. The push to consolidate customers of alternative fixed networks may have been a necessary evil, but preventing those networks' owners from doing what they do best can easily be construed as overkill. The NBN is both necessary and far better than wireless alternatives, but a truly competitive market would rely on customers finding this out for themselves; any other approach can create suspicions, however unfounded, that customers are being sold a lemon.

Even if you accept that protective quiet periods are necessary, there are also legitimate concerns about their length: 15 years for Optus and 20 years for Telstra will prevent the companies from capitalising upon the billions they will spend on LTE over the next decade or so.

I don't know whether the companies' boards worry that this will cloud their return on investment figures for 4G infrastructure spend — presumably it's a trade-off that they weighed before making their deals with NBN Co — but it certainly can't help the business case for fixed 4G services.

Instead, with these terms in place it's clear that development of LTE services will focus specifically on mobile applications — which is doubly ironic because NBN Co itself is a big fan of fixed LTE services. While NBN Co can promote fixed wireless as an alternative to fixed fibre services, its two biggest rivals cannot do the same.

Despite countless dollars poured into Raiden machines, I never managed to make it to the end of the game; stripped of whatever power-ups I had accumulated before losing a life, that protective bubble just never lasted long enough to let me get more than a few weapons and a violent butt-kicking by marauding aliens.

The NBN, it now seems, needs its bubble to last much longer — well past the supposed end of the roll-out itself, at this point. And even if we accept these restrictions as necessary evils whose spirit is based in protection of taxpayer funding, as Mike Quigley has said, they still represent yet another kick to the head of Australia's competitive communications market — and raise questions about how many other seemingly anti-competitive protections will be necessary to make the network commercially viable.

What do you think? Are these restrictions just common business sense? Or will they stop LTE from reaching its full potential in the future? Where do we draw the line between necessary and anti-competitive?

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