As the national broadband network process notionally draws closer to its endgame next month, we’re further away than ever from resolving the issues the National Broadband Network rollout is supposed to address.
CommsDay has reported rumours that the NBN tender process will be “rebooted” over the unresolved issue of access to Telstra infrastructure. A new process would give Telstra the opportunity to re-enter an NBN tender properly. The Opposition says its sources close to the process have confirmed it is in trouble, although they wonder whether Conroy himself is responsible for the speculation, in order to soften the announcement of its collapse. Speculation is unlikely to have come from within the Department of Broadband itself, where the process has been conducted under heavy security.
Estimates this week gave some further insight into the exclusion of Telstra. Around the time it was turfed out, Telstra and some of its media cheerleaders peddled the line that its exclusion was unfair because, even though there was a requirement for a small business plan in the tender, there was no requirement that it be submitted simultaneously with the tender, and Telstra had submitted a plan a few days after lodging its own half-ars-d tender at the death.
At Estimates, Departmental officials — while declining to reveal their exact legal advice — confirmed that the five different sets of advice they had received about the tender all agreed that Telstra’s claim was, in short, bollocks. Telstra’s executive team might give some thought to the important difference between the legal advice you want to get, which can be anything you like, and the legal advice you need to get, which should be right.
Nick Minchin has criticised the exclusion for Telstra on the basis of what he calls a technicality. This is more than a tad hypocritical as it was the Howard Government itself that in 2002 imposed mandatory Small and Medium Enterprise requirements on all ICT contracts worth more than $20m. Politicians of all stripes obsessively observe a form of political correctness about small business, which can do no wrong in their eyes, and will do anything to avoid the suggestion that Governments are not bending over backwards to help them. The SME requirement in the NBN tender, like the Howard Government’s mandatory requirements, was part of this political correctness.
The lack of participation by Telstra might, as rumours suggest, create a compensation issue around the need to use Telstra infrastructure to reach from the node to home users. Broadband bureaucrats won’t be the first or the last to struggle with this issue. Fifteen years after the Hilmer Report heralded a new era in competition policy, Australia still has not satisfactorily resolved the issue of infrastructure access, either in terms of process — it’s a litigation war zone — or overall policy.
The basic Hilmer approach was that Governments should regulate access by third parties to monopoly infrastructure, as long as the infrastructure owner could charge a fair price. When monopoly infrastructure was mainly owned by Government enterprises, the basic injustice of demanding that infrastructure owners surrender access to a competitor on terms determined by a regulator or a court was easily overlooked.
But the regime — as we’ve seen in the stoush between Fortescue and BHP/Rio in the Pilbara — applies to private infrastructure too. And what a fair price is for access has been at the heart of disputes between Telstra and the ACCC for years. In the event a broadband rollout occurs without Telstra, it’ll be at the heart of disputes over that, too. Telstra’s idea of a fair price is one that gouges its competitors.
The departure of Sol Trujillo won’t change that. In a little-reported speech to the National Press Club this week, David Quilty, who replaced Phil Burgess at Telstra, gave a good idea of Telstra’s thinking. Quilty complained about the telecommunications infrastructure regime that “incented” (that’s SO not a real word, David) its competitors to use Telstra’s infrastructure rather than build their own. He was kind enough to omit his own involvement in the development of that regime as Richard Alston’s chief of staff, but the majority of his listeners wouldn’t have needed reminding of that.
Quilty wanted to see “regulatory overreach” curbed and a more pro-investment regime put in place — code for discouraging Telstra’s competitors from using its infrastructure. Quilty also argued the merits of Telstra’s access pricing model over the ACCC’s, and declared that Telstra would be taking its bat and ball and going off to organise its own “independent scrutiny” of its and the ACCC’s models. Memo to Telstra — something’s not independent if you’re in charge of it.
Despite Quilty’s emphasis on “working constructively”, this is more of the unconditional surrender approach that has marked the Trujillo-era Telstra’s demands of government. But they’re not alone in that approach. The rival Terria NBN bid is based on an outright ban on anyone else — ie Telstra — from operating a competing network.
The only real resolution to the problem of infrastructure access pricing is to remove the incentive for the infrastructure owner to gouge competitors by ensuring they’re not competing with them. But structural separation, controversial enough if applied to Telstra, isn’t a viable proposition in other infrastructure like mining operations where in effect it would punish vertically-integrated companies for investing in infrastructure by forcing them to split. Chris Bowen is supposed to be developing a paper to address infrastructure access issues, but it is yet to emerge.
The other problem that will bedevil the NBN is that regional and rural broadband isn’t commercially viable but metropolitan broadband is. But the Government’s 98% population target for the NBN links them together. The previous Government had the right idea in funding a separate rural/regional broadband service, won by the OPEL consortium. Conroy killed the OPEL tender last year, a decision the Coalition continues to criticise. They’re right. Even assuming all goes miraculously well with the NBN tender, rural and regional communities won’t get broadband for years after OPEL could have provided it.
In fact by the time a successful tenderer starts rolling out what would in effect be a 2005 broadband solution, it might look rather out of date. Telstra’s NextG network — while doubtless overhyped by Telstra — suggests wireless might become the preferred platform for individual users. Businesses will always need a fibre-based network for heavy data traffic and security, but, if one bravely assumes spectrum problems can be resolved, portability might become the killer app for personal broadband use, undermining the commercial case for the NBN.
While the budget contained tens of billions in surpluses, the expenditure of $4.7b on a broadband network looked fair enough. Now that infrastructure investment funds are suddenly scarce, the investment of that amount in what might turn out to be a heavily-litigated and ultimately inferior network suddenly looks more problematic.