“It is a curiously inadequate document,” wrote Malcolm Turnbull of the NBN Co Business Case Summary. He’s right. A business case that doesn’t, y’know, present a case for the business, supported by proper numbers? WTF?
At least the document released yesterday – only 36 pages, not the Gillard-announced 50 – sketches out broad timelines for NBN Co’s network rollout and a roadmap showing the order in which retail service providers (RSPs) can expect the company’s wholesale network products to come online. There’s a handy summary at ZDNet.com.au.
It also highlights the contentious issue of Points of Interconnect (POI) – the places where the NBN’s network is connected to the RSP’s networks and then out to the rest of the universe. The final decision on the number and location of these POIs is subject to ACCC review, a process that’s expected to be completed by 30 November.
“Irrespective of the decision on the POI the NBN will realise a return higher than the long term average government bond rate, the decision itself has significant implications for the structure of the NBN and the telecommunications industry,” the document says in a gloriously ungrammatical sentence.
“Significant implications” is putting it mildly.
On Telstra’s copper network there are hundreds of POIs. If you’re an RSP – a retail internet service provider (ISP) – then on top of Telstra’s wholesale charge for using the copper, you also have to pay for a backhaul link from every POI where you have customers to your own data centres. That means dealing with someone like NextGen, AAPT, PIPE Networks, Optus or perhaps Telstra itself.
NBN Co’s proposal is for just 14 POIs in major cities. Major ISPs already have data centres in those cities, so they’d just need short backhaul links to those POIs rather than, potentially, dozens or hundreds around the country. In effect, the rest of the backhaul would be provided by NBN Co itself — and presumably NBN Co’s wholesale charge to use its network would be that little bit higher.
Is this reduced number of POIs good for competition? Good for the end consumer? The answer depends on who you ask.
If you’re in the business of providing backhaul, you probably won’t like NBN Co appearing as a competitor and, by bundling backhaul charges with network access charges, killing off your business opportunities. Major ISPs might well be in the same position. They may have already made significant long-term investment in their own backhaul and are probably selling it on to the smaller ISPs and other businesses.
If you’re a small ISP — and there’s around 600 registered ISPs in Australia — and serve only one city or state, you may not need any backhaul at all. You may well like the idea of this simplified network, because it could make it easier for you to expand your territory. Depending on the price, of course.
But we don’t have those prices yet.
“NBN Co’s announced intention is to utilise a special access undertaking approved by the ACCC to determine pricing for NBN,” the document says. “The special access undertaking cannot be finalised and lodged with the ACCC until key policy matters such as the number and location of POIs and pricing of products and services are finalised.”
That and the relevant legislation is passed, such as the Telstra break-up and the NBN Companies and Access Arrangements Bill.
Is the reduced number of POIs good for the NBN’s bottom line? The answer is presumably ‘yes’, or they wouldn’t have suggested it.
“If the Government elects to mandate a larger number of POIs [and] that solution does not promote the same intensity of retail competition as the 14-POI offering, NBN Co projects that its IRR could decline by 50-80 basis points,” they write.
For what it’s worth, the document was turned into a PDF file at 1.57am yesterday morning by user “pmo591”. Whoever that is.