Is Splitting Up NBN the Best Option?

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Friday, October 17th, 2014
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In the absence of Labor’s full FTTP-solution, the break up of the NBN into competing entities could be the best means of expediting the long-term growth of Australia’s telecommunications infrastructure.

Newly appointed Optus chairman Paul O’Sullivan has decried the adverse impact on competition of Telstra’s heavy involvement with the NBN, and issued a call for the telecommunications giant to be structurally separated and for the NBN itself to be broken down.

Speaking at his first public appearance since his appointment to the position of chairman last month, O’Sullivan said the multi-billion dollar payments Telstra is set to receive for its contribution to the NBN pose a major threat to competition within Australia’s telecommunications sector.

“Competition is more threatened by the way the NBN is being constructed that it has ever been since competition was introduced in 1992,” he told a Trans-Tasman Business Circle lunch in Sydney.

O’Sullivan voiced his support for the recommendation made by the Vertigan Panel that the government split up the NBN into a host of vying entities so that Australian broadband users can reap the benefits of heightened competition.

The final report from the panel of experts led by Dr. Michael Vertigan AC has recommended that the government “disaggregate the NBN Co along the lines of its underlying networks where each of the satellite, fixed wireless, Hybrid Fibre Coax (HFC) and Fibre-to-the-Something (FTTx) networks would serve as the basis for a competing entity.”

The Competitive Carriers Coalition has dismissed the idea as “nothing more than rehashed, discredited theoretical arguments,” while telecommunications minister Malcolm Turnbull has stated that “now is not the time” for such reforms, as “breaking up NBN Co would distract its management and delay the provision of high speed broadband to all Australians.”

The Vertigan Panel’s recommendation has found a seemingly unlikely supporter, however, in the form of Gary McLaren, who served as chief technology officer with NBN Co for nearly five years, chiefly during the period when Labor was pursuing its Fibre-to-the-Premises (FTTP) policy initiative.

In an opinion piece written for Business Spectator, McClaren said Australia can be justifiably referred to as a “Broadband Backwater” gives its ranking of 41st in the world in terms of average broadband download speeds.

Given this situation, McClaren believes one of Australia’s priorities should be a dramatic overhaul of its telecommunications infrastructure, chiefly by expanding the scope of the country’s optical fibre network and bringing it closer to end users.

Gary McClaren

Gary McClaren

The comprehensive FTTP solution advocated by Labor would have achieved this in a peremptory way by using a broadband monopoly utility in the form of the NBN to bring fibre optic connections to almost all households and business in Australia.

Since the last Federal election, however, the Coalition government has opted for a more economical Multi Technology Mix (MTM) solution for the NBN. Fibre connections will reach as far as nodes instead of to all buildings and households, with Telstra’s existing copper network used to pick up much of the slack.

While key aspects of Labor’s broadband monopoly utility model will be retained under this solution, the end result will be a partially complete fibre network which connects to only a quarter of Australian premises.

McClaren points out that while a broadband monopoly utility is highly suited to the implementation of a comprehensive FTTP solution, there will be little incentive for such an entity to engage in the sustainable, on-going expansion of a partially-finished fibre network.

Given that the government has already eschewed a full FTTP policy, McClaren supports the breakdown of the NBN into multiple entities in order to create a competitive environment which will better expedite the continuous growth of Australia’s fibre optic network over the long-term, and which will help to meet the overall objective of improving Australia’s telecommunications infrastructure.

“I have no doubt a competitive infrastructure model will result in more fibre being deployed over the medium to long term than relying on a multi technology monopoly,” said McClaren. “It will also be more efficient and innovative.”

McClaren further advocates the implementation of the Vertigan Panel’s recommendations immediately given the extremely complex nature of telecommunications companies and the tremendous difficulties involved in their disaggregation.

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