Optus and Telstra urge changes, regulatory oversight for NBN

Telco giants Telstra and Optus have spoken out against some elements of the National Broadband Network, urging the Government to both introduce amendments and set up a new regulatory body to oversee the construction of the massive project.

Optus chief executive Paul O’Sullivan said at a technology conference on the weekend that a new regulatory body should be established to oversee the construction of the network, and said that the rights of operation for the network should be held in a competitive tender.

“It’s essential that we do not create a situation in which, like a toll road operator, NBN Co. can simply offset its revenue shortfalls or its cost overruns due to its poor operating performance, by increasing its prices to the end user,” he said.

O’Sullivan also warned against the network’s possibility of being a “new monopoly” and said checks and balances are needed.

He also said this new regulatory body would not be political or organised by Parliament.

“This is a body that would sit independently from government and would be tasked with ensuring that the NBN is run to a well-defined set of criteria all aimed at managing the NBN in the best interests of its customers, not of the government of the day, nor of any political agenda, or indeed the NBN Co’s executives.”

But Ovum research director David Kennedy says such a body would need to spell out why its responsibilities are different from those of the ACCC.

“My initial reaction is that you would need to explain what this would be doing that the ACCC isn’t doing. Because adding powers to the ACCC would make more sense than just making a new body.”

“However, the issues here are real, because clearly the NBN will be a monopoly and will require regulatory scrutiny to ensure it doesn’t exploit that.”

Telstra has also highlighted some of those issues in a new submission to the Department of Communications over the new NBN Companies Bill.

In its submission, the telco giant warns the new legislation could potentially erase the benefits of the NBN by allowing the network to become a monopoly and threaten future competition in the telco sector.

The submission warns that the Companies Bill offers too many opportunities for “scope creep” – Telstra believes there is a possibility the NBN is too broadly defined and could end up operating as a retailer.

It wants the Government to put new language into the bill that would prevent the NBN from ever becoming a retail operator.

“It is a fundamental plank of Government policy that NBN Co. should be a wholesale-only operator in order to address concerns about vertical integration in the telecommunications industry.”

“The NBN Companies Bill requires important amendments to ensure that this occurs, as the present provisions are easily circumvented and would enable NBN Co. to vertically integrate into retail corporate and government markets with little difficulty.”

Telstra also points out that a second bill, the NBN Access Bill, will arguably restrict future competition and stifle potential innovation.

Telstra has two problems with the bill. The first is that there are provisions requiring the regulation of all new superfast broadband networks, but Telstra says this is anathema to creating better solutions for customers.

Requiring regulation of new broadband networks before they are even built will create a powerful disincentive to investment in infrastructure and will discourage competition with NBN Co.

Legislating for the regulation of particular services that may be supplied by efficient investors is also an unnecessary and unwarranted intrusion into the domain of the independent regulator.

Telstra also points out that non-discrimination provisions “go too far”, saying that they require a “one size fits all” approach.

The telco says it will make it almost impossible for other networks to compete, which would eventually lower prices and create more innovative solutions.

“Discouraging new entry where this is economically efficient… will not benefit consumers over the long-term.”

The Government has said it is considering the amendments.