Backhaul providers lobby against NBN POI proposal

Industry polarised over centralised approach.

Australian backhaul providers have cried foul over NBN Co's proposal to offer 14 aggregate points of interconnect (POI) to its nationwide fibre network.

NBN Co proposed a "composite" approach, in which it would provide consolidated POIs in Sydney, Melbourne, Brisbane, Adelaide and Perth, and "the opportunity to connect" at 195 connectivity serving areas.

The approach was expected to best serve the Government's plans to provide network access in both metropolitan and rural areas at the same price.

But it was heavily criticised in submissions to an ACCC discussion paper by AAPT, Nextgen Networks, Optus, PIPE Networks, Telstra and the Competitive Carriers Coalition (CCC) for reducing competition in backhaul markets.

Dark fibre provider PIPE Networks said the POI aggregation models "in effect give away free backhaul for NBN services", thereby ending investment in backhaul networks in Australia.

While it took no issue with aggregating traffic from uncompetitive areas, PIPE objected to the "unnecessary stranding of its network" by excessive and unwarranted aggregation.

Nextgen told the ACCC that the consolidated approach would leave it with "significant stranded assets". It currently had 17,000 kilometres of fibre optic cable in all mainland States and Territories.

Decreased competition may not only hinder innovation, but also raise - rather than lower - retail prices for consumers, carriers wrote.

Additionally, a national uniform wholesale price may not necessarily lead to national retail price parity, according to the CCC, which noted that retail service providers would still need to acquire inter-capital transmission to connect to interstate and international peering points.

The coalition recommended that NBN Co investigate other means of achieving price parity, including direct retail regulation, wholesale pricing regulation and subsidies.

Telstra too backed the establishment of subsidies for privately funded backhaul infrastructure, or a backhaul blackspots scheme, to address geographic price parity issues.

"Where there are prospects of competition, public funds are better invested in assisting the private sector to deploy competing infrastructure than in funding a publicly owned monopoly," the telco wrote.

Telstra, which operated the lion's share of Australian backhaul, also called for NBN Co to align itself to "international best practice", which required access providers to provide points of interconnect "where it is technically and operationally feasible".

Meanwhile, AAPT delivered a scathing submission to the regulator, speculating that NBN Co's proposal was "not supported by any apparent analysis or logic", and was not "based on proper industry consultation".

"[AAPT] seriously questions the thinking behind a decision to use taxpayer's money to significantly damage the backhaul market for what appears to be a marginal (if any) competitive benefit in the retail market," it wrote.

Some support for consolidated approach

Carriers like Optus, VHA and TPG backed a "low consolidation" approach, calling for the establishment of up to 400 or 500 points of interconnect.

NBN Co expected a fully distributed, "no consolidation" approach to involve 718 to 950 POIs, with one located at every fibre serving area. It did not provide an estimate for "low consolidation".

Meanwhile, the composite approach drew the support of Internode and Primus, which expected the 14 POI proposal to "best deliver the Government's uniform pricing ambition, while also enhancing the prospect for genuine competition".

"The Government ... now has an opportunity to create once and for all a level playing field, and NBN Co should not shy away from that ambition," Primus wrote.

"While Primus acknowledges there may be some initial objection from opportunists or those in the industry seeking to preserve their market power, Primus submits the decision on POIs must be based on the long term interest of end users."