Fibre builders face up to Government-funded threat

Fibre network builders in new housing estates have lampooned the Government over a policy shift that will see NBN Co compete with them for contracts from next year.

The shift, revealed by iTnews last week, will see NBN Co offer fibre-to-the-home infrastructure in a range of new housing estates - not just those that can't attract a similar offer from the private sector.

When the Telstra/NBN Co heads of agreement was announced last month, the Government said NBN Co would be "wholesale supplier of last resort" - but iTnews has since discovered that this phrase is ultimately misleading.

The move has left commercial operators seething and, in many cases, re-evaluating their businesses as they face the real prospect of a Government-funded competitor.

"We're fundamentally unimpressed with the lack of information about what statements from the Minister's department and NBN Co actually mean," OPENetworks' strategy and legal counsel Michael Sparksman said.

"Until last week the Government had said it would fund the NBN Co to deploy FTTP networks in brownfields [existing suburbs] and that developers should pay for FTTP in greenfields.

"As a result of a policy back flip last week, the NBN Co announced that from next year it is not limited to being the "last resort" open access, wholesale only operator for greenfields, but intends to compete against established open access, wholesale only operators."

Mandate opportunity dashed

Just months ago, commercial operators were buoyed by the Federal Government's fibre mandate in greenfields estates, due to take effect next year, which was to substantially grow the market opportunity for fibre deployment services.

Comverge was granted a national carrier license in March in preparation for the impending boom.

Its core business is in systems integration and specialist private networks for gated communities and marinas. The license was to have led an expansion of its business.

But last week's announcement by NBN Co has left it retreating back to its core business again, according to marketing manager Dane Hansen.

"We were gearing up to compete for greenfield estates [but] the fact that NBN Co looks like it will frankly be providing the service for free or at taxpayers expense simply means we fall back to our traditional position," Hansen said.

"It's disappointing that [the market] is perhaps not going to be as open as we thought it would be, but all the work we've done [in preparation] for the NBN isn't going to be wasted.

"[And] we haven't been too financially disadvantaged by any change in strategy by NBN Co or the Government," he claimed.

But Hansen said he knew a "lot of companies that had made significant investments based on what was broadcast into the market" by the Government and NBN Co in the past year.

Two of the larger open access, wholesale-only network builders and operators - the Hills Industries-backed OptiComm and Fujitsu-backed OPENetworks - warned of the current and impending fallout from the policy shift.

"The change to the policy will have a dramatic impact on the greenfield FTTP market in Australia," OptiComm general manager Phil Smith said.

"OptiComm, like its competitors, is re-evaluating its future business opportunities and is seeking further clarification from the stakeholders involved.

"Over the coming weeks we should be able to provide the development industry more clarity of the options available after January."

Developers "paralysed"

Sparksman said the current situation was causing "paralysis" among housing developers, with many putting fibre deployment plans on ice until they understood what their options were - and who and what would be funded by Government.

"What the Government has allowed NBN Co to do is confuse the Government's offer to fund some aspects of Greenfield FTTP deployment as NBN Co opportunity to earn quick revenue from greenfields, but then not tell developers whether funding will also be available to [use] private open access operators," he said.

"If NBN Co, which is to floated off by Government into private equity hands, is the only recipient of taxpayer funding for FTTP local networks, then it could crush non-government operators like OPENworks and Opticomm, creating another monopoly and setting the service level at the lowest common denominator, instead of encouraging competition in and diversity of network services."

Sparksman said developers and the industry "should not have to put up with this confusion."

The confusion for developers is exacerbated by the cloud hanging over Telstra Velocity as an option in new housing estates.

Rumours have engulfed the industry that Telstra has frozen new sign-ups until it sorts out a definitive agreement with NBN Co. Telstra continues to maintain that its Velocity business remains open.

Quick wins

Sparksman also suggested NBN Co's "sudden focus on greenfields was a case of getting their priorities mixed and needing to get quick runs on the board."

"We're not saying there's no role for NBN Co in greenfields - there may be - but it's not a priority, because there are existing operators that can cover greenfields.

"Brownfields should be 99 percent of NBN Co's focus," he said.