iiNet calls 'cherry-picking' at South Brisbane exchange

ISP iiNet has made a bid to have Telstra's fibre upgrade of the South Brisbane exchange captured by anti-cherry-picking rules being debated in Canberra.

The rules would force Telstra to provide a Layer 2 bitstream service on an open access basis to competitors – arrangements the incumbent was yet to clarify as part of the upgrade project.

South Brisbane Exchange was being relocated and upgraded from copper to fibre to make way for a new hospital. About 40 percent of existing copper connections in the exchange area were served by Telstra's competitors, according to a report by The Australian.

Competitors – including iiNet – had previously raised concerns about what might happen to their customers on the exchange once the upgrade was completed.

The ISP now wants the planned NBN legislation to provide it – and other ISPs – assurance that Telstra would have to play by similar open access rules in South Brisbane to those that compelled the incumbent to open the copper network.

For South Brisbane to be caught by the cherry-picking net, several amendments to the Access Bill would be required.

iiNet recommended the cherry-picker rules "only apply to vertically-integrated network owners" and that the wording of the rules be tightened so that small upgrades – such as those affecting an exchange area - weren't allowed to slip through the cracks.

This could be achieved by changing references to "networks" in the legislation to "network units", which were specific subsets of "networks" that were defined in the Telco Act.

The legal team at iiNet argued a wording change was required because the term "networks" was open to legal interpretations that could favour cherry-pickers over NBN Co.

"Although Telstra's FTTP upgrade would come into existence after 25 November 2010, Telstra's broader national "telecommunications network"—which the FTTP upgrade in the South Brisbane ESA [exchange service area] would be part of—has been in existence for many years prior to 25 November 2010," iiNet's chief regulatory officer Steve Dalby noted in a senate submission [pdf].

"Arguably, the broad meaning of "network" allows this provision to be interpreted so that it can only apply to new entrants in the market building their first telecommunications network".

"[In addition] if Telstra's FTTP upgrade is otherwise considered to be an alteration or upgrade of its existing national "telecommunications network", then arguably, Telstra's telecommunications network would not have become "capable of being used to supply a superfast carriage service to customers" as a result of the FTTP upgrade.

"This is because Telstra is likely to already have existing network units outside of the South Brisbane ESA that are capable of being used to supply a superfast carriage service to customers, and these form part of its national telecommunications network.

"Therefore, the broad meaning of "network" allows this provision to be interpreted so that it can only apply to owners of existing telecommunications networks that do not currently have any network units capable of supplying a superfast carriage service to customers.

"Therefore, in order to give proper effect to the intention of the proposed provisions and to ensure vertically-integrated carriers are prevented from favouring their retail businesses over other access seekers, it is submitted that "networks" be substituted for "network units" as recommended".

There was no question that Telstra was capable of opening the South Brisbane exchange as a wholesale product. Industry consensus was that Telstra's FTTP trial in Point Cook, near Melbourne, was a test site whose systems would also apply in South Brisbane, but this has never been officially confirmed by Telstra.

The submission by iiNet recommended that owners or controllers of network units "supplying a fixed-line carriage service to only wholesale customers" should be exempted from cherry-picking rules, unless they specifically made a play to "undermine Government policy".

In that case, the Communications Minister should have the power to selectively intervene and apply the cherry-picker rules where he or she saw fit, iiNet said.

The ISP also recommended that, if passed, the proposed laws be enacted as soon as possible, stripping an "adjustment" period for the industry that the ISP warned could be used by some as a grace period to circumvent the rules.