Telstra, Optus oppose 'special' NBN rules for utilities

Australia's largest telcos have spoken out against proposals to allow utilities to bypass retail service providers by buying a wholesale fibre service directly from NBN Co.

In the current draft of NBN legislation before parliament, utilities would be allowed to take a direct wholesale service from NBN Co to underpin services like smart metering.

The Energy Networks Association had argued [pdf] that buying NBN services from a retail service provider would add unnecessary cost with few benefits to those services, potentially driving utilities to deploy their own duplicate fibre infrastructure.

"Maintenance of this exemption is very important to the ability of electricity and gas network businesses to meet 21st century expectations around affordability, reliability and quality of energy supplies," the association argued in its submission to parliament.

"It is clear that the nature of the service that energy network businesses require from NBN Co would be very different in its scope and features from the services supplied by retail service providers to standard retail consumers of the NBN."

But representatives of Australia's major carriers disagreed, arguing they were well equipped to service the utility sector.

Telcos argued the exemption, as it stood, would allow NBN Co to move outside its definition as a "wholesale-only" business.

"We're not persuaded by the [utilities'] argument at all," Optus general manager of interconnect and economic regulation Andrew Sheridan said.

"We have products and services that can be tailored specifically for their needs. Optus and others will look at providing those services to utilities.

"If we allow the electricity industry to do some carve-out, it pushes that door open to anyone who wants to plead a special case."

Optus government and corporate affairs director Maha Krishnapillai believed that providing an exemption to the electricity sector would lead others to follow the lead "to buy straight fibre".

"I think everyone will argue they're special," he said.

"It's a matter of once you open that door it's very to shut it and very hard to preclude how it gets used in the future.

"What we want to preclude here is a market structure that doesn't work."

Telstra director of government relations James Shaw agreed.

"We don't think utilities have made a sufficient case to be treated separately," Shaw said.

"We believe RSPs [retail service providers] will want to provide services to utilities. We believe there will be a market there for RSPs to provide the type of service that utilities want and that it can be done in a way where we can add value.

"There should be no need for these organisations to deal directly with NBN Co."

Shaw said that telecommunications history showed that telcos would invest in tailoring services where "we think we can make a buck out of it". Servicing utilities using NBN infrastructure fit that bill.

He said that utilities that were unhappy with a bitstream service taken from one provider could always change to a rival.

Alternatively, the utilities could apply for a carrier license and buy a direct service from NBN Co, but that would subject them to the same "level playing field" rules as all other access seekers.