ACCC: NBN won't kill internet competition

ACCC commissioner Ed Willett has refuted industry suggestions that the costs of providing services over the National Broadband Network will reduce competition for retail internet services.

Amid woes of consolidation and dwindling numbers in the telco industry, Willett was defiant that the NBN will provide a platform for robust competition, pushing providers to differentiate from competitors and offer a greater variety of services.

His comments are intended to counter repeated claims from the likes of Internode CTO John Lindsay that NBN Co could be left with as little as six "real" service provider customers in future.

Instead of competing on the best-value broadband offering, Willett said ISPs would likely compete instead on product bundles and improved service.

Bundling opportunities include the emergence of "quad play" offerings of fixed-line internet access with phone services, video-on-demand and mobile.

Optus has begun offering a similar service - known as "triple play" - that combines three of the four products in a bid to lure customers.

"We envisaged a world where competition would probably be based on fewer players providing services in a different way and providing differentiated products rather than competition with everyone providing the same sort of services on the same basis," Willett said.

He pointed to other potential platforms for competition, including service providers or content providers competing over access to broadcast or video streaming rights.

The realisation of such competition could see ISPs pitted against the likes of Google and Apple for the customer relationship, according to Willett.

"It may be that we have the network services providers in mobiles and retailers coming under challenge from other players who simply use their services as a conduit to the customer and become the primary source of the customer relationship using those network services," he said.

"That is going to be quite a challenge to the traditional retail service providers but I think it's also going to be a source of key competition."

PoI pain

Willett's affirmation comes despite ISPs repeatedly referring to the ACCC-mandated model of splitting the NBN into 121 separate points as a key pain point for smaller players in an NBN world.

An ISP must connect to all 121 points in order to service all available customers on a national basis. The cost of leasing fibre backhaul to those points, and paying a bandwidth charge at each point led Lindsay to proclaim on Tuesday that "the days of the back-room ISPs are well and truly over".

They would, he said, be replaced by the market's four largest ISPs - Telstra, Optus, iiNet (including Internode) and TPG - as the "four foundation stones" of NBN Co's customer base with smaller players either competing solely at a regional level or retaining national service through one of a number of aggregators on the network.

Consolidation

The transition to the NBN has partially spurred an increase in consolidation among some larger ISPs, with iiNet acquiring two major providers while Primus was bought out by M2 Telecommunications.

But Willett said there was "a lot more to competition than counting heads".

"Competition can be dynamic and very vigorous with a few players or it can be not so vigorous with more than that," he said.

Competition had remained at the forefront of the ACCC's consideration of NBN-related matters, according to Willett, including the pending approval or rejection of NBN Co's $800 million agreement with Optus.

"The question of the nature and the benefits of competition in the context of natural monopolies is a really difficult issue," he said.

"Generally there are big benefits in recognising the natural monopoly of that network."