ACCC hearts NBN, predicts end to Foxtel monopoly

Speaking at the ATUG Regional Conference today, Samuel lauded the NBN, and in particular the regulatory changes expected to accompany its construction, as "the most momentous policy initiative" in telecommunications since deregulation.

In a wide ranging speech, the chair of the Australian Competition and Consumer Commission conceded that the Government had failed to bring competition to the telecommunications industry to date, but placed the blame at the foot of the Howard Government's poorly executed privatisation of Telstra.

"The NBN project raises the opportunity to undo the mistakes made by previous governments that decided to leave Telstra in control of both the copper network and its retail operations," he said.

"The ACCC considers these decisions to have been fundamental errors that have had very serious implications for the development of competition in the telecommunications industry."

Telstra, he pointed out, still enjoys 72 per cent of fixed line retail voice subscriptions with its nearest competitor (Optus) gaining only 11 per cent of the market.

"Telstra has been permitted to compete in the same markets in which it provides access services over its fixed line copper network to other companies - granting it both the incentive and the ability to discriminate against access seekers in an anti-competitive way," Samuel said.

"The vertical integration of Telstra... has significantly constrained competition. "

Competition safeguards, such as the imposing of accounting and operational separation regimes on Telstra, have been "ineffective in constraining Telstra's incentives and ability to discriminate against access seekers," Samuel said.

The head of the competition watchdog also gave a roundabout endorsement to forcing Telstra into structural separation - questioning whether the softer 'functional separation' alternative would be effective.

"When successfully implemented, functional separation may go some way to addressing concerns regarding the promotion of equivalence in the treatment of access seekers," he said.

"However, vertical integration of any form into downstream markets, even when subject to functional separation, will not necessarily ensure equivalence."

Could the NBN end Foxtel's monopoly?

On numerous occasions during his address, Samuel referred to how a high-speed Fibre-to-the-premise (FTTP) network with open access could revolutionise the way in which Australians consume entertainment.

Samuel said Telstra's ownership of the "two largest cable networks in the country" plus its interest in Foxtel has "blocked the emergence of effective inter-modal competition."

Forcing Telstra to sell off its HFC cable network, he said, would "introduce a new infrastructure-based competitor" and "address some of the concerns arising from Telstra's stake in Foxtel as well as its control of the principal pay TV network."

Samuel said the result would change the way Australians consume entertainment.

"The days when we refer to television being provided by a few free to air television networks or one or two pay television networks will become distant memories of last decade's technology, as we move to audio visual content of almost infinite choice being streamed over fibre optic cables," he said.

Advances in broadband, Samuel said, have allowed "telecommunications networks to deliver content formally provided only by the traditional media companies in print, radio and television."

The NBN, he said, will promote the convergence between media and telecommunications further by boosting network speeds.

But Samuel reminded delegates that Australia needs to ensure it never again sees a network operator owning enough exclusive rights to content to erode the possibility of effective competition.

"Concerns could arise if a telecommunications network operator is able to acquire sufficient compelling content on an exclusive basis, such that it limits alternative network owners' ability to offer attractive packages to consumers.

"Control of both the telecommunications pipes and a large volume of compelling content that is distributed over those pipes, could give one company significant market power in both the telecommunications and content sectors."

New issues for regulators

Samuel said the Government's latest NBN plan "raises a plethora of issues about industry structure, competition and regulation."

He advocates replacing the current "negotiate-arbitrate model" with powers for the ACCC to "set access terms and conditions upfront without waiting for an arbitration or the submission of an access undertaking," a change granted to regulators in Singapore and the UK.

He also made a number of recommendations to ensure competition during and after the building of the NBN:

• Define the access service as close as possible to the basic physical infrastructure to ensure open access.
• Ensure the network can be accessed at wholesale level at speeds that are "not throttled in any way" with upload and download speeds "as symmetric as possible."
• Ensure the NBN is technically capable of transmitting data for a variety of services - from voice and VoIP services to web-browsing and streamed audio-visual content.
• Points of interconnection should be located such that access seekers can still opt to take advantage of their investment in alternative backhaul networks.
• Interconnection protocols should be based on well-accepted standards for broadband, voice and video and "be sufficiently well-described to allow access seekers to design and build their own interconnection facilities."
• Protocols regarding access to physical buildings for the purposes of interconnection will be required. 
• Protocols may also be required around how data packets are prioritised and handled and how congestion in shared network elements can be dealt with.
• The NBN will have to provide transparent and effective operations support systems, including visibility of provisioning, fault reporting, rectification and service assurance.