Analysis: Five afterthoughts for the NBN debate

In what was billed as the ‘Great Debate' at the Comms Day Summit in Sydney, five panelists brought together two days of discussion in a wide-ranging and hotly contested debate.

So iTnews thought it only fair to present the top five outstanding challenges for the Government, regulators and industry to deal with once the winner is announced.

1. We're going to the Courts. Again.
Telstra's GMD of public policy and communications, David Quilty, was left to defend the incumbent amid suggestions by Optus and others that the NBN is headed for "legal quagmire".

"[Whether or not it ends up in the Courts] is fair and square in the hands of Telstra," said Maha Krishnapillai, director of government and corporate affairs at Optus.

It would not be without precedent, Krishnapillai said. He cited figures from the ACCC that "over 50 per cent of the regulator's court cases deal with Telstra".

Quilty wouldn't rule out the possibility of legal action if it came to defending Telstra and its shareholder's rights, but said it wasn't Telstra's focus.

"There's no great benefit for anyone in having a legal-first strategy," he said.

"We want to focus on growing our company, building networks and serving customers.

"Obviously Telstra has the fiduciary right to protect its assets where it sees the value of those assets and investor holdings being adversely impacted or attacked. We can't be blamed for that, but it's not our focus."

Quilty continued: "The primary thing we ask for is that we can compete [with it] on a level playing field.

"The critical thing we ask from this process is that no one is restricted or prohibited from building competing networks to deliver broadband services to customers."

The suggestion drew rebukes from several panelists.

"David is saying he wants a level playing field. If you want one, wait in a queue to get a rack into a TEBA [Telstra exchange], or get your rack rejected because you used the wrong type of screws," said PIPE Networks' chief Bevan Slattery.

End thought: Will litigation delay the NBN build?

2. Pricing wholesale access - to the courts...
Just who will set wholesale access pricing to the NBN was a source of fierce debate.

The inference of the panel was that access regimes need to be overhauled to prevent a repeat of issues that have dogged the incumbent Telstra in relation to the way access to its wholesale network is priced.

Krishnapillai said that under Optus' proposal, the ACCC - rather than the network ‘owner' - would control access to pricing on the NBN.

"We've always said Optus will only be a minority holder in the NBN organisation [if we win]," Krishnapillai said.

"Investors certainly want to know how access pricing is calculated but the option was never there for investors to set that pricing."

Krishnapillai accused Telstra of "always having the ability to pillage pricing" to its wholesale network.

Quilty disagreed, believing the cost of accessing Telstra's Wholesale network has been underpriced for some time.

Telstra is involved in a long-running dispute with the ACCC over whose wholesale pricing model to use to cost out access to the Telstra network. Both organisations have developed separate models. The ACCC's model is currently out for consultation.

"The fundamental dispute [over pricing] isn't between us and access seekers, it's between us and the ACCC," Quilty said.

"Today I can undertake to submit our access cost model to the world's leading independent network modelers for the most thorough assessment and I'd ask the ACCC to submit their model for the same level of assessment.

"I'm quite happy to live with the results of the independent assessment comes out with as long as the people selected have credibility as independent experts.

"The ACCC cannot be independent of its own cost model."

But the undertaking was immediately canned by Slattery.

"It's not up to the ACCC to bend to a third party. You can pass it to an independent expert but the party that really matters is the Federal Court. Let's just go to Court and decide who's right and wrong."

Quilty responded, saying Telstra "had been doing that for 12 years" and that he wasn't sure it was the right strategy. He declined repeated requests from Slattery to reveal who had won in the most recent instance of the long-running dispute.

Krishnapillai intervened: "Before we start doing models at 50 paces, I think David is genuine in the offer [to independently assess Telstra's model] but historically for the last decade Telstra has done everything in its power not to listen to the umpire and has appealed every decision.

"We've had 12 years of slog to get resolution of these issues. [Litigation] is clearly part of Telstra's strategy. Otherwise we've seen opportunities for Telstra to resolve this many years ago."

Krishnapillai's statement drew a concession of conditional support from Slattery.

"If Telstra is offering a new consultative strategy, then I'm happy. Just understand there are people here [today] that have fought Telstra on this issue for the past 12 years."

End thought: Wait until next week. And then let the arguments for access pricing begin...

Read on to page two to see how the NBN could punish the industry.

3. It's just old hat
It's a concern that's getting more airtime - that by the time an NBN is ready for the public its minimum mandated 12 Mbps speeds will be outdated.

"The idea of the NBN first came up three and a half years ago," Quilty said.

"We've found since then that it has become somewhat of a 2005 idea. We've seen massive changes in that time in wireless, cable, fibre-to-the-premises (FTTP) and satellite.

"The need for high speed broadband isn't diminished but the right way to go about it needs a fundamental rethink."

The panel seemed to agree generally that fibre to the node or premises/home wasn't for everyone.

"I don't condone rolling out a FTTH architecture to everyone in Australia," said Jason Ashton, CEO of BigAir.

"The reality is that technology could be obsolete before the fibre even goes into the ground. Investing in stuff that taxpayers are going to own that is then going to be obsolete is crazy."

Telstra is potentially advancing the NBN's obsolescence with a raft of investments in its core networks, including advancing Next G to 42 Mbps peak speeds and a major upgrade of its metropolitan HFC network.

None of the panelists could fault Telstra's strategy to ramp up network investments now it has been excluded from the NBN process - although it does raise an interesting question on how much market opportunity will be left for an NBN provider operating at 12 Mbps once its network is finally ready.

"Telstra are going to do as much as they can for there to be as little business case for the NBN provider as possible," Slattery said.

"I can't blame them. If I were them I'd be rolling out HFC as fast as I could."

Krishnapillai said Optus had factored heightened competition from Telstra into its costings submitted as part of the NBN RFP.

"We've always assumed that Telstra would radically expand its capability and capacity for HFC. We've factored that into calculations and the financial model still stacks up," he said.

End thought: Is the NBN in its current form already redundant?

4. Punishing the industry
Unsurprisingly, carriers and service providers remain concerned about the impact an NBN will have on the successful businesses they've built.

In particular, panelists will be looking for some assurances over the extent to which the Government and NBN winner will duplicate private sector investments in already competitive markets.

It has been suggested a number of times in recent months that the NBN should focus on areas of broadband disadvantage first, rather than in areas where infrastructure competition is alive and kicking.

"We're a bit concerned what the impact will be," Ashton said.

"My gut feeling is that it will be positive and open opportunities for us to expand our network but there's certainly some questions over how it will impact us in metropolitan areas.

"It does sadden me that after 12 years of deregulation, a period in which we've gone out as carriers should and build a profitable business that is generating cash, that the Government is going to hand out $4.7 billion in public funds to a competitor.

"It doesn't seem fair but at the same time I do understand it's for a higher good," Ashton said.

Slattery was equally troubled by the potential of the NBN to undercut PIPE's network investments.

"We do some backhaul for competing carriers so over a number of years we think that will wash out to some extent," Slattery said.

"This is part of the FUD the NBN has created. Have any of the consortiums consulted with the next-generation of application developers on what they need for the network? Have they consulted with the content providers on the impact of technical and commercial terms?"

Slattery predicted that the Government may be required to invest more than the promised $4.7 billion to achieve its aims. The only other alternative would be to spend the promised amount and make the 12 Mbps "a non-guaranteed service", he said.

"At that point a person like me becomes annoyed if you change the rules because you've denied people who said you were wrong from the start from putting in a bid," Slattery said.

"It's completely impossible to do the NBN at the budgeted numbers provided."

Telecommunications analyst at Ovum, David Kennedy, said it was disappointing that so little is known of the underlying principles the Government will apply in merging the NBN initiative into the existing competitive communications framework.

"Will they be investing in competitive markets or not?" queried Kennedy. "No one can figure out what the impact of the NBN will be on their business.

"There's genuine competitive interests at play here. If the Government can pull off a deal with the various protagonists then they deserve all the credit they get."

End thought: The Government and winning bidder have some explaining to do.

5. Let's sit down and debate it. Again.
If one can use the word ‘certainty' to describe the NBN given everything that's occurred to date, reports indiciate it is relatively 'certain' the decision on who wins will be handed down by the Rudd Government next week.

But with legal, technical and financial "quagmires", as Quilty puts it, all still to be played out, everything appears to be pointing to the need for another talkfest with the industry to nut out these and other issues before the network build commences.

Earlier in the summit, the Communications Alliance called for an ‘NBN Digital Vision Day' to set the direction for Australia's transition to the broadband environment.

"The NBN announcement is a significant landmark in the journey towards Australia's digital future and its rollout will both underpin and drive the transformation to a digital economy," Hurley said.

"Following the decision, stakeholders should come together to shape the vision for this transformation."

According to Ms Hurley, the ‘NBN Digital Vision Day' would bring together a wide array of stakeholders to discuss a range of issues and set an ambitious vision for the national use of broadband networks.

Although not directly commenting on the Communications Alliance proposal, Slattery was an advocate of a "serious sit-down a la 1997/98" to nut out some working specifics for the next 20 years of operation in Australia's telecommunications environment.

End thought: The government has mentioned many times it is taking its time with a decision to ensure it gets it right. Will it also take its time with industry consultation to ensure the winning bid gets buy-in?