Morrow: FTTB threatens rural broadband

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Morrow: FTTB threatens rural broadband
NBN Co chief Bill Morrow.

Large scale FTTB will "dramatically change" NBN economics.

NBN Co chief Bill Morrow says that the Australian Government could find itself paying more subsidies for rural broadband services if the national wholesale carrier is forced to compete with multiple fibre-to-the-basement providers.

Morrow’s warning followed that the competition regulator’s announcement yesterday that it would not take action to block TPG Telecom fibre-to-the-basement rollout and reports that Telstra would follow suit.

If NBN Co faced major infrastructure competition in urban areas, its economic model would no longer be able to support its mandate of providing equal access pricing for bush broadband services, Morrow said.

“If this is going to happen on a large scale basis, then we have to reconsider what that does to the model. For instance, is there more taxpayer money to be given to the remote areas to have access? Or do we say that we're not going to provide the same level of pricing to people that are in the bush to people that are in the city? These are concerns that have to be considered whatever happens from a market point of view."

Morrow was speaking at Communications Alliance event in Sydney to examine the implications of the Vertigan Committee findings.

He was flanked by Communications Minister Malcolm Turnbull and the Vertigan Committee’s lead economist Professor Henry Ergas.

The Government has given NBN Co a strict budget of $29.5 billion to provide 100 percent of Australian premises with broadband by 2020.

“If Telstra is brought into the loop with their existing infrastructure and their market power, I think the economic model would change very dramatically for NBN Co,” he said.

Yesterday, Turnbull announced that he was seeking a new carrier license condition for FTTB network operators requiring them to provide wholesale access to their networks. The Australian Competition and Consumer Commission (ACCC) also announced a new inquiry to investigate whether FTTB services should be regulated.

The moves have triggered speculation that the Vertigan Committee’s regulatory review, currently before federal cabinet, would contain recommendations to declare VDSL services to discourage investment in FTTB.

Turnbull today acknowledged that the NBN cost benefit analysis has revealed a rural broadband subsidy of about $4 billion. He floated an alternative possibility to fund it.

“In the purest of pure worlds, that would come out of the budget," he said. "Alternatively, there could be an articulated element of the wholesale price that every wholesale carrier - NBN Co in due course to be the largest one and any others - would pay to cover that subsidy."

Morrow questioned, however, whether retail internet providers would be prepared to take-up wholesale service from direct competitors.

“Remember, structural separation was the original intent when we started a couple of years ago. If there is a retailer that is going in to offer wholesale service, and if it's not a wholesale-only, one has to consider whether one of the retail competitors would say ‘I'm happy to ride over your network while you have direct access to that customer in terms of relationship’.

“I say this with fact because most of the RSPs express concern to me 'I don't want the big guy - Telstra - too much (insight) into the existing customer database because they will leverage that to their benefit. Well, it's the same concept if you allow someone to do retail and wholesale into a given building,” he said.

Professor Ergas said Telstra structural separation undertaking could interfere with its ability to deploy FTTB.

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