NBN Co chair warns on coalition policy

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NBN Co chair warns on coalition policy

Defends monopoly.

NBN Co chairman Harrison Young has publicly attacked the Coalition's proposed broadband policy as a potentially more expensive and slower option than the existing National Broadband Network.

Young told a Committee for the Economic Development of Australia lunch yesterday that the Coalition's plans to pare back use of fibre-to-the-home technology in favour of fibre-to-the-node or use existing hybrid-fibre coaxial infrastructure would simply slow down the network's rollout.

"If you retain Telstra infrastructure as part of the National Broadband Network, even just the last bit, you will not have accomplished the separation of wholesale from retail that was a major objective of Project NBN," Young said.

Using a greater portion of Telstra infrastructure, he argued, would require more and slower negotiations with the incumbent, while introducing more legacy IT from Telstra.

Such infrastructure "could only be navigated with Telstra's help, turning code into bottleneck infrastructure and giving Telstra ineradicable advantages", he noted.

"There are always trade-offs to be made. Some of them live inside the engineering task, while some live in the realm of policy. And from time to time, they will change their spots," he said.

Where shadow communications minister Malcolm Turnbull has marketed the Coalition's alternate policy as sufficient for Australia's current needs, Young said stripping NBN Co of its monopoly would have dire consequences.

"If the richest people in the country have broadband that is only 'good enough', someone — Telstra, Optus, a new entrant? — someone is likely to offer those households a 'superior' service, overbuilding the now NBN Co-owned HFC footprint with fibre, again sucking profits out of NBN Co, and undermining NBN Co's ability to offer uniform national wholesale prices," he said.

He also defended NBN Co's decision to sign agreements with Telstra and Optus that would see the migration of their respective cable broadband customers off the network and onto the NBN.

The Optus agreement was criticised as contrary to economic logic after it was approved by the competition watchdog earlier this year.

Young said failing to neutralise a source of potential competition like Optus' and Telstra's cable networks would also threaten the cross-subsidy NBN Co was tasked with providing between built-up and regional areas.

"I haven't done the math, but this is an issue any Government would have to wrestle with if it elected to leave the HFC networks alone," he said.

"So what happens if you decide to make NBN Co the owner of those HFC networks and instruct it not to overbuild them?

"Depending on technical issues I am not competent to discuss, you could have the ironic situation that the wealthiest suburbs have the lowest-quality broadband in the country."

Turnbull said Young had failed to take into account the Coalition's plan, much of which is yet to be made public.

"Not only do we prefer competition to government monopoly, but we believe that subsidies should be explicit and transparent," he said in a blog post on Monday.

"We are thoroughly committed to providing access to broadband to regional and remote Australia at city prices — so there is no discrimination by reason of geography — but the cost of doing so should be transparent.

"And there is plenty of precedent for that. What, after all, is the [Universal Service Obligation]?"

Young said NBN Co would not become involved in pet projects or "covert mission creep" — the latter a point of criticism from NewSat.

Instead, it would seek to use any additional profits to lower wholesale prices over time, a measure he assured would be passed on by competing retail service providers.

"Project NBN makes the crucial assumption that there will be vigorous competition at the retail level, which will drive down prices and deliver value to end-users," he said.

"But what if that doesn't happen? I've asked that question of a lot of friends and colleagues. Most of them answer that of course there will be competition. Look how many retail service providers there are, they say.

"Telecom is a sexy industry, full of entrepreneurs. I tend to agree."

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