Telstra worried NBN may stray into 'adjacent' telco businesses

Telstra has warned a parliamentary committee that proposed changes to telecommunications legislation could mean NBN’s business strays into areas that would compete with the network builder's wholesale network customers.

Telstra corporate affairs general counsel Bill Gallagher today said relaxing limitations on the lines of business in which NBN operates would effectively allow it to offer system integration and data services to large corporations.

It may also allow NBN to provide commercial advice on retail product development.

Gallagher said such “adjacent” services were traditionally provided by telcos and “in principle” the legislation would take NBN beyond its original remit as a wholesale-only broadband provider.

“There’s any number of adjacencies outside the provision of the access network, and if you look at any of the service offerings of those providing services in those competitive spaces, you could argue that there’s scope for NBN to offer similar services,” Gallagher said.

Optus and Telstra presented a united voice on the issue at the hearing. Earlier in the day Optus head of interconnection and regulation Andrew Sheridan said such change should be considered by parliament.

“I don’t think anyone would have a problem with an amendment that was narrowly defined and would allow [NBN] to do incidental activities or incidental transactions," Sheridan said.

“But a change of this nature goes to a fundamental tenant of the NBN in terms of the limitations around its scope and scale, and if there are to be any changes to the NBN’s scope – and therefore the broader market – that’s something parliament should look at. It shouldn’t be dealt with through a regulation."

Under extensive questioning from the committee, Gallagher refused to comment on whether he believed the new provision was designed to allow the national network builder to address potential revenue shortfalls.

Telstra responds to “first mover advantage” fears

The proposed legislation was a response to a wide-ranging review of competition and regulation in the telecommunications sector led by Michael Vertigan.

However, it immediately prompted a backlash from carriers who argued that provisions of the legislation would unfairly advantage Telstra.

They argued that provisions of the legislation that relax requirements for NBN to maintain a level playing field when conducting product pilots would naturally favour Telstra, due to its prior ownership and depth of understanding of the network infrastructure that NBN would use to provide services.

Federal Communications Minister Mitch Fifield has publicly said the amendment is designed to promote innovation at the national network builder.

However, at the hearing, Sheridan, along with Macquarie Telecom’s regulatory chief Matt Healy, repeated industry concerns that it would allow Telstra to gain ground on its rivals.

Telstra did not provide any evidence reflecting its view on the amendment to the committee in its submissions.

However, Gallagher today admitted NBN may be deterred from testing new products without the amendment.

“We see the sense in it. There’s an efficiency argument,” he said.

“If the NBN Co is to be required to run pilots and trials with the entirety of industry each time it seeks to test a new product in the market, there’s an obvious cost associated with developing the capability and the capacity… across all providers.

“On the other side of the coin, there may be a disincentive [for] NBN Co if indeed the cost of building that capability to allow industry to participate was to deter it from trialling or testing innovative new services which it might have a question mark over.”

The Senate committee is expected to report its findings to parliament late February.