Hey you, with the fixed network – not so superfast!

November, 2016

By Mick Coleman, Partner

An extension to the Superfast Broadband rules beyond 1 January 2017 will impose further obligations on the (very few) superfast fixed networks competing with NBN Co.  But the real competitive threat will come from less-regulated fixed wireless operators that bypass fixed networks altogether.   

In December 2014, Malcolm Turnbull (as Minister for Communications) issued the Carrier Licence Condition (Networks supplying Superfast Carriage Services to Residential Customers) Declaration 2014.  The title is strong evidence for the PM’s comment recently that you “campaign in poetry, but govern in prose”.

The CLC kicks in where fixed lines are used by a carrier to supply Superfast data services (downloads of >25 Megabits per second) to residential customers, over any part of a network built from 2011.

If caught, the key obligation is that the Superfast carrier must wholesale its superfast services neutrally to all comers, via a separated wholesale company with its own directors, staff and operational systems.   Not easy, even for large-but-nimble players like TPG/iiNet and Vocus/M2.

The intended result is to entrench NBN Co as the fixed network monopoly, which depending on your economic world view is a nation-building cost-sharing investment in the future, or an expensive and anti-competitive regression to government monopoly.   As lawyers, we’re neutral.

Remember the 2014 CLC was imposed to close off an exception to the 2011 Telecommunications Act rules that were similar but allowed unregulated network extensions up to 1km.  TPG announced a lot of short extensions in high-teledensity areas.  The government promptly responded by closing off the exception via the CLC, pending a permanent legislative fix.

Turning to the 2016 draft CLC – still pending a permanent fix, it extends the CLC from current expiry on 31 December 2016, until 30 June 2018.  More interestingly, it requires the separated operators to report on the location of their networks (by suburb or postcode), the number of customers on those networks, and the identities of the retailers who purchase network services.

The first report is required for H1 2017.  Will the data be used to assess whether the threat of fixed network competition requires further controls, or conversely that NBN Co has seen it off?

Either way, fixed network competition could be a sideshow.  Both sides of the NBN debate agree that the main threat to NBN Co’s technology is not opportunistic extensions to other fixed networks.

The main game is bypass of fixed networks altogether, whether by mobile-only households, in-building wifi, mobile business applications.  Perhaps the most direct and fearsome substitutes for the fixed network are rapidly improving fixed wireless technologies, ie from a network fibre endpoint near the customer, radio transmission over the last few metres out to the customer’s household or business wireless router or similar semi-fixed termination device.  Is fixed wireless caught by the CLC and Telecommunications Act superfast wholesale and separation rules?  If not, should it be?  And what would such broader regulatory reach look like?

By mid 2018 when the new data is in and the fixed landscape is more or less settled, the telecoms landscape overall could look very different.

Conclusion

The draft CLC comes at a time when the industry is closely watching the growing threats to NBN Co posed by fixed-wireless and like competitors, and a possible regulatory response seeking to minimise the bypassing of the NBN network.

Mills Oakley will provide further updates as this important, nation-wide telecommunications conversation continues.

Contact Mills Oakley


Mick Coleman|Partner
T: +61 3 9605 0060
E: mcoleman@millsoakley.com.au

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