Backhaul remains the NBN's weak link

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Tasmanians have been discriminated against since the beginning of the internet era and neither the Labor nor the Coalition's National Broadband Network (NBN) addresses the key deficiency. The main problem is backhaul, which remains the NBN's weakest link.

To stimulate competition in the backhaul and retail access markets the government launched the Regional Backbone Blackspots Program (RBBP) in 2009 as a cornerstone of the fledgling NBN. The $250 million dollar injection permitted backhaul links to be installed to locations that previously were only supplied by Telstra or were a backhaul “black spot”.

iTnews recently reported one telco executive saying that the RBBP had “caused a ‘ten-fold reduction’ in wholesale backhaul pricing - regulated for equal access by the Government - over Telstra's fibre in some areas.”

However, even with government intervention there are many areas of Australia that suffer from a lack of competitively priced backhaul, Tasmania being one such region. There is also a lack of information about when all of the RBBP backhaul links will be turned on and made available to service providers,  or could it be that the RBBP backhaul links are sitting idle?

A vital but often forgotten aspect of the NBN is the backhaul from the NBN Points of Interconnect (PoI) to the Retail Service Provider (RSP) networks which typically reside in Sydney and Melbourne.

The Australian Competition and Consumer Commission (ACCC) has mandated that NBN PoI should be connected to by at least two backhaul providers. This could at first appear to be logical given Telstra’s backhaul network is extensive and other backhaul providers are available in most areas. Where there was only Telstra the RBBP provided an alternative, such as to Geraldton, South West Gippsland, Victor Harbor, Broken Hill and Darwin.

However, the ACCC regulated backhaul pricing has not prevented backhaul to Tasmania, which is provided by Telstra and Basslink, being fixed at prices 40 per cent higher than backhaul links on mainland Australia.

The ACCC has also failed to identify if all of the RBBP backhaul links are connected to NBN PoI and have active RSP connections.

According to the competition watchdog, the case for the 121 POIs was built on the premise that there where at least two providers present at every point and there was a reasonable prospect of a third. If that additional competition didn't happen – that is in routes with only two providers -  these routes are subject to regulation by the ACCC. While the established regulated price is designed to provide extra protection is the regulated pricing model doing enough or do we need a fresh approach?

In June 2013 Fairfax reported extensively on the lack of backhaul competition to the two NBN PoI in Tasmania. Andrew Connor, a spokesman for consumer lobby group Digital Tasmania, told Fairfax that Tasmanians were “missing out on the innovation that smaller players have generally provided to the Tasmanian market. Adding Tasmania to some national contracts offered to small service providers [by intermediaries] doubles the cost.''

Tasmania remains a digital black spot

The reason for the ACCC decision to permit Tasmanian backhaul to be more expensive than backhaul to Darwin or Geraldton, both of which are much farther from RSP networks and international gateways typically in Sydney, is unacceptable.

Telstra has been fleecing Tasmanians for decades and it should be assumed therefore to have made a substantial return on investment for the Telstra owned backhaul links across the Bass Strait. Whether Telstra was subsidised by the government to provide one or both cables to Tasmanian is unknown, but should be clarified by the ACCC.

In 2008, Telstra went out of its way to try to justify the high prices for data to Tasmania. Telstra posted a YouTube video that remains one of the pantheon of Telstra clangers made to pacify a disbelieving public over the past couple of decades.

Basslink is predominately an electricity grid connection between Victoria and Tasmania, which included fibre in the core of the electricity cable. When Basslink finally commenced data services in mid-2009 Telstra reduced its backhaul charges to Tasmania by about 50 per cent.

Yet Tasmania remains a digital black hole because of a lack of backhaul providers and competition in the retail and business internet sectors.

According to the ACCC, Tasmania isn't disadvantaged because at a retail level all ISPs price their offerings nationally and they aren't offering higher price retail services in Tasmania, compared to the mainland.

Yet there are considerably more ISPs available on the mainland and until a couple of years ago when Aurora Energy made rack space available in its Hobart data centre there were no commercial data centres in Tasmania for business customers. 

Universal Service Obligation (USO) to the rescue

The USO, which was last updated in 2012, fails to provide Australians with reasonable access to the digital world and has therefore become antiquated and in need of a complete overhaul.

Let us consider backhaul to the two Tasmanian NBN PoI which we know to be 40 per cent more expensive than backhaul anywhere on the mainland.

The government should extend the RBBP to put a link to Tasmania, thus providing three backhaul providers to this disadvantaged state.

A question that the ACCC should answer is why it has mandated a minimum of two backhaul providers to each NBN PoI when in the previous decade the government found that there should be a minimum of three mobile providers to ensure there was adequate competition in that sector.

Backhaul is vital for the NBN and rather than regulating backhaul separately the government should add backhaul to the USO.

Backhaul charges to every corner of the nation should be regulated by the ACCC where insufficient competition exists to ensure that no Australian residential or business customer is disadvantaged. This would ensure that every Australian has equal access to the digital world and can participate equally in the digital economy.

Additional costs for backhaul to regions such as Tasmania and other islands off the mainland should be subsidized using the USO telecommunications industry levy which is managed and collected by the Australian Communications and Media Authority (ACMA).

The government instituted the Bass Strait Passenger Vehicle Equalisation Scheme to ensure that Australians wishing to take their car to and from Tasmania would not be disadvantaged by the extra costs associated with the Bass Strait crossing.

Tasmanians need access to the digital world as do all Australians so why are they being treated as second class citizens? Access to the digital world is an essential service today and the USO fails to meet the challenge.

The government made a commitment before the election to improve telecommunications competition and therefore must act to review the USO before the end of the year and introduce a new USO that meets Australia’s needs.