Telecommunications Industry and NBN in Chaos

The Australian telecommunications industry has sunk into chaos and dragged the NBN into the mire with it. Yesterday on Business Spectator the slanging and punches being thrown are discussed to highlight the need for a industry commission with a broad membership. What is the alternative? More chaos that ultimately harms the industry and all Australians?

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Over the past five years our telecommunications industry has been slipping ever so slowly into a state of chaos unlike anything seen by a sector in Australian history.

With glimpses of sanity few and far between, the past year has seen the industry clinging for dear life on an out of control roller coaster, plotting a tumultous course.

As Canberra settles in for a long and protracted fight over an austerity budget and a cantankerous Senate, it’s time for the telcos to realise that there’s little hope of Canberra dispatching the cavalry to ride to the industry’s rescue in the foreseeable future.

So who exactly is to blame for the turmoil?

The trouble with pollies

The political influence and stature of a minister is often a very public guide to how well an industry will fare when it comes time for a government to allocate Commonwealth funding. A minister in the 'inner circle of power' will be able to focus the government’s attention on the legislative changes necessary to ensure the portfolio moves from strength to strength.

Just how much influence Communications Minister Malcolm Turnbull has in Canberra has been a topic of conversation for some time and the lack of Commonwealth funding for telecommunications infrastructure and services in the last budget could be a good indicator.

Does Turnbull’s recent admission that he was not consulted over appointments to the panel that recommends appointees to the ABC and SBS boards also provide an indication that he is being kept at arm’s length?

Last week at the Melbourne Institute’s Economic and Social Policy conference Turnbull made an extraordinary political attack on the Australian Competition and Consumer Commission (ACCC) and its former chairman Graeme Samuel. Turnbull stated that “the ACCC and Graeme Samuel were the cheerleaders for it [Labor’s NBN], and the destruction of value that resulted was gigantic".

The ACCC had advised the former government that investment in a fibre-to-the-node (FTTN) rollout would result in an investment loss if there were a decision to roll out fibre-to-the-premises (FTTP) within a few years of the FTTN rollout being completed.

Turnbull said "They are not a firm of consulting engineers. They're not a telecommunications business. They've got no expertise in this area at all, yet they gave that advice, and even more improbably, the government relied on it."

report by the well-respected ICT analyst Paul Budde in 2012 highlighted why the AT&T and BT FTTN rollouts were not a good example for Australia to follow, yet Turnbull has spoken very favourably of the AT&T and BT FTTN.

One of the issues raised by Budde was the loss of investment if FTTP replaces FTTN before a Return On Investment (ROI) is achieved on the FTTN. For a positive ROI to be achieved about 10 years needs to pass before FTTP is considered, and it was unlikely the industry could justify 10 years of FTTN before FTTP commenced.

Yet Turnbull went on to say that the ACCC had “no expertise in this area at all, but the government relied on it".

He went on to make the extraordinary claim that the ACCC’s determination that Telstra was to cut line access fees to its copper access network (CAN) from $35 per month to $14 per month was the reason why Telstra did not invest in an upgrade of the CAN to FTTN.

Lest we forget, the ACCC’s role is to force monopolies to offer products at justifiable prices so that consumers don’t get ripped off.

Broad sinks the boot in

In unison with Turnbull’s attack on the ACCC, the former AAPT chief executive Paul Broad took the opportunity earlier this week to sink the boot into the regulator and the former government when he made the claim that AAPT lost $1 billion as a result of Labor’s NBN.

In an article on ZDNet Broad is quoted as saying "look, I think it was one of the saddest days of the business I had when that announcement was made by Graeme [Samuel], and he became a great supporter of it".

"I don't think it was a lack of power, I think there was commitment on his part to support it and the rest of the industry were completely dumbstruck," Broad said.

TPG, which now owns AAPT, has announced that it will use AAPT’s dark fibre infrastructure to roll out a fibre-to-the-basement (FTTB) network in high-value urban areas. Does this mean that TPG will turn the AAPT fibre into a gold mine -- something that the former AAPT management failed to do?

If the Competitive Carriers Coalition (CCC) is to be believed then the ACCC must take a “strong line in addressing prices that remain out of line with international benchmarks".

On July 4, Macquarie Telecom, a CCC member organisation, called on the ACCC to take action against Telstra for treating consumers in regional areas with contempt.

In a strongly worded complaint to the ACCC, Macquarie Telecom said that Telstra was refusing to provide wholesale products, including wholesale 4G, in areas where it has a monopoly mobile network and is forcing wholesale customers to restrict data caps to levels lower than data caps offered by Telstra.

Macquarie Telecom industry and policy executive Matt Healy said that “Telstra will no doubt have its hand out for more taxpayer freebies, but its contempt for regional Australians is on full display in its behaviour in wholesale markets".

“Macquarie hopes the ACCC moves quickly and decisively to end this monopolistic behaviour," Healy said.

If the ACCC upholds Macquarie Telecom’s complaint and forces Telstra to offer wholesale mobile products without restrictive data caps in areas where Telstra has a monopoly, does this mean that Telstra will stop upgrading its mobile network and provide some substance to Turnbull’s claims?

An industry without a plan

As far as the telco industry is concerned the current picture stands as such: Telstra is still the gorilla in the room and it’s only getting stronger; TPG is hell-bent on extracting every ounce of advantage it can from the existing legislative loopholes; and Optus, Vodafone and the other CCC members are unlikely to agree to anything without kicking up a fuss.

The battle lines are drawn and one wonders whether Friedrich Nietzsche’s belief that “out of chaos, comes order” really does hold true for a telecommunications industry. The alternative is a moribund state of play with no recourse for meaningful progress.

It’s time for wiser heads to put aside differences and to work towards an outcome that benefits shareholders and the nation.

Industry leaders need to take a step back and call for an industry commission that brings together the major political parties, the regulators (ACCC, ACMA) industry bodies like the CCC and Communications Alliance, academia, the CSIRO and the Australian Communications Consumer Action Network.

The industry commission’s terms of reference should include the requirement that the commission carry out a full and frank ongoing public discussion of key factors affecting the telecommunications industry and preparation of a 10-year plan that is reviewed biannually to take into account changes to the marketplace that occur due to international or local developments and the unanticipated effects of new disruptive technologies.

Telecommunications is now an essential service and must be treated as such. The current chaos must lead to something worthwhile but that will require breaking the status quo.