TPG Networks have re-released a FTTB product after taking steps to comply with the government's rushed Carrier Licence Condition which has had little effect other than forcing TPG to raise the FTTB connection costs by about 15 per cent - is this what the government meant by "cheaper, faster, sooner"? What TPG's decision to re-enter the FTTB market means is discussed in Business Spectator and the outcomes lead to further discussion around what the government is actually achieving by increasing the telecommunications chaos.

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Communication Minister Malcolm Turnbull’s attempt to slow TPG Telecom’s fibre-to-the-basement (FTTB) rollout evidently couldn’t keep the telco down for too long, with TPG relaunching its FTTB product less than two months after it was forced to pull the product off the market.

Yesterday, TPG listed a single FTTB + home phone bundle for $70 per month on its website for new customers, which is $10 per month dearer than the old plan, while existing FTTB customers would remain on the $60 per month plan.

TPG has always been an access provider with very reasonably priced plans and has been able to grow from strength to strength over the past decade. The likelihood that another company will seek wholesale access to TPG’s FTTB and compete with TPG’s FTTB product is unlikely because the price margin available to beat TPG’s offering will be very small.

TPG has, in a little over four months, reworked its FTTB network design to be able to offer wholesale access on a non-discriminatory basis, but it is evident that this has come at a cost to new customers, who will now have to pay $10 per month more than existing FTTB customers. What this means is that Turnbull's actions have increased the cost per month of TPG's FTTB to new customers by about 15 per cent. Is this what the government means by “cheaper, faster, sooner”?

A rush to nowhere

Turnbull’s decision to rush out a draft Carrier Licence Condition (CLC) to force TPG to functionally separate and offer TPG's FTTB as a wholesale product to other retail service providers (RSP) has achieved very little other than to add to the telecommunications industry chaos.

Will the Australian Competition and Consumer Commission (ACCC) takes action against “superfast carriage service” providers that fail to meet the deadline of July 1, 2015, by which time they must comply with all of the CLC requirements including the requirement to structurally separate.

During the transition period from January 1, 2015 to July 1, 2015 the arrangements “provide carriers with additional time to meet certain requirements. During this transitional period, affected carriers must provide wholesale access on a non-discriminatory basis, but are not required to separate their wholesale and retail operations.”

What this means is that the companies affected by the CLC have been provided with six months before they will be required to demonstrate that structural separation has been achieved.

“From July 1, 2015, the licence condition will require owners of high-speed networks servicing residential customers to functionally separate their wholesale and retail operations, and to provide access to competing service providers on the same non-discriminatory terms as those provided to their own retail operations.

The carrier's wholesale company will also need to supply a Layer 2 Wholesale Service to other carriers and service providers, with the price of that service set at $27 per month.”

A key facet of the CLC is the government’s move to separate access networks into two categories, those that are predominantly connecting residential customers and those that connect business customers. What this means is the larger telcos will not be forced to comply with the CLC for their existing inner urban business focused access networks.

Is this the government’s idea of competition at work?

What you’re not being told about VDSL2

Not only is the TPG tangle a mess for the telecommunications industry but it highlights the failure of the government to utilise the best technology for the nation’s future telecommunication needs. The key technology being used for the FTTB and fibre-to-the-node (FTTN) rollouts, VDSL2 is now being progressively replaced around the world.

Turnbull continues to shy away from justifying why VDSL2 is preferred over alternative technologies that will have a lower cost of ownership over their lifetimes when the need for technology upgrades to meet customer demand are taken into account.

Key requirements for the National Broadband Network (NBN) identified by NBN Co such as multicasting is not being made available over FTTB/N and the cost of important traffic class management and quality of service features has been set so high that most RSPs will only provide customers with “best effort” traffic, nothing better than what is offered now over ADSL2.

Another key feature of the NBN was meant to be the introduction of competition between RSPs at the customer premises. What this means is that customers would be able to have two telephone connections and four data connections from different RSPs at the same time if they wished. Whilst this may not seem important at first glance, it will become more important as customers look to get access to services being offered exclusively by different RSPs, such as the new streaming services including STAN and Netflix.

This key feature of the NBN is not possible with FTTB/N because the VDSL2 copper connection will only support one telephone connection and one data connection and due to a limitation with the FTTB/N node equipment if a customer wishes to have a telephone connection and data connection from different RSPs then there appears to be a need to use two ports at the FTTB/N node.

What this means is the cost to customers that seek telephone and data from different RSPs will be prohibitive and effective competition is being stifled by the government’s multi-technology mix (MTM) NBN.

It is likely that most RSPs will utilise digital Internet protocol telephony for the FTTB/N and what this means is that customers will be locked in with one RSP for voice and data bundles.

For many people the idea that they could churn from one RSP to another without losing their Internet connection was a real benefit of the all fibre NBN, but unfortunately with the MTM NBN the problem that we face today where one RSP is likely to disconnect you on a Friday and the new RSP might connect you some time the next week if your lucky is going to continue.

TPG brushes off the CLC

For TPG the CLC has been of little consequence and the race to gain FTTB market share will continue. TPG now has the government backed into a corner because TPG can cherry pick inner urban customers and this will cause a serious financial problem for NBN Co.

NBN Co Chairman Dr Ziggy Switkowski told a Senate committee in March 2014 that TPG’s infrastructure competition could hurt NBN Co’s bottom line by up to 10 per cent but the initial estimate of the number of customer connections that might be captured by infrastructure competition occurring under the legislative loophole being exploited by TPG has been increased from about 500,000 to 2 million.

NBN Co CEO Bill Morrow has been unable to get NBN Co to make any headway with the endless delays and technical problems surrounding the MTM NBN in 2014 and it appears that 2015 is going to be another year of stasis for the NBN. It is unlikely that NBN Co is going to be able to achieve the headline results necessary to give the government good news in the lead-up to the next election.

Competitive evaluation process?

The government’s security ban on NBN Co using Chinese vendor Huawei adds another layer of complexity because TPG’s FTTB network is being built with equipment from Huawei.

Is the government going to step in and prevent TPG from utilising Huawei FTTB equipment for an access network that could capture as many as 10 per cent of residential customers that would otherwise be connected to the NBN?

How can TPG’s mini NBN be permitted to utilise equipment from Huawei when NBN Co has been restricted to using Telstra’s key vendor partners Alcatel-Lucent, Ericsson and others?

And when will NBN Co put the NBN FTTN/B network equipment out to tender? Or is NBN Co using a “competitive evaluation process” to only purchase equipment from Alcatel-Lucent and other vendors given the tick by Telstra?

It is a very poorly kept secret that NBN Co has commenced the FTTN/B rollouts and brought Telstra in to drive the rollout. And it appears that Alcatel-Lucent equipment is being used for the rollouts without an open and fair tender being carried out.

The government’s “cheaper, faster, sooner” slogan for the MTM NBN looks shaky and TPG’s way is now clear. The telco is going to go full throttle with its FTTB network adding to the NBN Co’s woes.and tick off its industry rivals as well.