Turnbull's announcement that Telstra will build the FTTN should soon be following by an announcement that NBN Co will become a Telstra reseller of FTTN and HFC. In Business Spectator this week the implications of Turnbull's annoucement are discussed. Will the telecommunications industry roll with the changes to the NBN that means a shift towards reasserting Telstra's dominance or will concerned companies step up and challenge what is happening?

Read the article here

You know something is afoot when Malcolm Turnbull turns to social media and a gaggle of politicians to announce an agreement between NBN Co and Telstra to commence the National Broadband Network (NBN) fibre-to-the-Node (FTTN) rollout with a new contract that will see 1000 nodes deployed and 206,000 premises connected to the NBN.

Turnbull’s announcement to parliament highlights the government’s desire to get on with the task of rolling out a multi-technology mix (MTM) NBN. But wait, didn’t the minister tell Australians that there needed to be a cost benefit analysis (CBA) before we could really truly know just how bad for the nation the former government’s decision to roll out fibre-to-the-premises (FTTP) was?

And didn’t he promise to provide all Australians with not less than 25 Mbps download before the end of 2016?

There’s little doubt that the communications minister has had to refine his pre-election promises and has done everything possible to obscure the changes actually occurring at NBN Co and to the NBN. 

His announcement last week sets in motion the beginning of the FTTN rollout at a time when the panel, led by Dr Michael Vertigan, carrying out the Cost-Benefit Analysis and Review of Regulation has not yet completed the review and provided the justification Turnbull needs for the government’s MTM NBN 2.0.

Don’t call it a trial

Turnbull described the agreement between NBN Co and Telstra as an “interim step” along the lengthy path to achieving a renegotiated agreement.

This “interim step” is in fact the beginning of the FTTN rollout, with NBN Co and Telstra having completed a smaller trial carried out in Woy Woy, NSW.

The Victorian part of this earlier trial at Epping never got off the ground due to a problemgaining access to power at the nodes. The exact details of what the hold-up is have not been released by NBN Co under Turnbull’s open and transparent policy, but the problem highlights the issues that NBN Co will face as the FTTN rollout continues.

But why wasn’t the FTTN rollout put out to tender? And where is the legislation to support the FTTN rollout?

It probably won’t be long before we get an announcement from the Competitive Carriers Coalition (CCC) -- a vocal critic of Telstra’s market dominance -- on what is happening over at NBN Co. That is, unless it has resigned itself to a failed attempt to change the status quo.

After all, there is always Telstra’s structural separation undertaking to give hope in the winter months ahead, surely?

It’s all about the copper

On June 26, Turnbull told ZDNet "The copper will remain the property of Telstra pending the conclusion of the renegotiations. What this is, is really getting on with the job and making sure that we're not waiting to kick-start the FTTN part until the ink is dry on the amendments to the definitive agreements with Telstra."

Hammering out a new agreement with Telstra is turning out to be just as arduous a process for the Coalition as it was for the Labor government, despite Turnbull’s optimistic proclamations prior to the last federal election.

Turnbull said last August that the new agreement would take weeks and given that NBN Co had effectively bought the copper from Telstra in 2011, he didn’t see any reason why Telstra would not hand over the copper needed for FTTN at no extra cost.

Here’s the rub. It could be argued that NBN Co bought access to Telstra’s infrastructure including the copper between premises and the nearest pit, typically 20 to 40 metres, as part of the 2011 Telstra agreement.

And the agreement called for Telstra to turn off the copper access network (CAN) 18 months after a regional Fibre Access Network (FAN) became operational, meaning that Telstra could recover the copper and sell it.

But the 2011 NBN Co and Telstra agreement did not give NBN Co the right to access and utilise the remaining copper between the exchange and street pits.

And unfortunately for NBN Co, FTTN nodes will typically provide connections to premises that are up to 500 to 800 metres away.

What this means is that Telstra has NBN Co over a barrel and Telstra CEO David Thodey has provided guidance that Telstra is unlikely to sell infrastructure to NBN Co. Telstra really isn’t in the business of doing the government any favours.

Competition confusion 

It makes you wonder why NBN Co did not consider rolling fibre past premises and connecting to premises using a hybrid Fibre to the Drop Point (FTTdp) approach.

Well, this would mean that NBN Co would have to utilise equipment from Huawei, as Telstra’s preferred equipment supplier Alcatel-Lucent has focused on FTTN and FTTN solutions.

Not only does Alcatel-Lucent not have a commercially deployed  FTTdp solution its FTTP and FTTN offerings are much more expensive than Huawei’s offerings.

And have you ever wondered why countries around the world, including Britain and New Zealand, and other Australian carriers, excluding Telstra, are happily buying and installing Huawei equipment and systems?

The furphy that is being perpetuated by the Australian government is that if Huawei is used for the NBN, Australia will put our security relationship with the US at risk.

If it wasn’t for that pesky rogue Edward Snowden leaking NSA secrets left and right we would be in ignorant bliss and believe the government line that Chinese companies can’t be trusted, unlike the trustworthy companies from Europe and the US.

Like a bad movie, the government script fails to mention the serious security problems with equipment from non-Chinese vendors identified over the past couple of years as a result of Snowden’s leaks.

In Turnbull’s quest to provide Australians with a cheaper, slower, less capable MTM NBN 2.0 he could have at least stuck to his commitment to ensure there is open competition between carriers and vendors.

Are we all rowing together?

As far as unusual happenings over the past week go, NBN Co’s submission to the Harper Review on Competition Policy, is either whacky or suicidal or both.

The government went to the election with an NBN policy that states “to put further downward pressure on prices, the Coalition will unshackle the competitive telecom market that Labor tried to stamp out, and reduce the cost of the NBN to prudent levels".

The Coalition’s NBN policy goes on to state, on page 10:

“Competitive and free markets have driven innovation and cost reductions in telecommunications since the early 1990s. The Coalition will remove or waive impediments to infrastructure competition introduced to provide a monopoly to Labor’s NBN, and investigate opportunities to invigorate and enhance competition among retail service providers (where hopes that monopoly infrastructure would enable a dynamic retail market have so far been unfulfilled).”

As it turns out the prospect of infrastructure competition has got NBN Co worried that its ability to provide affordable broadband to all Australians is now under clear and present danger, unless there’s an industry subsidy in play.

Imagining a scenario where NBN Co isn’t a monopoly wholesale access provider isn’t something NBN Co chief executive Bill Morrow would be keen to do. But for the moment all bets are off and there’s unlikely to be any clarity until the Vertigan committee’s report is out in the open.

With a new regime installed at NBN Co all Turnbull has left to do now is to ink an agreement between NBN Co and Telstra that paves the way for NBN Co to become a Telstra reseller pending the NBN being absorbed back into Telstra in a few years' time.

Or is it too early to come to this conclusion?