An investigation into Telstra’s Wi-Fi network this week in Business Spectator has highlighted the chaotic nature of the telecommunications industry, the lack of a government plan for the inevitable national and community public Wi-Fi rollouts and dithering by NBN Co, that has led to a missed opportunity to utilise the National Broadband Network (NBN) as infrastructure of choice for special services like Universal Service Obligation (USO) funded payphones and Wi-Fi rollouts.

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The spectre of a national Wi-Fi infrastructure rollout has been on the cards for many years and Telstra’s national Wi-Fi network will provide Australians with consistent reliable nationwide access to Wi-Fi, something that many other countries already take for granted.

An investigation into Telstra’s Wi-Fi network has highlighted the chaotic nature of the telecommunications industry, the lack of a government plan for the inevitable national and community public Wi-Fi rollouts and dithering by NBN Co, that has led to a missed opportunity to utilise the National Broadband Network (NBN) as infrastructure of choice for special services like Universal Service Obligation (USO) funded payphones and Wi-Fi rollouts.

What is a national Wi-Fi network?

In many ways a national Wi-Fi network resembles a mobile cellular network. Wi-Fi enabled devices would connect to Wi-Fi access points and this is similar to how mobile cellular devices connect to mobile cellular base stations. The Wi-Fi access points are connected to local aggregation nodes which are connected to the Telco’s network using backhaul.

We can use Wi-Fi to make telephone calls today using providers such as Skype and Facetime and starting next month mobile cellular will shift to using VoLTE for telephone calls making a Wi-Fi telephone call similar to a mobile cellular telephone call. 

Wi-Fi devices typically use a lower transmission power than mobile cellular devices and utilise two spectrum bands (2.4 GHz and 5 GHz) whilst mobile cellular devices use two or more spectrum bands (700 MHz, 850 MHz, 900 MHz, 1800 MHz, 1900 MHz, 2100 MHz, 2300 MHz, 2600 MHz and 3500 MHz) at the same time or individually depending on the environment, such as in a building or in the country, to improve coverage and reception.

What this means is that until Wi-Fi transmission regulations are changed and more spectrum bands become available, especially in the 600 to 700 MHz bands, a national Wi-Fi network would be focused initially on areas where high data utilisation justifies Wi-Fi coverage.

Telstra gets the ball rolling 

By launching a national Wi-Fi network Telstra has embarked on a bold venture that aims to enhance the telco’s position as the leading provider of wireless mobility solutions that will harness the complimentary capabilities of mobile cellular and Wi-Fi to increase market share by positioning Telstra as the premier Wi-Fi provider and to take the lion’s share of the nascent Internet of Things (IoT) market.

What’s remarkable about Telstra’s national Wi-Fi network is the plan to offer subscription Wi-Fi using either Wi-Fi access points to be rolled out into public locations or specially modified hardware, that is provided to Telstra’s fixed access network customer’s that opt to gain access to the Telstra Wi-Fi network when thy are away from home. In return they must share their fixed access network connection with passing Telstra Wi-Fi network customers.

By leveraging Telstra’s fixed network customer connections to the internet the cost of a national Wi-Fi network rollout is significantly reduced at the expense of slowly increasing customer data caps to compensate for growing Wi-Fi traffic by other Telstra customers.

To further reduce the cost of the national Wi-Fi rollout Telstra is using public payphone infrastructure as sites for Wi-Fi access points. This makes sense as the 60,000 or so public payphones were distributed nationally throughout cities and regional centres often in key locations, such as down the main street or near shops.

Over the past decade Telstra has been slowly decommissioning public payphones where usage has dropped off, but this will now be seen to have been premature as public payphones are an excellent structure upon which Wi-Fi access points may be placed. The good news for Telstra is that even though the payphone may have been decommissioned the power and copper telephone cables would not have been pulled up and could therefore be returned to service quickly.

At about 2.5 metres tall public payphones provide a strong and secure facility that can carry the weight of the access point and provide power and a fixed connection to the network using either fibre in some locations or the copper access network generally.

Telstra has been contracted by the government to provide the USO public payphones and the USO is funded by the government and partly through a levy on the entire telecommunications industry. 

But public payphones are funded through the Universal Service Obligation (USO) levy on the entire telecommunication industry and any use of payphone infrastructure should result in a payment from Telstra into the USO as an offset against the shared use of the infrastructure. After all the cost of a 2.5 metre pole on council land, access to power and a broadband connection isn’t cheap and there will be an ongoing monthly operating cost.

In response to an article on Telstra’s Wi-Fi in Business Spectator on November 27, 2014 Telstra stated that “the rollout of Wi-Fi to payphone sites is unrelated to our provision of payphone services. The Wi-Fi solution uses the payphone sites as a physical location for the hotspots. The equipment, backhaul, installation and maintenance of the Wi-Fi solution is separate to the payphone and is entirely paid for by Telstra.”

In response to a further query on how Telstra is connecting the Wi-Fi access points placed on top of payphones connected to the broadband network, the telco stated “for the [Wi-Fi] trial we are using a mix of access technologies to roll out the Wi-Fi network depending on location and demand. In high density and popular locations we are using fibre. In other locations we are using an ADSL service. We are also trialling cellular backhaul at a small number of sites.”

What this means is that in some locations Telstra is using one of the copper cables that connect to the payphone to the PSTN telephone network. Also, Telstra has placed the Wi-Fi access points on top of the payphone structures and is powering the Wi-Fi access point using the power cable that provides electricity to the payphone and for lighting.

Telstra’s statement that “the Wi-Fi solution is separate to the payphone and is entirely paid for by Telstra” leaves many unanswered questions. Telstra has subsequently stated that some of the Wi-Fi access points were connected to the network using ADSL, possibly using one of the copper pairs that would have been rolled out to the payphone when it was first installed.

But this does not explain the shared use of the payphone facility, the electricity cable and the copper cables that were installed for the payphone and not for some future Telstra Wi-Fi network.

Telstra should publically state what the cost for each facility would be if the payphone did not exist and the Wi-Fi installation was new, what the monthly operating costs are for facility maintenance, power and broadband and what Telstra intends to do about compensating competitors that contribute to the USO for the provision of payphones by making an offset payment into the USO.

The competition 

So far Optus appears to be the only telco that has reacted to Telstra’s Wi-Fi network when it announced that it had done a deal to offer Wi-Fi in 21 Westfield shopping centres.

The announcement highlights the lack of competition faced by Telstra and there is no immediate end in sight to this situation.

According to the Australian Competition and Consumer  Commission (ACCC) “We note that other service providers may be able to seek access to Telstra payphone sites to provide their own Wi-Fi services. The facilities access provisions of the Telco Act set out that a carrier must provide other carrier with access to facilities for the purpose of enabling the other carrier to provide competitive facilities and carriage services or establish their own facilities (see schedule 1 of the Telco Act). The terms and conditions of access to such facilities are commercially agreed between the parties, but if parties cannot agree to terms and conditions of access, they may be determined by an arbitrator appointed by the parties (or if they cannot agree to an arbitrator, the ACCC).

“In addition, schedule 3 of the Telco Act states that a carrier can enter land to install and maintain a facility in certain circumstances (such as where the facility is low impact).”

“Therefore, if other carriers wish to access Telstra’s payphone sites (or nearby areas) to install facilities to provide Wi-Fi services, they may be able to do so under these provisions of the Telco Act. We consider that this regime limits the risk that Telstra will be advantaged because it is using payphone sites, to which it already has access.”

What this means is Telstra’s competitors can access Telstra’s payphones for a Wi-Fi rollout and that a fee would be negotiated between the parties, possibly with the ACCC’s help. It would be fair to then expect that any fees received by Telstra for the use of the payphones by a competitor to provide Wi-Fi would be paid into the USO, after administration costs are removed, because after all, the USO is funding the payphones, not Telstra.

The ACCC goes on to say “based on current information we do not consider that Telstra’s use of payphones sites in its Wi-Fi network constitutes anti-competitive conduct under the CCA [Competition and Consumer Act]. Telstra is not preventing any other service providers from also providing competitive Wi-Fi services to consumers using their own infrastructure. Other providers are free to offer similar services to Telstra. Accordingly and based on the information that we have received, we do not consider Telstra’s use of its payphone sites is being undertaken for an anti-competitive purpose or will have the effect of lessening competition.”

How much Wi-Fi infrastructure is enough?

The ACCC’s response raises an interesting question and that is whether Telstra’s Wi-Fi infrastructure including the payphones could be prescribed under the CCA by the ACCC, which means that Telstra would be forced to provide access to the payphones and possibly forced to wholesale access to its Wi-Fi network infrastructure in some locations such as on payphones. But for this outcome to occur, the other telcos would have to seek access to Telstra’s Wi-Fi infrastructure and argue that there is reasonable justification.

Possibly Telstra’s use of the USO funded payphones might get the ACCC to consider this outcome but until the argument was put to the ACCC by Telstra’s competitors the answer will remain unknown. The Department of Communications Secretary Drew Clark stated “My Department is not aware of any service providers having approach the ACCC seeking to have access to payphones declared.”

Clark goes on to state “I have been advised that the Wi-Fi infrastructure is physically positioned on Telstra payphones but that no actual interconnection of the Wi-Fi network (and associated equipment) with Telstra’s payphone network occurs. Instead, a direct link is made into Telstra’s backhaul network. Accordingly a declaration under Part XIC of the Competition Act of payphone related services would not assist another carrier in establishing its own Wi-Fi network.”

Clark’s statement “that no actual interconnection of the Wi-Fi network (and associated equipment) with Telstra’s payphone network occurs” is disconcerting because Telstra identified ADSL as one of the transmission technologies used to connect the Wi-Fi access points to the network and the ADSL is either carried on the same copper pair as the payphone calls or on a second copper pair that would be used as a backup for the payphone if the other copper pair becomes inoperable. So what does “no actual interconnection” mean in this context?

And Clark does not consider the costs of installing a comparable facility and the ongoing facility maintenance costs and the cost of the provision of electricity.

According to the contractual arrangements between the Commonwealth and Telstra for the provision of the USO (including the payphones) over the period July 2012 to June 2032 Clark states that the “contract does not prevent Telstra’s use of some USO payphone infrastructure to host Wi-Fi equipment. As the use of the payphone infrastructure in this manner does not reduce the costs to Telstra of complying with its USO obligations, in my view a reduction in the amount paid to Telstra is not justified in any event.”

If you were one of Telstra’s competitors you might have a different view because comparable facilities to the 60,000 or so payphones available to Telstra would cost many tens of millions if not more than $100 million to install and connect to power and the broadband network.

Telstra is being paid more than $2 billion by the government for the provision of the USO and a comparable amount through a levy of the telecommunications industry over the next twenty years so taxpayers should be concerned that the government is not looking to claw back some of this funding by charging Telstra for the use of USO funded payphones.

In response to a query about whether the Department would take action to limit the visual impact of structures installed to support Wi-Fi access points that are typically placed about 2.5 metres above the ground, Clark stated “Finally, in response to your concluding comments about the potential visual impact of a proliferation of Wi-Fi equipment and other fixed wireless infrastructure, including through the use of Schedule 3 of the Telecommunications Act 1997, my Department is not aware of any significant community complaints or concerns in this regard.”

NBN Co to the rescue? Not quite

Australia is currently in the middle of a Wi-Fi boom. While, Telstra is the only telco making more than a half-hearted attempt at providing Wi-Fi nationally there are hundreds of community public Wi-Fi networks springing up around the nation.

And you might think that this would attract some attention over at NBN Co because monetisation of the NBN is one of its core objectives. The opportunity to satisfy demand for high speed broadband through a wholesale Wi-Fi product makes sense and this would also ensure that the NBN becomes the access network of choice for community public Wi-Fi and the IoT.

You might thing that NBN Co would jump at the opportunity to connect USO funded payphones to the NBN thereby offering Telstra’s competitors with a wholesale cost competitive alternate broadband connection at the payphone which would remove any broadband connection cost impediment when competing with Telstra Wi-Fi.

But unsurprisingly NBN Co has yet to take the first step towards becoming a wholesale Wi-Fi provider and to connecting the 60,000 or so USO payphones to the NBN.

The Telecommunications Universal Service Management Agency (TUSMA) told Business Spectator that “in relation to the transfer of payphones from Telstra’s copper network to the National Broadband Network (NBN), the TUSMA agreement includes arrangements under which the USO payphones can be migrated to alternative infrastructure, including the NBN. Prior to commencement of migration, NBN Co is required to release a paper describing how a class of ‘temporary special services’ that includes USO payphones, must meet technical and other requirements as a condition precedent for migration to the NBN. At present, NBN Co has not released that paper, and TUSMA is not considering the migration of USO payphones as provided for under the agreement.”

What this means is that until NBN Co does what it is required to do TUSMA will not consider moving the USO payphones onto the NBN, even in areas where FTTP has already been rolled out and the copper to residences turned off.

But NBN Co appears to have been given a reprieve by the government and explained to Business Spectator that “on 11 December 2014, the Government released its response to the recommendations of the independent Vertigan Panel of review, including indicating that NBN Co should progress the white paper work in relation to ‘special services’ (which includes services to Telstra’s USO payphones) during 2015.”

What this means is that NBN Co has had five years to look at “special services” and we will need to wait until the end of this year, at the earliest, before we should expect to see any progress at NBN Co.

NBN Co’s glacial progress to monetise the NBN by taking on “special services” such as USO payphones is matched by its failure to offer wholesale Wi-Fi. And for this reason local communities around the nation are bypassing NBN Co and going directly to telcos for their community public Wi-Fi rollouts.

The duplication of Wi-Fi related infrastructure around the nation may be a positive outcome for economists that believe that infrastructure duplication is a positive sign of competition but should the Abbott government stay silent while NBN Co fails to make the most of an opportunity to monetise the NBN by offering a wholesale Wi-Fi product?

Mark Gregory is a Senior Lecturer in the School of Electrical and Computer Engineering at RMIT University.