According to the Oz debate errupted at the Realising our Broadband Future smart infrastructure stream on whether NBN Co should build a layer 3 service or not.
As readers should know the "layers" refers to the 7 layer ISO model that was developed to create open standards. No standards in the real world actually adhere to the model, but at the lower levels it is often referred to. Layer 1 refers to physical indfrastructure (copper or fibre), Layer 2 to the active elements to tur that into a transmission medium (in this case the GPON gear to make ethernet services) while Layer 3 is the layer at which the communications protocols themselves are established including triple a - authentication, addrssing and something else.
A participant suggested that if NBN Co didn't provide an "optional" layer 3 service then the market would still be dominated y a few big guys doing layer 3.
If NBN Co offers a layer 3 service as well as a layer 2 service it will no longer be structurally separated, and the self same problem of competing with its downstream customers will occur to NBN Co as has occurred to Telstra.
People reading this debate need to look more closely at the reference model architecture diagrams, and understand that there are probably 4 ethernet ports on the ONT. Let's just for now label one of these ports "services" and recognise that this is the port that is addressed by the kinds of "trans-sectoral" services that Budde talks about and specifically referred to in his comments in the linked article.
The architecture model fully accomodates the provision of these services direct to premises through Layer 2 with the application provider managing Layer 3 - which will not traverse "the Internet" at all. That is, and this is important, not all services are delivered "over the top" of the public internet.
If Government is sensible it will recognise the benefit of building one infrastructure for these "services" applications that interconnects at all the NBN Co POIs. This is also important because it means these services never form part of the Internet payload, and include no user generated backhaul component. In other words once the line cost from POI to premises is covered there is no marginal transmission cost.
(Note a similar argument occurs over how NBN Co should configure services to use one of the Ethernet ports as an IPTV port).
Layer 3 should NOT be an option for NBN Co.
PS I think the Cisco dude needs to count the number of ISPs out there today already delivering layer 3 service over layer 2 or lower purchased access infrastructure. The risk to market structure will be the extent to which participants can bundle the layer 3 ISP service with other services - either other carriage services like mobiles and voice (through the ATA port on the ONT) or content services.