The decision not to take action is based on the ACCC's interpretation of the law, in particular that TPG could avail itself of the level playing field exemption. This conclusion is that the existing assets were capable of providing superfast broadband and that the investments are only a less than one kilometre extension.
It is always somewhat unsatisfying to have to rely upon a regulator's interpretation of the law, rather than a court's. As a non lawyer I thought an argument could be made that none of these assets had ever been used before to provide VDSL to residential buildings so they weren't technically capable. TPG is doing something new - it is not just an extension of the capability.
Unfortunately the ACCC is also bound by the Model Litigant rules in Appendix B of the Legal Services Directions 2005.
I suspect this is the source of my long running concern that the ACCC is far more inclined to seek new powers than to test the powers it has in an actual court. It would seem to be far preferable to move to alternative solutions on the basis of a court determination rather than an ACCC interpretation that will have been necessarily conservative because of the model litigant rules.
That said, and since neither the Minister nor the ACMA who could also initiate action seems prepared to do so, we are back to the telco regulation merry-go-round. The simplest and most obvious remedy would be to amend the legislation to remove the per se exemption. To deal with genuine cases of simple network extensions it could be replaced by an authorisation regime for network extensions.
Instead there will be a two part process. Firstly, the VDSL service inside buildings will be subject to a declaration inquiry as outlined in the ACCC release. Such a process could take up to a year. Secondly, the Minister will commence consultation on a carrier licence condition that "would require owners of high-speed networks affected by the ACCC's declaration process to functionally separate their wholesale operations, and to provide access to competing service providers on the same terms as it is provided to their own retail operations."
This is much weaker than the obligation that would have applied to TPG if it was not exempt from the level playing field rules; they require structural separation. These rules also - in common with the level playing field rules - ignore the important questions about where an access seeker is required to interconnect with the TPG network. If it is at somewhere other than the NBN Co Points of Interconnect this creates a potentially higher cost for access seekers than TPG.
The impact on NBN Co if this is proceeds is immense. If NBN Co chooses not to compete (by building FTTH) with TPG then it has a significant financial impact. TPG will see merit in pricing its services at the same price points as NBN Co's - that is the "market price." TPG will have a monopoly on the buildings for FTTB because two providers can't both use the copper for vectored VDSL. But TPG will only build where its costs are sufficiently low to make a profit.
So NBN Co will lose low cost premises but average revenues.
If NBN Co chooses to compete with TPG by building FTTH then NBN Co also loses relative to the MTM base case because it incurs higher costs (but it may get slightly higher revenues).
But the damage does not end there. While some like Stephen Bartholomeusz think that the functional separation requirement will deter Telstra and Optus, a lot will depend on the actual drafting of that instrument. It is hard to imagine that the functional separation requirement will extend beyond the operating business that provides the actual VDSL service.
Indeed, Telstra and or Optus could go one better to provide a structurally separated by wholly owned vehicle that invests in the VDSL boxes and the fibre to connect to pre-existing fibre assets. This wasn't an attractive business proposition when NBN Co was going to build FTTP.
To be clear - this is a problem entirely created by the decision to deploy FTTB rather than FTTH.
Worse, the instrument being proposed by the Minister could give Telstra the opportunity to rethink what role it plans to take on FTTN. Would functional separation of only the FTTN business satisfy the Minister. The costs of functional separation that Bartholomeusz quotes were the cost of a separation of the existing business, not a prospective separation of a new business.
We see yet again the wonderful intricacies of telco regulatory policy. How the establishment of independent regulators that aren't actually empowered to decide law creates a chimera of oversight, and how once you change one thing how repercussions are felt through the rest of policy.
(A good case study for my CommsDay presentation on 9 October)
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