Industry slams government's $4.7bn broadband tender

The Federal Government's $4.7 billion next-generation broadband tender has met with scathing reviews from industry representatives, who claim the lack of regulatory detail raises alarming questions about the future competitive landscape.

The Department of Broadband Communications and the Digital Economy last week called for submissions to build the government's $4.7 billion Fibre-to-the-Node (FttN) network. The National Broadband Network is aimed at providing 98 per cent of the Australian population with access to high-speed broadband of at least 12Mbps.

Submitted proposals will be assessed by a panel of experts assembled by the government last month. It includes representatives from the Australian Communications Authority, University of Melbourne, University of Adelaide and Allphones. The panel will issue recommendations to the Federal Government by the end of the year.

One of the biggest concerns expressed by industry representatives is that the proposal doesn't specify the regulatory conditions to be imposed on whoever ends up building the network. Several claimed a nationally developed and owned network under Telstra, the likely winner of the contract, could create a monopoly on next-generation broadband services.

Members from the Optus-led G9 consortium, arguably the only potential rival to Telstra for the contract, are outraged by the proposal. Internode and iiNet which sit in the G9 consortium alongside Optus, AAPT, Macquarie Telecom, PowerTel, Primus, Soul and TransAct -- have labelled the proposal ill defined, uneven and biased towards Telstra.

"There are no technical specifications, no architecture defined for interconnection, access or service, and there is no regulatory framework to govern how different companies must deal with each other in relation to 'declared' services," iiNet regulatory affairs manager, Stephen Dalby, said. "There aren't even any 'declared' services. This is Telstra's proposal, first put forward in 2006. It has been adopted by government and scaled up -- it will allow Telstra to escape the regulatory constraints currently in place around a copper-based network."

Dalby said a review of process shortcomings and the resetting of timeframes were needed to ensure a good outcome could be achieved for the market. While supportive of Conroy's plan to deliver high-speed national broadband, local independent telco analyst, Paul Budde, said the FttN proposal was unsatisfactory because it didn't specify any execution plans and could lead to anti-competitive behaviour.

"In this situation you can't interpret it [the proposal] in any other way but that it's extremely favourable to Telstra," he said. "The proposal doesn't guarantee we will have a competitive environment. That will mean everyone has to pay higher prices and there won't be any innovation."

One major unanswered question is the future of the ADSL2+ network once a FttN network is rolled out. In a statement, Internode managing director, Simon Hackett, said the industry must preserve existing ADSL2+ services in parallel to FttN to ensure competition. Failure to do so will result in stranded investments, prolonged legal battles between parties impacted by the FttN tender around loss of past and future investment, and loss of competition, he claimed.

"Only the continued presence of competitive services in the market can provide sustainable protection against monopoly rent being ultimately extracted from consumers," he said in a submission to the expert panel overseeing the National Broadband Network.

IDC telecommunications analyst, David Cannon, labelled the government's FttN proposal "much ado about nothing" if the ADSL2+ network was maintained, but a detrimental change if the copper loop was cut.

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"Working off one central infrastructure isn't going to work on multiple layers. It stops the competitive environment, solidifies the business model we have to follow going forward, and dictates the services consumers have to buy," he said. "We will pay more for FttN than what we pay today."

In a statement, Communications Minister, Stephen Conroy, said the government has committed to providing up to $4.7 billion in funding and will consider any necessary regulatory changes to enable the rollout. In recent media reports he has also been quoted as considering a structural separation of Telstra to ensure competition.

"We don't need $4.7 billion if we want to address the regulatory environment and have the right framework in place," Budde said. "The Labor government, like the previous one, is struggling to do what everyone is telling them to do."

But IDC's Cannon said the debate about next-generation services should be taken away from technology and onto social usage factors. The tight schedule set by the government for the FttN rollout would only limit these discussions.

"The thing about FttN and the choice of technology is that it doesn't address the social reasons for why we're building this network," he said. "What do we want to do with it? Is it to make improvements to healthcare and connectivity in the bush? Is it to reduce waiting times and accessing doctors from home? Is it so people in regional areas can videoconference with their counterparts in metro areas? Or is it so hospitals can transfer large files from one location to another? In some of these cases, you don't need the 50Mbps or more access speeds fibre will provide.

"That's why the argument overall is flawed. If we get agreement on what we want the network to do, then add the bandwidth requirements to that, the question of what technology to rollout will be answered."