Following a two-year review process, the Australian Competition and Consumer Commission (ACCC) has ruled in favour of regulating access to wholesale superfast broadband services, and declared a five-year superfast broadband access service (SBAS) on all non-NBN pre-2011 superfast broadband networks.

The superfast broadband access service declaration allows retailers to access non-NBN network services with a downstream data rate normally more than 25Mbps.

The definition covers Layer 2 fixed-line broadband services with a downstream data rate that is normally more than 25 megabits per second, and Fibre Access Broadband services.

As a result, the SBAS will apply to services on networks including TPG’s fibre-to-the-basement/building (FTTB) networks, Telstra’s fibre-to-the-premises (FTTP) networks in South Brisbane and Velocity estates, and iiNet’s VDSL network in the ACT and HFC networks in regional Victoria.

Why declare an access service?

Prior to the ACCC declaration, wholesale superfast broadband services supplied as part of the National Broadband Network were regulated under its Special Access Undertaking and published Wholesale Broadband Agreement (which are then on sold by RSPs to end users).

Meanwhile, non-nbn networks built or extended by more than one kilometre since 1 January 2011 were subject to the “level playing field” obligations of the Telecommunications Act 1997 and therefore required to operate on a wholesale-only basis (as nbn does) and provide access to superfast carriage services upon request (which are also on sold to end users by RSPs).

However, non-nbn networks built before 1 January 2011 were not subject to wholesale access regulations and could be operated on a wholesale only, wholesale and retail, or retail only basis. This included TPG’s FTTB rollout, as the existing network would be extended less than one kilometre.

In 2014, the ACCC began a public inquiry into whether to declare an SBAS to cover such networks, in response to competition concerns raised by the panel conducting the Vertigan Review regarding the use of vectoring of VDSL services and its own finding that TPG’s fibre-to-the-basement (FTTB) network rollout to large apartment buildings in metropolitan areas would not be in breach of the level playing field provisions of the Telecommunications Act.

The Vertigan Committee recommended that vectored VDSL services should be declared by the ACCC and opened up as a wholesale product available to rival RSPs, to counter concerns about the potential creation of small technical non-nbn monopolies.

The use of vectoring in vectored VDSL2 technology with FTTB or FTTN connections removes interference that would otherwise reduce the data speeds that could be provided on the copper lines (which make the final connection to each individual premise) within a single cable.

However, vectoring is only effective if there is only one network provider operating all the copper lines within a cable. The Vertigan Committee was concerned that this could inhibit competition if providers were to install vectored VDSL2 equipment in multi-dwelling buildings without providing access to other retail services providers on competitive terms.

nbn had also expressed concerns that the potential for vectoring in the TPG FTTB rollout, which aims to connect approximately 500,000 premises in large apartment buildings in major metropolitan areas to superfast broadband, would mean premises connected by TPG may only have the option of the one RSP.

After a period of consultation, in which submissions were received from various industry players, the final decision to declare the SBAS was announced in late July 2016.

The ACCC states that the SBAS is intended to counter the “natural monopoly characteristics” of superfast broadband networks and open up greater opportunity for competition between retailers, as well as promoting consistency of regulation across all networks supplying superfast broadband services.

“What this access declaration does is provide retailers with the opportunity to enter superfast broadband markets, and in turn increase competition,” ACCC Chair, Rod Sims, said.

“This decision will also help to simplify and clarify the existing regulations that apply to superfast broadband services, allowing all retail providers to compete on their relative merits, regardless of the technology used, when the network was constructed, or who operates it.”

Implications for superfast broadband networks

During the inquiry, the ACCC received eleven submissions on the draft decision to declare a SBAS. Organisations that made submissions included TPG, Telstra, Optus and nbn. The majority of these submissions focused on the potential impact of the declaration on competition.

TPG’s submission was the sole submission arguing that the SBAS should not be declared.

TPG disagreed with the ACCC’s conclusions that:

  • The long-term interests of end users (LTIE) would be promoted by the declaration of SBAS
  • Competition in the downstream markets for retail superfast broadband services on reasonable terms required the declaration of SBAS
  • Promotion of the economically efficient use of telecommunications infrastructure required the declaration of SBAS
  • All superfast broadband services are likely to display natural monopoly characteristics
  • The technical and economic barriers to entry mean that it is unlikely to be economically efficient for multiple infrastructure providers to deploy superfast broadband networks in the same area.

TPG considered the SBAS declaration to be not in the best interest of end users primarily due to discouraging investment in infrastructure-based competition due to the threat of regulatory burden. It also argued that a SBAS was unnecessary for retail competition.

The submission states, “It is of some note that infrastructure-based competition flourished in the Australian market without regulatory intervention on parties that did not have substantial market power. Optus installed a HFC network. Hutchison installed a 3G network.

“Optus and Vodafone installed 2G and 3G networks. Neighbourhood Cable and TransAct installed HFC and fibre networks. PIPE Networks and Amcom installed fibre optic networks. There are many other examples.

“It is interesting to observe that the spark for this SBAS inquiry has only arisen since TPG announced its intention to roll out a VDSL2 network to buildings in CBD areas under an expressly created exemption to rules that would otherwise have been considered anti-competitive (the so called anti-cherry picking rules).

“VDSL and other high speed infrastructure competition existed for many years, including HFC cables (which have been capable of running up to 30Mbps for some years), other VDSL deployments such as that of TransAct and Telstra’s FTTP networks in South Brisbane.

“Prior to the NBN and TPG’s rollout, there had been, to TPG’s knowledge, no call for declaration of those networks, much less actual declaration.”

“However, for reasons that are not clear to TPG (but which could include strong submissions from nbn, or perhaps the exercise of commercial power of parties negotiating contracts for the National Broadband Network), regulation on TPG and other legitimate infrastructure-based competitors has been written up as being critical for the LTIE.

“TPG submits the countervailing view. If declaration of SBAS is made, it will create considerable uncertainty for the investors of capital looking at bringing new technologies to Australian consumers.”

TPG stated that while “vectoring may cause some interference impacts, VDSL (in particular TPG’s FTTB network) does not necessarily mean the end of the infrastructure-based competition in a building or area.”

The rationale for this position was that other technologies such as HFC could still be used to connect the buildings with TPG’s FTTB to the NBN, and that advances in wireless technologies such as 4G and 5G mobile broadband would provide additional competition.

TPG puts forth the view that mobile broadband should be considered as a possible substitute for fixed broadband services and that to continue to treat mobile broadband as merely a complement is to ignore the enormous developments in that market.

This mirrors a view expressed by a number of industry commentators that, in the long-term, advancements in wireless broadband may prove the biggest competitive threat to the NBN.

Overall, TPG suggested that instead of a SBAS, the ACCC should just extend the carrier licence conditions already enforced.

On the other hand, nbn strongly supported the ACCC declaring a SBAS, although it did not support some of the suggested exemptions in the draft decision relating to small network providers and networks servicing business customers.

It also suggested that the service description should capture all download data transfer rates at Layer 2 of 12Mbps or more on non-nbn superfast broadband networks.

Optus supported the SBAS, but recommended that the declaration make clear that the access obligations only apply in so far as non-nbn SBAS networks have not been overbuilt by a network provided by nbn.

The company also suggested that the ACCC needed to be aware of the need to ensure integrated SBAS providers did not discriminate in favour of their own downstream retail products, and to avoid imposing unnecessary costs on nbn, which should be borne by SBAS providers.

Telstra generally supported the SBAS, but suggested that the draft decision’s scope was too broad and that the SBAS should not apply to its FTTP networks in South Brisbane and Velocity estates.

The rationale given was that the FAB service is not a Layer 2 bitstream service and any requirement to provide a Layer 2 bitstream service over those networks would incur substantial and unnecessary costs and operational and technical complexity that would significantly outweigh any benefits.

Where to now?

The SBAS declaration of service has triggered an inquiry into the price and non-price terms of access that should apply to the SBAS. The ACCC has set interim price and non-price terms and conditions to apply for the next 12 months while it completes this inquiry.

The ACCC states that during the inquiry it will look closely at the likely compliance costs for smaller operators, being mindful of the price benefits competition can bring to consumers.

It remains to be seen whether TPG might reduce the scope of its FTTB rollout as a result of potentially reduced incentive. Meanwhile, the potential of competition to fixed line services from mobile broadband technologies remains looming in the distance as a future possibility.

Lauren brings a fresh approach to content. While she’s previously written for publications as diverse as Australian Geographic, The Border Watch and Girlfriend, she’s found her true passion in her current role as an editor in the world of energy and infrastructure trade magazines.

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