| " Telstra may be paranoid, but it would appear they really are out to get it. Almost every emerging aspect of the proposed national broadband network contains new and damaging news for the group.
Late last year NBN Co issued a consultation paper and invited submissions on its planned network design and product offerings. It followed up with a series of industry forums. It has now issued its own response to the 50 or so submissions it received.
The basic proposed design of the network was generally greeted warmly. NBN Co will connect premises to about 210 points of interconnect around the country with fibre, offering a layer 2 bitstream product.
From those points of interconnect in effect, the outer edge of NBN Cos version of Telstras customer access network NBN Co will use existing backhaul fibre provided by current infrastructure owners to connect the fibre access networks in the various cities and regions.
However, there is an exception to that basic model.
NBN Co proposed to initially offer two wholesale products to retailer service providers. One is describes as a local ethernet bitstream (LEB) and the other as an aggregated ethernet bitstream (AEB). They are very similar products the difference is that the AEB product effectively bundles the LEB offering with backhaul that aggregates regional areas and connects them to a single point of interconnect.
The bit that would, and did, disturb Telstra is that the AEB product is supposed to be offered in rural fibre services areas where there is no contestable backhaul services beyond the point of interconnect. Rural areas? No contestable backhaul? Ah, areas where only Telstra has backhaul.
So, in regions where there is no competition between potential providers of backhaul, NBN Co would use its fibre to produce short-haul backhaul. In those regions the LEB product wont be made available the retail service providers will have no option but to buy the AEB product and backhaul capacity owned by NBN Co.
NBN Co has estimated that there will be about 10 million connections to premises within its network. About 15 per cent of them 1.5 million premises are within the footprint that it expects to provide AEB access to.
The rationale for forcing service providers to buy a bundled product rather than have the choice of using the NBNs backhaul or Telstras is to ensure that no service provider is disadvantaged relative to another. If Telstra were able to purchase an LEB product but use its own backhaul while everyone else either had to buy an AEB or buy from Telstra its retail business might have an advantage over its competitors.
Not surprisingly, Telstra was the only dissenter NBN Co cited in the responses it received to the plan. Telstra was concerned that the proposal would deny NBN COs customers the ability to acquire services from existing infrastructure. It described the plan as "neither pro-competitive nor pro-choice".
NBN Co said it appeared Telstras concern stemmed from a fear it wouldnt be able to use its existing backhaul assets for both self-supply and to make a wholesale offer to retail service providers.
Telstra wouldnt be the only party potentially affected. By only offering the AEB product in some regions NBN Co would not only harm Telstra whose infrastructure in those regions would effectively become redundant and its investment stranded but stymie any prospective new investment in competitive backhaul in those areas. Presumably, NBN Co will make Telstra an offer for its infrastructure that is too good to refuse.
Conveniently, that would ultimately leave NBN Co with an infrastructure monopoly in the areas that are least economic to serve and where, if there were competitive infrastructure, its own economics would probably be most affected. The cost of servicing those regions is presumably a major part of the explanation for why there is no competitive backhaul there today.
The damage to Telstra may be an unintended consequence of NBN Cos pursuit of a level playing field for retail service providers but almost every announcement or piece of draft legislation issued in relation to the NBN seems designed to tear another strip of value from the already badly wounded giant and to make it ever more difficult for Telstra and NBN Co to strike a commercial arrangement while the already daunting pile of uncertainties continues to build. "
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