ACCC won't block TPG's fibre-to-the-basement rollout

NBN Co "welcomes clarity" on issue

The Australian Competition and Consumer Commission (ACCC) won't step in to halt Internet service provider TPG from rolling out fibre-to-the-basement services that could compete with National Broadband Network infrastructure, but the competition watchdog is likely to step in and regulate the provision of vectored VDSL services in apartment blocks.

The ACCC announced today that it would take no action after investigating a complaint that TPG's rollout ran afoul of 'anti-cherry picking' rules designed to prevent telcos undermining NBN Co's business case.

The rules are intended to stop high-speed broadband infrastructure that would compete with the NBN being built by telcos in high-value or low-rollout-cost areas.

Teclos are prevented from rolling out broadband infrastructure capable of delivering 25Mbps download speeds unless they offer the service on a wholesale-only basis. A loophole in the cherry picking rules means that network operators can extend a 'super-fast' broadband network that existed prior to 2011 by up to a kilometre.

"Having carefully examined TPG's plans, the ACCC does not propose to take further action in relation to TPG’s planned fibre to the basement network rollout to supply residential customers in high-rise buildings in Brisbane, Sydney, Melbourne, Adelaide and Perth," the ACCC's chairperson, Rod Sims, said in a statement.

"The ACCC has reached this decision based on information and evidence that TPG’s networks were capable of supplying superfast carriage services to small business or residential customers at 1 January 2011 [when the anti-cherry picking rules were legislated], and confirmation that TPG is not extending the footprint of these networks by more than one kilometre."

The ACCC today said that it would consider regulating access to vectored VDSL services as part of an inquiry the watchdog is conducting into the regulation of superfast broadband access.

"The ACCC will now conduct a declaration inquiry into whether a superfast broadband access service like the type to be provided by TPG over its fibre-to-the-basement networks should be the subject of access regulation," Sims said.

"Amongst other matters, the inquiry will consider whether regulation is necessary to ensure that consumers in TPG connected buildings can benefit from competitive retail markets for high speed broadband services."

"As they have stated, the expectation is that the ACCC will consider declaring these services. If so TPG will have to make them available, at a minimum, at the declared wholesale price and terms to RSPs," said independent telecommunications analyst Chris Coughlan.

"I'd expect these terms to be similar to those that are provided by NBN Co. TPG will be able to stall this through prolonged negotiations with the ACCC and RSPs, then setting standards and POI [points of interconnect] locations for connecting and integrating with RSPs."

"Now the government has basically decided to give us only a second rate broadband solution [by ditching fibre-to-the-premises], I am in favour of ending the infrastructure monopoly that NBN Co has, at least in metropolitan areas," telco analyst Paul Budde said.

"While everybody (including the minister) agrees that FTTP is the end goal, there is no clear path towards that solution. Under a monopolistic regime and without the government willing to provide that path to [fibre-to-the-home], there is the potential that Australia for a very long time will be stuck with the halfway house.

"There is no stimulation for NBN Co to move beyond the MTM [multi-technology mix]. This gap however could potentially be filled by competition. I would suggest that now the government has opted for the inferior solution that it should open up the market to companies that are willing to make the investment to improve on that."

The ACCC's decision on TPG is "an opportunity to open up that debate and to stimulate, in the metro markets, infrastructure-based competition," Budde said, though the analyst said he was concerned about regional areas being left behind.

In the wake of the ACCC announcement, Communications Minister Malcolm Turnbull flagged the introduction of a new licence rule for telcos that could potentially force companies including TPG to separate their retail and wholesale arms.

Read more: Broadband projections fail reality test: Rod Tucker

"NBN Co welcomes clarity on this important area of policy and will be keen to see an expeditious inquiry process," an NBN Co spokesperson said.

"We have a competitive offering in the market which will continue to pursue with vigour. The NBN enables strata holders and tenants the ability to benefit from the full fruits of retail competition in telecommunications."

NBN Co's CEO, Bill Morrow, has previously warned that buildings that sign up for TPG's FTTB offering run the risk of being stuck with a single retail service provider.

“It’s one thing for a provider to aspire to have an open access network; it's another to do it in practice," the NBN Co spokesperson said today.

"The NBN is an open access wholesale network. That means retail telecommunications providers can compete on fair and equal terms – to the benefit of consumers."

Read more: Turnbull flags new rules on retail, wholesale separation for telcos

"TPG welcomes today’s announcement from the ACCC concerning TPG’s fibre-to-the-building project," a TPG spokesperson said.

Competing infrastructure could potentially "severely" impact NBN Co, the organisation's chairman Ziggy Switkowski has previously claimed.

The government-owned enterprise has suggested that telcos rolling out competing infrastructure should be forced to pay a levy to subsidise the rollout of the National Broadband Network in areas where broadband services are likely to deliver lower revenue or be expensive to roll out.

TPG has previously argued that the economics of NBN Co would not be "threatened significantly" by the roll out of competing last mile infrastructure.

In a submission to the Vertigan panel — the government-appointed panel that conducted the cost-benefit analysis of the NBN — TPG argued that "Infrastructure based competition delivers the best outcome to end users".

"The NBN was not intended to be a fixed line monopoly and it should not be a fixed line monopoly," the ISP argued in a submission to the panel's review of the NBN regulatory environment.

"Carriers (other than Telstra) who had invested many hundreds of millions of dollars building 'superfast' networks prior to 2011 were, and should remain, permitted to make use of those networks to compete with the NBN and other broadband providers. The Government expressly wrote that right into law (Parts 7 and 8 of the Telecommunications Act)."

Up to 500,000 premises could be covered by TPG's FTTB rollout. TPG has said that many of the premises are already in Telstra's HFC footprint. Under the revised plan for the NBN, NBN Co will seek to take over and operate HFC networks as part of a 'multi-technology mix' for the network.

In April NBN Co announced a "commercial response" to the TPG FTTB rollout, accelerating the rollout of NBN services to apartment blocks in inner-city areas in Brisbane, Melbourne and Sydney.

Follow Rohan on Twitter: @rohan_p

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