ACCC to reject NBN points of interconnect proposal, report claims

The Australian Competition and Consumer Commission is set to reject a proposal from the National Broadband Network Company, saying its plan to provide 14 points of interconnect would “strand” competitors’ infrastructure, a new report claims.

The report comes as the NBN Co. hopes to have its deal with Telstra and the ACCC finalised by the end of December in order to proceed with pre-construction testing and preparation for a national roll-out.

As reported by the Australian Financial Review, the ACCC will urge the Government to reject one part of the $37.5 billion project due to fears that it will actually duplicate certain backhaul links owned by companies including Telstra and Optus.

This same situation has been forecast by wholesale telcos, who have warned the NBN Co. that it will have to pay compensation if their networks are left behind.

The ACCC report is a key part of the negotiations over how the network will be set up and priced. The NBN Co. has recommended 14 POIs – points where retailers can connect to the network – but it also wants more in rural areas.

Some telcos say this will lessen competition and make their networks ultimately redundant.

With the Federal Government set to debate the two proposals from the NBN Co. and the ACCC over the next few weeks, a conclusion to the debate will be even more pressing now appropriate legislation has been passed.

But Ovum research director David Kennedy points out the report is simply a draft and that the NBN Co, expects some back-and-forth.

“I think it’s pretty clear that the ACCC’s concerns are real, and the NBN Co. knows the score. They know they have to make the ACCC happy with their plans. This was always a draft plan, and they will work on things from here.”

Kennedy says the main concern is simply lack of competition.

“The criteria the ACCC is using here is lack of competition, and what it is looking for here is a network architecture which does not see the NBN Co. integrating into markets that are already competitive.”

“Now indeed, some of these backhaul markets that we’re talking about are not competitive – they are Telstra monopolies. In those cases, I don’t think the ACCC is going to mind too much if Telstra is duplicated or bypassed.”

Indeed, companies including Optus and AAPT have warned the Government that the 14 POI proposal is inadequate and would leave them stranded – a situation these companies have said would force the Government into handing over millions in compensation.

Kennedy says the ACCC will be concerned where the NBN is moving into markets, particularly in rural areas, that already have competitive backhauls. “The fact that NBN is going into competitive markets could be a lessening of competition.”

He also says the ACCC will flag areas where competition would be lessened in metropolitan areas.

“Potentially it’s in both areas. The concern is that the existing infrastructure of competitive players could be stranded by the NBN bypassing the infrastructure and now allowing interconnection at lower levels of the network.”

Meanwhile, the Government faces another legislative battle, despite having passed both the NBN and Telstra separation bills. Independent senator Nick Xenophon, who negotiated the release of an amended NBN business plan last week, has indicated he may have problems with pricing rules.

Xenophon is concerned that the NBN Co. pricing could benefit larger players and leave smaller ISPs out of the loop.

“This taxpayer funded enterprise needs to be a true level playing field to attract my support for the upcoming legislation,” he said. “But right now there is scope within legislation that could see larger telcos being granted cheaper access than smaller players and that is simply not acceptable.”

Greens senator Scott Ludlum has said those concerns are valid, but says there is still time to debate the legislation before it appears in Parliament.