AAPT warns NBN it wants compensation if its networks are made redundant

Telco veteran Paul Broad has warned the NBN Co. that it should be prepared to hand out compensation if the network builds over existing infrastructure owners and makes demand for their services redundant.

The comments come as independent MP Tony Windsor has also said he would oppose an NBN cost-benefit analysis as suggested by the Coalition, even though communications spokesman Malcolm Turnbull said a tick from the Productivity Commission may convince the opposition.

AAPT chief executive Paul Broad has said the NBN should be careful it does not overbuild the company’s own services, or else it will request compensation much in the same way Telstra has for shutting down its copper networks.

The comments come after the Australian Competition and Consumer Commission released a paper last week outlining plans to provide a universal wholesale price to ISPs. In order for this to be achieved, the network needs to establish a certain number of “Points of Interconnect”.

These POIs are points where the internet retailers can access the NBN. The discussion paper comes after various negotiations between the ACCC, Telstra and the NBN Co.

One of the proposals put forward by the NBN Co. is a model where 14 POIs would be constructed. However, nearly 200 additional POIs would be constructed to service regional areas when needed – which could leave some existing backhaul networks “stranded”.

Broad says this could leave some of his company’s networks useless, along with networks owned by wholesale providers including NextGen, Pipe and Optus.

“If they have sevenor 14 POIs, then they are going to have to overbuild all of us, so they had better start writing cheques for compensation. All they will do with that small number is re-monopolise the industry,” he told The Australian.

“If you want to enhance competition and you want consumers to benefit, then you use the fibre in the ground that is there already. That means you should have about 500 points to start with, because that’s how many exchanges the telco industry has equipment in at the moment.”

However, Ovum senior consultant Craig Skinner says there isn’t need for talk of compensation just yet.

“Paul is worried that depending on pricing, demand for the wholesale backhaul services will disappear. The NBN Co. is proposing this as a structure, but they will still be looking to the market for other alternatives.”

“At this point, it’s much too early to be talking about compensation for these other companies because they have the chance to provide a competitive service and negotiate with the NBN. There will be submissions put forward and I’m sure AAPT will put on forward as well.”

Meanwhile, a debate still rages regarding the possibility of the Productivity Commission conducting a cost-benefit analysis of the NBN. Turnbull is set to introduce a private members’ bill today that would require the Government to submit the NBN to a cost-benefits test.

Among a number of other measures, the bill requires the Productivity Commission to release its report before the middle of next year, along with establishing a committee for overseeing the rollout of the network. Turnbull argues approval from the Commission would play a big part in getting the Coalition’s approval.

“If the Productivity Commission… were to give it a big tick from a cost-benefit point of view, it would be incredibly persuasive,” Turnbull told Channel Ten yesterday. “I think it would obviously change a lot of people’s perspectives, have a huge impact. But nobody in their right mind gives a blank cheque to anyone.”

However, the idea has been met with contempt from both the Government and one of the independent MPs holding the balance of power, Tony Windsor. He told ABC Radio this morning the idea of submitting the NBN to a cost-benefits test doesn’t make sense given the nature of the project.

“When you look at the number of projects that have been rolled out across Australia, if they’d done a cost-benefit analysis on the Snowy scheme for instance, it might be interesting for Malcolm to get one done in relation to that because it would probably show up that it wouldn’t be a viable operation,” he said.

Communications minister Stephen Conroy also told ABC’s Insiders the Coalition may not ever support the network.

“They have refused to allow debate in the Senate,” he said. “They said we had to release the ACCC (Australian Competition and Consumer Commission) report. They said we had to release McKinsey’s report. We have done all of that.”