Aussie telco critic calls for NZ-style regulation

Tough, New Zealand-style regulation recommended to break Aussie monopolies

While Australia grapples with its planned National Broadband Network (NBN), one prominenet critic says New Zealand-style regulation is needed to kickstart competition.

Telecommunications infrastructure investment through a National Broadband Network (NBN) will help Australia weather the economic crisis, but only if the ACCC and the government can pull their heads out, get the NBN players co-operating and turn the first sod before 2010.

That was the message of telco analyst Paul Budde at a roundtable in Sydney recently, as he offered a scathing assessment of Australia’s position at the crossroads between years of

telecommunications stagnation and the transformation to a digital economy.

“[Telecommunications] infrastructure is perhaps the most important infrastructure that needs to be deployed if we want to pull out of the crisis and move forward to a digital economy...telecommunications is not the solution to the financial crisis, or education or energy problems, but none of these problems can be solved without telecommunications and IT,” Budde says.

“It’s a shame and very sad that this government is failing to show leadership. It has now been a year and the government has done absolutely nothing. They are sitting on their bums hiding themselves behind the tendering process which is totally flawed and not going to work. Nothing has happened in the last three years.”

Budde levelled the toughest criticism at Senator Conroy’s department for leaving it up to the industry to propose regulation of the NBN, while dictating the technological terms of the network.

“We have a government that is so incredibly weak it doesn’t dare come up with policy or guidelines on how we actually need to do this. The government is basically saying to the industry ‘You come up with the plans, the ideas and policies and then we’ll have a look at it and make a decision’,” he says.

“We are the only country in the world to do it this particular way, everyone else is coming up with the guidelines, regulations and policies first.”

According to Budde, tough government initiatives and heavy involvement of competition regulators in countries like New Zealand and the Netherlands, where next-gen networks reduced the monopolies of incumbents, needs to happen in Australia.

“None of the incumbents around the world voluntarily gave up monopolies. There have been government initiatives and a huge big stick. We never use the stick in Australia, we pussy-foot around — the regulator is talking separately; the government is talking separately; Telstra is talking separately, and the rest of the industry is talking separately. No one is sitting around the table and I think it’s a pity that neither the government nor the regulator have facilitated more,” he says.

Budde believes Senator Conroy got it wrong in dictating the technological terms of the network while not clearly defining how it would be regulated. In order to keep pace with the rest of the world, Australia should set its telco infrastructure goals in line with the top OECD countries, he argues.

“It’s so ridiculous for a government to come up with technology solutions when they have absolutely no idea what they are talking about. The current infrastructure policies are already outdated. [12Mbit/s minimum speed at 98% coverage] might have been a great thing when Conroy dreamt it up in 2005-06, but now the rest of the world is talking about 20-50Mbit/s.”

Leaving it up to the industry to propose how the network owner will operate has essentially boiled down to an argument over whether Telstra should or shouldn’t be structurally separated, as the incumbent is the clear favourite to win the bid.

However, the atmosphere of regulatory uncertainty created by the government means that by the time the tenders are in at year’s end, and the bid is awarded, Budde predicts 2009 will most likely be spent sorting out legislation or in the courts by Telstra fighting separation.

“By March next year there will be some sort of outcome and that will definitely include regulations or legislation. On one side we’ll get disputes, guaranteed disputes, and [on the other side] I’ve never seen regulation or legislation done overnight so the rest of 2009 will be spent sorting that out. Nothing is going to happen in 2009 for the NBN, 2010 at the earliest.

“There’s no use going though this tendering process without a regulatory framework. Even if we do get it there will be endless legal issues in March. The worst case scenario is we get another Telstra monopoly, the second worst case scenario is we have ongoing legal battles through 2010, 2011.

“The best case is structural separation. In one way or another the government will have to make a decision on structural separation and make a strong position, so why not do it early? We’ve already wasted three or four years, do we want to waste another?”

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