Broadband’s increasing status as a critical driver of service industries such as health and education means the forthcoming Australian national broadband network must be truly open access with utilities-based pricing at its core, according to a report issued by telecommunications research firm BuddeComm.
The report warns that without a change in access and pricing structure, Australian businesses and consumers will continue to lose competitive advantage and fall behind the rest of the developed world.
BuddeComm conservatively estimates that broadband will add over A$100 billion (NZ$125 billion) to the Australian economy over the next 10 to 15 years through distribution of services to customers, and as a communication, electronic marketing and electronic production tool.
BuddeComm director Paul Budde says full broadband deployment can significantly boost productivity and allow Australian organisations to tap into overseas markets. The flipside is that overseas organisations are paying less to compete in Australia’s market.
“That in itself is a tricky area because if we have a lower quality of broadband and higher broadband prices, that is an advantage to overseas companies to compete on the Australian market, and it’s a disadvantage to Australian companies. We are running at least two years behind the rest of the world so we have to be careful that running behind doesn’t start costing the economy,” Budde says.
The key factor of this shortcoming, according to the report, is the move from technology to affordability. While ADSL2+ technology has become widely available, the price is too high for more than 60% of current broadband users.
Budde, often critical of Telstra, believes an open access network that removes Telstra’s monopoly on the current infrastructure would solve the problem.
“You need an open access network so everybody can freely compete on the network, and that has to be linked to affordability. Our prices are somewhere around double the prices they charge in Europe, so that is [not stimulating people to move to broadband],” he says.
“In other countries, web pages are very rich, video-based pages, which is a much better sales and marketing tool than just text. So we are hampering the Australian economy by not giving full throttle access.”
“If you look at telecommunications as a national interest, you have to price the infrastructure as you do other utilities like gas, water and electricity. At the moment the ROI that Telstra wants is twice as much as it has, and that is the reason why in many situations our access price is twice as high as in other parts of the world — that is the real culprit that the government will have to regulate in order to solve,” Budde says.
Telstra spokesperson Jeremy Mitchell disagrees, saying the high concentration of people in small geographical areas such as Europe or East Asia means it is unrealistic when compared with the low concentration of people spread over Australia’s vast geographical area.
“If you look at any international comparison of OECD countries, from the entry price to the high level deluxe broadband services, we are on comparison to them. Some are lower, some are higher, but if you look at the range that is available through the OECD we are comparable to other countries,” Mitchell says.
“When you look at the terrain and distances Australia has, whether its telecommunications, roads or electricity, the costs are higher for geographic reasons,” he says.
Budde wants to see broadband access regulated in the same way as other utilities, where utilities-based pricing could see the cost of broadband drop to around A$30 a month instead of upwards of A$70.
“It’s worthwhile considering utilities-based pricing rather than the sorts of profits Telstra would like to see. It’s understandable [for Telstra] — if you are a monopoly you go for the high prices, but it’s not in the national interests to do so,” he says.
Telstra rejects claims that it isn’t acting in the nation’s interests, stating that it’s investment in the Next-G network is evidence of its commitment to bringing Australia into the future.
“We have delivered to Australia the world’s fastest and largest mobile wireless broadband network with Next-G, it’s the envy of the world. We want to do the same in the fixed line area, but because of regulations and uncertainty over the last three years we’ve been unable to do that,” Mitchell says.
Senator Conroy has stated that regulatory changes are required and that an open access network is the path Australia’s telecommunications industry must take for a national broadband network. But Budde is cautiously optimistic that the request for proposal has not made it clear exactly how that will be regulated.
“It will be a very risky process because Telstra has indicated they are not happy with that and have threatened the mother of all legal battles if the government wants to do something like that. But I also believe the government is adamant to get it right this time,” he says.
Without any structural changes proposed under the RFP, BuddeComm warns it is in Telstra’s interest to build a new monopoly as quickly as possible, this time based on FttN.
Mitchell, however, insists Telstra is committed to building a high speed broadband network that is completely open and competitive, and has already proved it is not out to stifle competition for its own benefit.
“The whole thing about a wholesale open access network means that people will be able to compete and there will be competition. Telstra Retail will be given no preference over other competitors and will have the same standards,” he says.
“Telstra Wholesale already has a wholesale regime that works, and there is competition in that area already. We aren’t afraid of competition, we welcome it and that’s why we’ve always said we welcome an open access network.”
Budde says consistent comparisons of the new national broadband network to international benchmarks, and continual analysis by key stakeholders from industries reliant on telecommunications technologies, is the way forward.
“The government understands that the new NBN requires regulatory changes, and in one way or another we need to create an open access network. The minister has clearly indicated he is all in favour of that, now it just comes down to the execution.”
“The thing we want the most is a quick outcome, we have waited three years for this and Australia is falling behind the rest of the world in the development of this vital infrastructure that will underpin our economy and underpin innovation and future prosperity,” Mitchell says.
“We need a fibre network to deliver it to Australian homes. There is nothing on the horizon in the next 20 years or so that will replace fibre as the conduit. It will be very much a bedrock for our economy and infrastructure for a long time, so it’s important we get it right and delivered. And the rest of the world is already doing that and we’re falling behind the more we wait.”