NBN panic could sink our broadband future

Is Malcolm Turnbull now in a similar position to the one Stephen Conroy found himself in back in 2009?

At that time – under the pressure of destructive political opposition from Tony Abbott, who threatened to kill the NBN – certain regrettable political decisions were made. These would have been unnecessary had there been bipartisan support, the normal state of affairs in relation to telecoms policies around the globe.

Are we now facing a similar situation – this time as a result, not of political opposition, but of the political reality that the model being promoted by the current government is not going to work, certainly not in the way Turnbull had envisaged.

This realisation could easily generate political panic, which could see this government making decisions that will be regretted later and will again slow the country down on its desperately needed path of digital economic and social transformation.

The government needs the cooperation of Telstra to push the multi-technology mix (MTM) through. That might not be a problem in itself, but Telstra is a business, not a political party, and it knows that the MTM is very complex and that this will not be the final solution – everybody involved in the NBN agrees that Fibre-to-the-Premises (FttP) is the end solution.

So how do you build a model that facilitates MTM and allows for FttP migration, but at the same time does not include a return to the original NBN plan, which was aimed at doing the whole project right in the first place by going straight to a solution with FttP in mind?

My interpretation is that, like most of Australia, Telstra prefers a model with a clear FttP end result. But for political reasons (to avoid a so-called backflip) the current government doesn’t want such a model. So it needs to concoct one around MTM, but one that at the same time does not obstruct a move towards full FttP.

Telstra is in the middle of this. In order for it to build the MTM solution – it is the only one in the country who can effectively do that – it will need to make strategic decisions that require a range of conditions and concessions from the government. Key among these will be:

That the government takes care of all the financial risks linked to the MTM model – Telstra certainly doesn’t want to pay for all the surprises that will arrive once building an MTM is started. So it will need plenty of financial guarantees and concessions from the government beforehand.

As the government will be reluctant to pay more money to Telstra it might want to seek compensation through regulatory concessions, and that is something that could further undermine the already weak competition in the Australian telco market.

Telstra also will think of its own business future, so in one way or another the deal needs to incorporate the fact that FttP will eventually be needed; so they need to have a path forward within that MTM plan.

Telstra also needs to be protected against the change of political direction that most certainly would arise if a new government were to come up with yet another plan. It might even try to force the government to obtain bipartisan support for the plan – which, of course, would be a brilliant idea.

The government needs to introduce new legislation and regulation aimed at ensuring a competitive telco environment in Australia – and this will need to be balanced against the concessions that Telstra requires.

Telstra, being aware of the FttP end-goal, will want to use the new opportunity given by the government to separately start rolling out new fibre networks itself, to multi-dwelling units and other premises under new regulations that are being worked out. The government and Telstra will have to figure out how this will fit in the overall MTM plan.

With the MTM plan and Telstra’s role in it, the structural separation issues need to be reviewed by the government. The situation has changed; Telstra will not be faced with structural separation for much longer now. This is causing renewed concern within the industry. On the other hand, Telstra would want to receive a guarantee that it won’t be structurally separated.

The panic reaction could be that the above is all too complicated and that the government needs a win on the NBN, especially when the next election is getting closer.

It could be forced to give Telstra concessions that would undermine competition. It's obvious that the political price of voter dissatisfaction is greater than less competition, and that therefore a short-term, short-sighted solution could emerge from such political panic.

A worrying thought here is that the government’s harsh criticism of the ACCC and its threats to reform the industry regulator might have something to do with this. The ACCC would be a serious obstacle to its providing concessions to Telstra that would undermine competition in the market.

It is good to see that the industry has finally woken up and becoming more vocal on the issue. However, it is telling that Turnbull has so far failed to acknowledge, let alone address, these issues.

This is an edited version of a post originally published on October 24. Paul Budde is the managing director of BuddeComm, an independent telecommunications research and consultancy company, which includes 45 national and international researchers in 15 countries.