The Coalition makes many idealistic noises regarding a privately rolled out infrastructure. But how would it work and why hasn't it happened already? Credit: iStockphoto

In a recent address to technology journalists at the annual KickStart forum, Liberal MP, Paul Fletcher, outlined the opposition's view on the Government's role in ICT policy and the importance of competition in developing a robust telecommunications sector. Specifically, he pointed to the monopoly that NBNCo creates with regards to the infrastructure it's currently deploying across Australia.

Before we start here - this is not an argument about whether the NBN is a good or bad thing for the country. This is a discussion about competition and how it can work with the NBN.

A significant element to the Liberal Party's opposition to the NBN is that competition is required in order for the system to be operated optimally. This supposition is based upon the logic that consumers can only receive the best price for services if there are multiple service providers in the market. This makes sense except that the NBNCo won't be selling or providing any services to end-use customers. It will be providing access to infrastructure for service providers.

As Nick Ross noted recently "Labor and NBN Co's failure to explain the NBN's benefits is undermining the entire project". One of the parts of the NBN project that hasn't been well explained by the government has been the market structure of the NBN. Instead, the opposition has been able to own the debate and play the "all competition is good" card without any real debate.

In simple terms, the NBN's marketplace will have three major components. The fiber channel network being installed and operated by NBNCo that will be sold off in about 15 years, ISPs who sell services and customers who purchase and use services. A simple parallel from today's world is that you can purchase an ADSL service from an ISP who is on-selling a service that they lease from Telstra. As part of that ISP's offering you might get free access to movies. So, Telstra provides infrastructure, the ISP bundles Internet access with some other benefits and the customer can choose the ISP.

In order to ensure customers receive the best quality and range of services it makes good sense for the service provision to customers to be competitive. A number of different business models will be created by the companies that choose to play in this space. For example, Telstra's customers may choose to receive movie delivery services, iiNet might continue to offer iTunes Store access outside of usage quotas and so forth.

However, it does not make sense for the foundation infrastructure of fiber optic cable to be offered by competing businesses. There are several good examples of the downside of this.

Let's look at the mobile phone networks operating in Australia. Telstra, Optus and Vodafone/3 operate competing mobile networks. All offer similar services with calls, SMS and data services. Other than a great deal of pricing confusion - that one might argue harms competition by making it almost impossible to compare services across the carriers - there is a massive duplication of infrastructure in most of the populated areas of Australia.

Imagine what level of reliability and performance might be achieved if there was a single mobile phone network - note, I'm not saying service providers, I'm only talking about infrastructure - and the transmission antenna were distributed so that there was a more complete service footprint.

The mobile phone networks could all offer calls, text and data and offer different data services like access to live TV, sports or stock market feeds so that there would be different service options for customers but the cost of infrastructure could be smeared across all the resellers. It would also make it possible to have more resellers, thus driving further competition in service delivery.

Who would own this network? Let's look at the Victorian electricity system. The entire network is now privatised from generation to transmission, distribution and retailing. Generation and retailing operate under competitive regimes. Generators are only dispatched to deliver power at the lowest possible wholesale price.

Transmission and distribution cables are privately owned but operate as regulated monopolies. Price changes are managed under a government-run review process where any changes need to be justified before approval.

Under the NBN, the transmission and distribution network would be the fiber cable. It could be owned by a private entity. Access to the cable would be equal for any party with a license to operate as an ISP. Initially, the ownership would be by government after which it would be sold "subject to market conditions and security considerations" according to a government statement.

It makes no sense to build competing physical networks. It would only lead to duplicated infrastructure - like all the cables Optus installed when it launched its pay TV service when it was denied access to the Telstra cables already in place.

In GENERAL, competition in service delivery is a good thing. But's not ALWAYS the best way to achieve the best outcome for consumers.