ACCC publishes views on next generation telecommunications networks
The Australian Competition and Consumer Commission today issued for public consultation two papers related to next generation telecommunications networks.
The first is a draft decision on a 15-year special access undertaking given by the G9 for its proposed fibre-to-the-node network upgrade, with initial access prices of up to $29 to $50 per month (depending on the speed offered). This first paper also provides guidance on access to FTTN networks more generally.
The ACCC considers that reasonable access to a new FTTN network would normally include the following:
a bitstream access service over the last mile bottleneck, which gives the access seeker as much control as possible over its own customer traffic, so that it is able to innovate and compete
access prices which reflect efficient costs (whether actual or estimated) and give investors a return that reflects their investment risk, and
non-price terms and conditions of access that do not discriminate anti-competitively.
The ACCC would also expect a smooth migration to the new services for existing access seekers and their customers.
"These requirements would be similar for any fibre-to-the-node upgrade, regardless of the network operator," ACCC Chairman, Mr Graeme Samuel said.
In relation to the G9's proposal he said: "In assessing the specific undertaking, it is not the ACCC's role to express a preference for any particular type of next generation fixed access network or determine all the necessary measures to ensure open access to a next generation fixed telecommunications network for third parties.
"The ACCC's role is to consider whether proposed terms of third party access to a network are reasonable and consistent with the Trade Practices Act.
"The G9's prices for the initial three year period of up to $29 to $50 per month (depending on the speed offered) may be within the reasonable range of prices for this type of service and network."
Mr Samuel noted that demand forecasts for broadband services are more uncertain beyond a few years, making it difficult for any firm to set efficient prices upfront for a long period of time.
"The G9 has addressed this uncertainty by proposing a pricing approach widely used for long term new investments in other industries, including gas, electricity and rail."
In these industries, a pricing methodology is agreed upfront to provide regulatory certainty, and the access provider need only update key inputs from time to time. These updates are subject to a form of review or audit by the regulator.
"The ACCC is generally comfortable with the G9's proposed approach to pricing, which would provide a high degree of regulatory certainty for significant new investments, especially where efficiently and prudently incurred actual costs can be known.
"The G9 also proposes a degree of vertical separation of the network owner from retail carriers and carriage service providers. Vertical separation can reduce the need for regulatory oversight.
"However while the general pricing approach could be reasonable, the undertaking as it currently stands lacks effective independent audit of the key inputs.
"The undertaking also gives the network owner a high degree of discretion in unilaterally determining non-price terms and conditions for the 15 year undertaking period, without independent regulatory review," he said.
"We could not accept so much discretion from a gas, electricity or rail firm. Access seekers would not know where they stood."
Accordingly, the draft decision is that the ACCC could not currently accept the undertaking.
It is open to the G9 to refine its access proposal for future consideration.
The ACCC seeks submissions on the draft decision by 4 February 2008. It will be available on the ACCC website.
The ACCC today also issued a position paper on the possible variation of the definition of the declared Unconditioned Local Loop Service. The position paper notes the need for the ULLS declaration to be updated to keep in step with on-going network modernisation, including the evolution of traditional switched telecommunications networks to internet protocol.
The position paper seeks the views of interested parties on a proposed variation to the ULLS service description, with submissions due by 22 February 2008. It will also be available on the ACCC website.
FANOC Pty Ltd is a company created by the G9 consortium that has put forward a proposal for a fibre-to-the-node broadband access network. The G9's proposal is for a high speed broadband FTTN network upgrade, initially in the five mainland capital cities.
On 30 May 2007, FANOC lodged a special access undertaking under the Trade Practices Act 1974 with the ACCC. The SAU specifies the terms and conditions upon which FANOC undertakes to provide access to third parties over the FTTN network.
The G9 has also sought other regulatory and legislative changes to enable it to proceed with its proposed FTTN investment. One of these was a requested amendment to the ULLS service description, which is addressed in the position paper released today. Others go beyond the scope of the ACCC's role, and require action by the Government.
The G9's proposal includes a degree of vertical separation between the company set up to own the network (FANOC Pty Ltd) and retail carriers and service providers. Access seekers would be represented collectively through a separate body (the BAS Manager).
The SAU provides for access to a 'bitstream' access service. In terms of functionality, such a service lies between the ULLS and a wholesale xDSL service, both of which are available today.
FANOC has proposed initial access prices for this bitstream service of up to $29 to $50 per month, depending on the speed of service provided to an access seeker.
After the initial three year period, prices are determined via a pricing methodology which is fixed upfront, with the network owner only needing to provide certain key inputs from time to time, such as its actual costs, depreciation and demand forecasts.
The SAU contains relatively few non-price terms and conditions of access. Instead, the SAU provides a role for the BAS Manager to submit 'reference' non-price terms and conditions for each BAS Product to FANOC for approval.
