The Australian Competition and Consumer Commission is proposing to grant authorisation to specific provisions within revised agreements between NBN Co and Optus in a draft decision issued today.
These arrangements involve the progressive migration of Optus’ HFC subscribers to the new multi-technology NBN, while parts of Optus’ HFC network are integrated into the NBN.
The revised agreements form part of a broader transaction between the parties which involves the acquisition of Optus’ HFC assets. Under the Competition and Consumer Act (2010), the ACCC is not able to authorise acquisitions. The parties have asked the ACCC to consider the proposed acquisition separately under its informal merger review process (which takes into account the impact on competition but not public benefits).
In assessing the application for authorisation of the revised arrangements, the ACCC has had regard to the likely future without the conduct for which authorisation is sought.
“The ACCC accepts that in the absence of the revised arrangements, NBN Co and Optus would continue to operate under the terms of their original agreement, as authorised in 2012,” ACCC Chairman Rod Sims said.
“The ACCC concluded that it would not have exercised its discretion to initiate a revocation process for the existing authorisation having regard to the need for regulatory certainty and its view that the balance of benefits and detriments identified by the ACCC in 2012 was not likely to have changed, despite policy and technological changes since then.”
“This is because Optus would still be unlikely to invest in significant upgrades of its HFC network in order to provide infrastructure based competition beyond the short to medium term,” Mr Sims said.
“This means that Optus would cease to be a network competitor to NBN Co in any event and so little, if any, additional public detriment is generated by the revised arrangements.”
The ACCC accepts that the revised arrangements are likely to result in some benefits to the public, by:
- allowing NBN Co to access the fibre components of Optus’ HFC network and avoid inefficient investment in additional distribution fibre on these parts of the multi-technology NBN
- providing consumers with a greater choice of service providers and access to a greater range of broadband products sooner than they otherwise would have and
- facilitating less disruptive customer migration to the NBN.
“The ACCC acknowledges the revised arrangements form part of a broader proposal for NBN Co to acquire Optus’ HFC network assets, and that utilising existing HFC infrastructure in rolling out the NBN is likely to generate cost savings,” Mr Sims said.
The ACCC is now seeking submissions from NBN Co and interested parties in relation to its draft determination before making a final decision in August/September 2015.
Background
In 2012, the ACCC authorised the original agreement between NBN Co and Optus which involved Optus migrating its customers to the NBN and ultimately decommissioning its HFC network. At that time, the NBN was intended to be rolled out across the country using ‘fibre to the premises’ technology. Since 2012, in accordance with the original agreement, Optus has been migrating some of its HFC customers to the NBN but has not yet decommissioned any part of its network.
In 2014, the Government endorsed a shift to a ‘multi-technology mix’ model for the NBN, which includes NBN Co using the existing HFC networks of Telstra and Optus. The revised arrangements between NBN Co and Optus for which authorisation is sought reflect this change in policy.
Authorisation provides immunity from court action for conduct that might otherwise raise concerns under the competition provisions of the Competition and Consumer Act (2010). Broadly, the ACCC may grant an authorisation when it is satisfied that the public benefit from the conduct outweighs any public detriment.
Informal merger review
In its informal merger review of the proposed acquisition of Optus’ HFC assets, the ACCC’s preliminary view is that regardless of whether the proposed acquisition occurs or not, Optus and NBN Co would not compete with each other. That is because the agreement authorised in 2012 would continue to apply in the absence of the proposed acquisition.
Further information about the informal merger review is available from the ACCC’s Mergers Register. The ACCC intends to announce its informal merger review decision on the same date as the final determination on the authorisation application.