NBN Co should be split up: Vertigan panel

NBN Co should be broken into separate business units and anti-cherry picking law designed to protect it from rival infrastructure should be scrapped, the federal government’s telecommunications regulatory review has found.

It also recommended that the government move away from uniform national telecommunications wholesale pricing to a more “cost-reflective” model, and that a dedicated network regulator take over the Australian Competition and Consumer Commission’s (ACCC) role in regulating the industry.

The recommendations were among 19 that Dr Michael Vertigan and a panel of economists set out in their report of the review’s findings, which was made public tonight night.

The 196-page document constitutes a major overhaul of Australia’s telecommunications rules that aims to end regulatory failures that have haunted the industry for decades.

The panel wrote that the restoring infrastructure competition should guide competition and, where it came to NBN Co, lead economist Henry Ergas said the national carrier needed to transition into “competition readiness”.

The panel has proposed that NBN Co be “disaggregated” into business units in line with its underlying network technologies breaking the company up into competing satellite, fixed wireless, HFC and FTTx entities.

“Overall, the panel considers that an approach of delivering the NBN through a single entity (where NBN Co has comprehensive responsibility for planning, constructing, operating and commercialising high‐speed broadband services across all platforms) will inevitably foreclose opportunities for diversity, innovation, competition and choice in the long term. Entrenching an infrastructure monopoly imposes too great a risk on consumers, government and taxpayers and is unlikely to meet the objective of timely and cost‐effective deployment."

Another key plank in the panel’s strategy to restore infrastructure competition was to recommend loosening telecommunication laws around the supply of high-speed broadband services.

Under current telecommunications laws, carriers that use fixed line infrastructure built or upgraded after January 1, 2011 to deliver broadband at speeds faster than 25Mbps are obligated to allow wholesale at prices at or below those by the ACCC.

The Vertigan panel recommended that the law be scrapped, and that legislation behind an associated rule - prohibiting the network owner from supplying services to anyone other than a carrier or carriage service provider - be substantially amended.

“We believe that the so-called anti-cherry picking restrictions were ill-advised and so far have not been particularly effective,” Ergas said.

“Clearly there are very major problems with those provisions. Our view is that what is at issue here is to ensure you have a framework such that new infrastructure when it’s provided, it’s provided in a manner that’s consistent with infrastructure competition”.

In its initial response to the report’s findings, the federal government said it would not move immediately to break-up NBN Co.

“While disaggregation of NBN Co’s business units (as the panel recommends) after the network is complete cannot be ruled out, now is not the time. Breaking up NBN Co would distract its management and delay the provision of high-speed broadband to all Australians,” a spokesperson for Communications Minister Malcolm Turnbull said.

The government also signalled reservations about altering the anti-cherry picking legislation.

“Amending existing laws governing broadband networks that compete with NBN Co (as the panel has also proposed) so they are fair for all market participants will take time and inevitably involve uncertainty.

"In the meantime competing vertically integrated networks which do not provide wholesale access to retail service providers could undermine the level playing field for retailers. Therefore the Government is consulting industry on a carrier licence condition to ensure maintenance of the level playing field originally intended by the existing legislation,” the spokesperson said.

Opposition communications spokesman Jason Clare said the Government’s reviews were bogging down the NBN’s rollout.

“Cutting NBN Co into a number of different companies will just slow down the rollout of the NBN. There have now been almost as many inquiries into the NBN as there were into who shot JFK,” Clare said.

“Malcolm Turnbull now has six reviews and no excuses. He should get on with it, stop complaining, and build the NBN.”