Monday, August 11, 2008

Australia - Cave supports Telstra

Telstra, Optus experts clash on broadband build

A REGULATORY expert on Telstra's payroll says the National Broadband Network's focus on a single ubiquitous build will drive down competitive investment in telecoms.

Optus's regulatory expert, however, says Telstra has the story wrong.

On the Telstra side, Professor Martin Cave, director of the Centre for Management Under Regulation at the Warwick School of Business in Britain, has hit out at Optus, saying that the number-two telco's perceived lack of infrastructure investment would become a recurring theme if the National Broadband Network were built on a completely open-access model.

With the NBN, "it's very important for the Government and the regulator to maintain the impetus towards competition and not to allow the NBN to be the sole supplier of infrastructure in competitive areas", he said.

He pointed to Optus's lack of investment in Hybrid Fibre Coaxial cable, a broadband network that combines optical fibre and coaxial cable, as an example of the detriment to competition that occurs when telcos rely on competitors' infrastructure.

"It's a peculiarly Australian phenomenon for the cable operator to rely so heavily on competitors' assets even in areas where it has its own network," Professor Cave said.

"It's a mistake to allow Optus to unbundle Telstra's local loop in the footprint of its HFC network. It removes an opportunity to maximise infrastructure competition between the two networks.

"If you get infrastructure competitors to invest in infrastructure, you get product differentiation and essentially you get an investment race," he said.

However, according to Optus regulatory expert Andrew Sheridan, Telstra is wrong.

"It's fair to say from the Optus perspective that Telstra is pretty adept at twisting the facts.

"The problem in Australia is that there was insufficient policy to properly govern Telstra's HFC rollout. Telstra was allowed to overbuild the Optus HFC network and was allowed to take a dominant position in pay-TV.

"Those two factors destroyed the viability of Optus's rollout because we didn't have the key point of differentiation.

"They essentially had a head start in the investment race," he said.

Mr Sheridan said Professor Cave's argument was moot because any near-future infrastructure investment would be nullified by the NBN.

"We will find over time that Australia will have one ubiquitous broadband network with limited infrastructure based competition," he said.

"The NBN will be a government-subsidised licensed monopoly. It will be very difficult for anyone to build competing infrastructure against it unless they are prepared to lose a bucketload of money."

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