[AusNOG] Help with NBN questions.

[Grahame Lynch]

Hey guys correct me if I am overstepping the "journalist" rules here but we
have a really interesting letter going in CommsDay tomorrow from Ian Martin
at RBS.

He is talking NBN here and says some new things I haven't heard before.

Key pars:

*"**We may move to a market structure with 3 or 4 or more carriers of
sufficient scale to build and operate their own network connections to 200
POIs.  If so, this will be a very different market structure to that at
present where only Telstra has its own infrastructure backhaul to all 5,000
exchanges and all 1,200 or so that matter economically.  Indeed of the 350
or so that have contested DSLAMs no-one but Telstra has their own
infrastructure backhaul to all of these.  However, if we do get this
industry structure where 3 or 4 carriers have sufficient scale to have their
own extensive core networks then margins have to go up not down, as it’s the
margin that pays for the return on network investment.  Those prices and
margins are not directly a matter of how NBN sets its prices (maybe the
Government will keep subsidising NBN's own costs indefinitely); instead they
are a requirement to cover costs of the carriers' own core network and
systems.  Is this the right industry structure?  3 or 4 more established
carriers may be better for sustainable competition and so improve allocative
efficiency, but it may well push up industry cost structure compared
with the current structure and so be negative for productive efficiency.  So
is it the right industry structure? No-one knows; no-one has examined it.
(I think a marginal benefit to competition for a big increase in cost and
price.)"*

* *
*"**For 90 years until 1990, productive efficiency was so important that the
Government wouldn't let any other players into the market; so we had a
structure that retarded allocative efficiency (service volumes, service
range price options).  Here we are 20 years later and competition and its
allocative efficiency benefits are now seen as so important that the
Government is prepared to retard productive efficiency through a high cost
NBN, separation, forced migration and an artificial market structure to
enhance its preferred form of competition.** That’s not a recipe for lower
costs and prices except as introductory ‘sweeteners’.  After that the NBN
Implementation model calls for real prices increases.  That is the main
effect of NBN in my view, loss of productive efficiency for a small gain in
allocative efficiency mean higher prices, that's after 20 years of real
price decreases in fixed network services."
*
Anyway an "economist's" view of the NBN.... treat it for what it's worth....
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