[AusNOG] NBN Legislation

[Bevan Slattery]

Hi Brad,


> It *appears* that the gov has just defined a new "pstn" standard service.

That is an oversimplification. This insidious piece of legislation is all about removing carriers ability to make independent investment decisions to deploy capital efficiently.  It is about economically stranding the fibre assets.  What the Government has effectively done is choke off all the capital and investment in competitive infrastructure under the guise of 'harmonising standards'.   Infrastructure based competitive carriers are no longer able to consider each network extension, or individual product on its own independent situation.  Every day carriers make decisions on where to invest based upon the opportunities in front of them and in working with their customers.

So an example would be Internode wants to connect to their PoP in Brisbane to a corporate client 2kms off PIPE fibre with a 1GbE metroE service (an extension cost of $60k and a monthly increase in duct rental of $1,200).  Now before PIPE can sell Internode any services PIPE would need to create a non-discriminatory access regime between PIPE and Internode with the fact that this regime (Network FAA if you will) needs to apply to *all* future customers.  Now if the Network FAA says that PIPE will sell their 1GbE metroE service for $1,000 per month, PIPE would be unable extend its network to offer Internode this service because frankly, it would lose money.

Regrettably unlike NBN Co. companies like PIPE, Nextgen, Optus, AAPT etc. do not have unlimited funds and more importantly understand they need to provide a greater return on their investment than their WACC.  NBN Co. has already demonstrated that on an optimistic basis they may be able to produce a 6% return on invested capital some 5% LESS than their WACC over 30 YEARS.  In fact NBN Co. is estimating it's WACC is 25% per year for the first 3 years.  So unlike all other carriers out there, NBN Co. does not have company Directors who will be personally liable to shareholders for their decisions, NBN Co. and the Government is prepared to wipe away billions of dollars in investment dollars (the delta between its RoE and the WACC).

> Forward looking policy is sadly lacking from all governments. Sure you may
> disagree with the arbitrary values chosen, but the market has been broken
> due to policy failure for years, and some people are going to get hurt when a
> correction is applied - cold comfort for some.

Sorry - the "market" hasn't been broken.  Just the structure of one player in the industry and that is Telstra.  This legislation is about destroying the competitive carrier infrastructure players.   It's not a "correction", but a further abuse of market power by the shareholder of the new monopoly.  Time for a few people to wake up and smell the coffee...

[b]