NBN Co should NOT open its network to retail customers

It won’t come as a surprise that I follow what’s happening with Australia’s NBN Co with interest. After all, even if I’ve been highly critical of the plan’s implementation and it’s political weaknesses, it still is a national broadband network and as such worth looking into. But some things slip by me, and so it was with no amount of surprise that I read Paul Budde’s post on Linked In this morning entitled NBN Co Should Open Up Its Network to Others. I’ve met Paul and he’s generally been fighting the good fight in Australia on this issue, but I think it’s fair to say that in this instance I could not disagree more with the stance he is taking.

In essence, what Paul argues for is the ability for NBN Co to sell directly to retail customers. This is currently not easily feasible, he says, because NBN Co has 121 points of interconnection nationally and no wholesale product to connect these points of interconnection. It is also not allowed by the regulator ACCC.

To me this entirely undermines the point of structurally separating NBN Co in the first place. In the new regime NBN Co will have no retail contact with any customers, business or otherwise (apart from technical maintenance). They are a pure wholesale player. This is exactly as it should be. Any other regime recreates a publicly owned incumbent, one that has every incentive to act nefariously towards other market players and screw customers. There’s a reason retail monopolies were broken down, and NBN Co was designed in part to address the fact that Telstra post-liberalization was still too much of a retail monopoly.

I have often argued (unlike Paul) that the sin of the original NBN Co design was not that it had too many POIs but that it had too little. In order for competition to be healthy it needs to be able to optimise its costs, and the best way of doing that is to invest to get closer and closer to the customer. This substitutes a CAPEX-intensive model to an OPEX-intensive model and benefits the market. NBNCo is structurally designed to only offer an OPEX-intensive model and I think that’s a core issue.

I don’t have enough context on what’s going on here, and I need to dig deeper, but it seems to me that allowing NBNCo to offer products on the retail market would be detrimental on many levels: it would undermine the structural separation, if not deal a deadly blow to it; it would create distrust in the market between NBNCo and its customers. And ultimately it would require for NBNCo to be more than an infrastructure player. Considering how hard it’s been for the organisation to get to where it is today, I’m not sure that’s even sensible…

 Photo Credits: (CC) Geee Kay