Guidelines for new Broadband Network released

A new release on the DCITA website is the Expert Taskforce guidelines for the provision of a broadband network to Metro and Major Regional Australia funded solely by the private sector.

They have released draft guidelines for any interested parties to comment on.

I jumped on this as soon as I could and found some very interesting points in the document.

Let’s start with the ones the Telstra crew might pay attention to:

3.2 (iii) (iii) [The Expert Taskforce also considers that:] if required, proposed arrangements should provide appropriate compensation to affected parties.

This point is key. If there is compensation due to anyone for infrastructure being taken over, or any investment being stranded, and the other party has a just case for compensation, then they should certainly be compensated.

That is, if Telstra can’t provide a service from investments it has made, or any other ISP can no longer service a customer as a result of the proposed network, they should be duly compensated for any proven loss that they can justify.

This should certainly not include the party’s costs of providing a service however, it should only include the marginal loss they may have from having to pay someone else to service their customers. The rule applies to infrastructure also, where DSLAMs for example have been installed and a provider can no longer directly service a customer and are forced to pay another party, they should only be compensated to the point where there original costs, and there original margins are taken into account.

If they stated the cost of providing a service is $5.00 a customer, and they sell that service to a customer for $20, and they have to pay $10 to someone else to provide that service instead, the compensation about is simply the difference, $5 in this case.

The same rule applies to Telstra, who seemingly get great joy in overstating their costs.

3.1 (b) (iv) [Having regard to the Terms of Reference provided by the Australian Government, the Expert Taskforce considers that:] the ability for the investor to earn a commercial return commensurate with its costs and risks of investment;

This news here is also a key point for anyone thinking of investing in a new broadband network.

Risk is what I want to highlight here.

What risk is there in investing in a broadband network? Let’s think: Well, in Australia we have just one dominant provider who provides nearly all the industry’s telecommunication services.

That provider is probably the only threat to anyone in the industry, since other members of the industry lack either the balls or the money to invest and take Telstra head on in a serious manner that would drastically affect services they provide (eg. Someone who provides services without even having to once speak of Telstra to provide it).

And with a mandated monopoly, that is, a guaranteed term of no competitor equipment competing with yours, your risk is further lowered, to a level where pretty much the risk of investing is 0.

The investment risk is what they are speaking of in that point, and commensurate means just that, highlights the risk of the investment.

A no risk investment in this day and age doesn’t get you a million bux, in fact off $1, it gets you something like 6c. A high risk investment, like the poker for example, might net you gains of $40 or more per $1, and naturally that is commensurate with the risk of the investment (you could lose completely!).

So, with all that in mind, the risk level of a broadband network with regulated provisioning is certainly a very low risk investment, and as such, returns on any investment are not expected to be high.

Again to highlight that point, is this little fantastic point, which I am sure is music to ears (literally) of many, many consumers and competitors out there:

3.14 Consumers should face the lowest possible retail prices for services provided using the new network infrastructure. However, services need to be priced so they are economically viable. As discussed in paragraphs 3.17 to 3.23 below, ongoing competition, underpinned by effective open and non-discriminatory access arrangements, is important in delivering these price and choice benefits to consumers.

So, basically they are saying that any prices proposed on a network must be viable (so they network gets paid off and will keep the business running in the long term), but consumers should face lowest possible retail prices.

This is good news, because the focus is on the retail price the consumer pays.

Telstra should know this themselves, considering they have a large share of broadband connections and I would place a strong bet (no risk, this one) that the majority are taking 256k cheap connections. They aren’t shopping for speed, they are shopping for price.

They want broadband so the kids can get stuff quicker than dial up, and that’s all they really give a rats about.

The professionals in the industry will certainly look for the fastest, best value option, and that’s where the niche market lies. Professional users aren’t all of the broadband users in this country and in fact are outnumbered to a large extent by “general residential” users.

So with that in mind, those general residential users generally have no idea what they are buying and if its the cheapest, it’ll do them!

Consumers are a strong key part of the proposal.

I did take the time to use the email address provided to highlight to them that the current situation isn’t 100% ideal and things need to be considered to change the marketplace for the better, not because consumers need high speed, but because consumers need competition, they need choice. They don’t need artificial level competition either, like we have now where we have 200+ lazy, half arsed resellers who couldn’t be bothered to spend money on rolling out equipment (that’s right, they are down right lazy, if they had 100,000.00 they wouldn’t put it into new hardware, I am sure), and then we have the 10+ competitors who will roll out infrastructure, but only where there is a competitive market to do so.

I posted this on whirlpool, but thought it was more deserving here.

Backhaul is a continued problem in many areas.
Competitors will happily invest in areas where there is competing backhaul and customer numbers to make a return. Where they are not investing is areas where Telstra is the only backhaul option.

The industry needs to change for better competition, but that is stuck right in the middle of a conflict:

Competitors won’t invest in areas where there is no backhaul.
Backhaul won’t invest in areas with no competitors.

So, demand is waiting on supply, and supply is waiting on demand. None of those will move because each other isn’t sure whether the demand will increase, or the supply will come.

Supply won’t come for fear of Telstra lowering its prices below the prices they have, thus forcing them out of the market, or making an investment decision pointless.

Demand won’t come for lack of backhaul investment, and Telstra’s prices on backhaul are too high to go in and find out if supply will arrive if demand is generated.

Running your own backhaul network is easiest, but only really worth it if you can get big customer numbers in an area and be sure that you can make a return on investment.

All a big “Jam”. Something needs to change that, someone needs to make a move, or work with the other to see that both supply and demand get aligned right to make backhaul investment a no brainer, otherwise, what does industry expect will change?

Or are they all happy being lazy, half arsed resellers sucking at Telstra’s teats all day?


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