Resale services provided using NBN infrastructure

Submissions

Telstra submitted that services should only be declared where there is an essential bottleneck facility and noted that the NBN has been designed at the outset to maximise competition on a national basis. Telstra stated there are therefore no significant barriers to entry in supplying services over the NBN and that it would be contrary to the LTIE to regulate voice services (or other resale) services provided over the NBN.¹⁸⁹

A number of stakeholders submitted that a competitive wholesale market is likely to develop for resale services provided over the NBN. AAPT considered that there is a strong likelihood that there will be a competitive wholesale market for resale services over the NBN.¹⁹⁰ iiNet submitted that access seekers and potential access seekers are unlikely to face significant barriers to entry in supplying resale services over the NBN. Both iiNet and AAPT submitted that the NBN’s 121 points of interconnection is likely to encourage smaller retail service providers to purchase wholesale resale services and competition in the market for NBN wholesale services is likely to be stimulated by this demand.¹⁹¹

In regard to the PSTN OA service, Telstra submitted that the obligation to provide pre-selection and override functionality should only apply in respect of the PSTN.¹⁹² Telstra submitted three reasons why pre-select and override are not applicable over next generation networks:

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  the rationale for pre-selection and override (i.e. a separate long distance access alternative) has significantly diminished, even over the PSTN;
  
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  Next Generation Networks (NGNs), such as the NBN, are fundamentally different in structure to its copper CAN. The suite of voice services is highly replicable over NGNs so there is no inherent calling service bottleneck as there is with the PSTN; and
  
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  Telstra’s NGN-based networks do not presently have pre-selection and override capability. To enable this functionality, Telstra and other carriers would incur significant upfront and ongoing operating costs to alter relevant systems.¹⁹³
  

Telstra submitted that over the NBN, the full suite of voice services (local and long distance) will be provided by the end-user’s retail service provider of choice. It stated that NBN Co’s regulated access service replaces the two options currently used to supply the full suite of services, that is, ULLS or the combination of WLR/LCS and PSTN OA (pre-select and override).¹⁹⁶

Finally, Telstra submitted that ‘for similar reasons to… WLR and LCS services, there is no requirement for bundled long distance voice access to be regulated over NBN (or other next generation networks).’¹⁹⁷

ACCC’s draft views

The access component of providing a voice service using NBN infrastructure will be regulated. NBN Co will provide basic access services on regulated terms pursuant to its Special Access Undertaking (SAU). Further, the ACCC can make access determinations for services or terms and conditions not regulated via an accepted SAU.

Additionally, NBN Co is wholesale-only, meaning that it does not have a presence in downstream retail markets and will not have the incentive that a vertically integrated operator has to discriminate against downstream competitors in favour of its own retail operations. Further, the non-discrimination obligations in Part XIC of the CCA prohibit NBN Co from discriminating between access seekers in relation to the terms and condition of access to NBN services and in carrying out related activities such as developing or enhancing services and facilities.

The ACCC notes that a carrier’s core voice network using the NBN for access is different in structure and uses different equipment to PSTN networks. As a result, it is relatively inexpensive to self-supply voice services over the NBN. Additionally, a carrier is able to supply Layer 3+ voice services using the Layer 2 NBN service and its own switching equipment.

The ACCC considers that there is potential for the emergence of a competitive aggregation market for voice services. The ACCC notes that, under current policy and regulatory settings, there are likely to be economies of scale in providing a national voice service over the NBN, largely for the purchase of CVC services and transmission. Telstra, iiNet and AAPT submitted that there is likely to be an emerging and competitive market in the supply of resale services with numerous providers of aggregation and other wholesale services already participating or planning to participate in the market.¹⁹⁸ AAPT submitted that a number of access seekers, including AAPT, Telstra and Optus are offering or intend to offer wholesale services over the NBN.¹⁹⁹

A number of service providers have indicated that they intend to provide aggregation and other wholesale services when the NBN is further rolled out. The ACCC notes that NBN Co’s website lists 12 providers of wholesale services, including aggregation services, backhaul services and Layer 3 voice and internet services.²⁰⁰ The ACCC notes that the extent to which such services will be provided, and when, is not yet clear as the market is still in its formative stages.

With respect to PSTN OA (pre-selection and override) the ACCC notes Telstra’s submission that to offer pre-selection and override capability over the NBN, it would need to make an initial investment of approximately [c-i-c] [c-i-c] and incur annual operating costs of approximately [c-i-c] [c-i-c] of the initial investment. Telstra submitted that other carriers would likely face similar costs.²⁰¹ The ACCC notes that the use of pre-selection and override by end-users to select a different long distance provider is declining, and that access seekers will be able to provide a full suite of voice services directly using NBN infrastructure and their own switching equipment. Accordingly, the ACCC considers that the costs of investing to provide resale services over the NBN are unlikely to be matched by the likely benefits to end-users. The ACCC considers therefore that the declaration of this service over the NBN would be likely to lead to inefficient investment in new infrastructure.