Telstra should divest its shareholding in Foxtel and the federal government and ACCC should review regimes preventing anti-competitive conduct, a Senate Committee into broadband competition has found.
Democrats' communications spokesperson and chair of the Committee, Senator John Cherry, says broadband is critical to Australia's economic and social future and the government has not done enough to ensure the nation has a state-of-the-art broadband network.
This claim is supported by telecommunications analyst Paul Budde, who notes that despite a doubling of household broadband penetration since the start of this year, Australia still remains at the bottom of international rankings, with a penetration rate of 15%, much lower than key trading partners such as South Korea (87%), Hong Kong (68%), Japan (45%), US (38%), UK (31%) and Germany (20%).
"The missing dynamic is broadband competition between telcos and [cable] TV operators, which, according to the US regulator FCC, has been the driver behind the broadband uptake in the USA. With Telstra owning both the telco and the major cable TV network, this competition doesn't yet exist in Australia," he says.
To address the situation, Cherry suggests the government, in consultation with industry, should set a 10-year national target for an optic fibre consumer access network.
"The copper network is at the end of its life. Countries such as South Korea have a state-of-the-art network, while the US and UK have recently committed billions of dollars in broadband rollout; Australia cannot afford to be left behind," he says.
"The inquiry found that competition was being stifled because of Telstra's ownership of the copper wire, HFC network and Foxtel.
"The Committee concluded that the only way to ensure the development of a strongly competitive broadband industry was to have a significant change in the structure of the industry, and made recommendations accordingly.
"Even the government Senators acknowledge that Telstra has signed up almost five times as many broadband customers than its nearest rival Optus. With 68% of the market, Telstra sets the pace."
The Committee made a series of recommendations building on from the Senate report released last week on the state of Australia's telecommunications network. These include:
- Productivity Commission to undertake a full examination of all the options for structural reform in Australian telecommunications, including structural separation of Telstra.
- Government should review Section 151 AKA (10) of the Trades Practices Act to determine whether it may prevent the ACCC from acting swiftly to address anti-competitive conduct.
- ACCC should examine the availability of access to a cost of backhaul services for carriers building or proposing to build new broadband infrastructure.
- A national commitment to replace the remaining outdated copper network with fibre to the home over the next decade.
- Removal of all pair gain systems from the network to support a minimum dial-up speed to at least 40kbps (double the current minimum of 19.2 kbps).
- A requirement that Telstra be obliged to provide a broadband service to all Australians.
- Australian Communications Authority to conduct an independent review of the state of repair of the Customer Access Network and require remedial work where required.
- Review of the Customer Service Guarantee to ensure that carriers do not use 'mass service disruption' notice to avoid their obligations to consumers.
- The ACA to monitor faults on data services as well as phone lines.
- Changes to government contracting of telecommunications programs and services to promote competitive infrastructure, particularly in regional areas.
"Australians need a world-class broadband network and a combination of Telstra's structure, a lack of vision from this government and a weak regulatory regime means we are falling behind other nations. The government must bite the bullet and become more pro-active in encouraging investment and strengthening regulation to encourage competition," he says.
Not surprisingly, Telstra rejects the Committee's findings, saying they contain "no recommendations that would improve customer services".
Telstra's group managing director of regulatory, corporate and human relations, Bill Scales, says the telco has already demonstrated its commitment to improving customer services and investing in future telecommunications services.
"Our ongoing campaign to make broadband more accessible to all Australians saw Telstra's broadband customer numbers soar by 46% in just five months this year," he says.
"Telstra has spent well in excess of $1 billion broadbanding Australia with ADSL networks in the last four years, and as a result of a wide range of initiatives to extend the reach of broadband, expects to meet its target of one million customers well ahead of time.
"Today, every Australian can access broadband in one way or another, and 81% of Australian consumer and business lines can access broadband ADSL, up from 75% earlier this year.
"A new $28 million campaign will bring broadband ADSL to another quarter of a million lines to which ADSL was previously unavailable due to incompatible line equipment."
Scales adds that Telstra's ongoing program to increase the availability of broadband ADSL will see ADSL available to around 90% of premises within the next two years.
However, as
QBR has previously reported, ADSL lacks the speed and stability required by many businesses.
While Scales says Telstra is conducting a commercial pilot of fibre-to-the-premises (FTTP) technology, which delivers telephony, broadband data and digital subscription television services to customer premises on an optical fibre platform, Budde points out that the telco already has much of the infrastructure in place to rollout a fibre-based network.
In his recent newsletter, he quotes Allan Williams of Meridian Connection, a former senior manager of Philips, who was involved in the original rollout of the telco's fibre-to-the-curb plan.
Williams notes that Telstra (then Telecom) paid more than $2.5 billion for the component supply and engineering of a fibre cable system to the curb that was near completion in the late '90s. The subcontracting for the installation would have been in excess of $1 billion.
Previous to this contract, Telstra had already built fibre trunking, he adds.
"The Telecom Australia build is already fibre to the curb and coaxial cable to the home from near modes. This passes about 60% or more of all homes in Australia.
"Telecom Australia's plan was to continue from fibre to the curb to fibre to the home, as and when affordable ... [but] this program stalled."
To read more on this issue - including a new state government initiative to address Telstra's market failings - see this week's QBR e-newspaper, out Friday. Call 1800 649 578 or email subs@pubserv.com.au to secure your copy.