1 11 th ACCC Regulatory Conference Next Generation

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1 11 th ACCC Regulatory Conference Next Generation Networks in Australia and NZ -

1 11 th ACCC Regulatory Conference Next Generation Networks in Australia and NZ - Alternate paths to the same outcomes? 87260066

2 Objectives • Contrast approaches to NGN policy in Australia and NZ • Highlight

2 Objectives • Contrast approaches to NGN policy in Australia and NZ • Highlight some key issues • Reflect on Karl-Heinz Neuman’s paper

3 Why are Australia and NZ leading the world? • Are we visionaries? Better

3 Why are Australia and NZ leading the world? • Are we visionaries? Better understanding than ROW of the emerging digital economy? • Do we enjoy different economics from other OECD countries to justify NBN investment? • Proved-in business cases to demonstrate NBN & UFB as best use of nation’s capital? • Other drivers? • GFC, economic stimulus and Australia’s relative prosperity • Perceived under-investment in network and failure to upgrade • High cost, slow, and uncertain regulatory solutions to market failures; incumbent behaviour over time

4 NBN Snapshot – at least 90% fibre coverage Cf Karl-Heinz data points: •

4 NBN Snapshot – at least 90% fibre coverage Cf Karl-Heinz data points: • € 1000 -2000 per household • FTTH x 5 the cost of FTTN • 25% FTTH viable in France • 72% VDSL viable in Germany • Cf EU NGN Agenda: Source: NBN Co Limited • BSO by 2013 for 100% • 30 Mbps by 2020 for 100% • 100 Mbps by 2020 for 50%

5 NBN Snapshot – fibre + wireless + satellite Source: NBN Co Limited

5 NBN Snapshot – fibre + wireless + satellite Source: NBN Co Limited

6 NZ- LFC Candidate Areas • Layer 1 and Layer 2 services • Around

6 NZ- LFC Candidate Areas • Layer 1 and Layer 2 services • Around NZD 3000 to pass and connect • Layer 1 equivalence after 10 year concession

7 Key project differences Australia - NBN NZ - UFB • 100% Government funded

7 Key project differences Australia - NBN NZ - UFB • 100% Government funded • Form of PPP • $43 Billion Govt contribution • $1. 5 Billion Government contribution • 90% coverage • 75% coverage • Speeds to 100 Mbps • Layer 2 services only • Layer 1 and 2 services • GPON architecture except for Layer 1

8 Key project differences -/2 Australia - NBN NZ - UFB • Telstra deal

8 Key project differences -/2 Australia - NBN NZ - UFB • Telstra deal • No deal with TCNZ at this point • Infrastructure access by NBN • Copper decommissioning • Ultimately one last mile network • Chorus as an LFC? • Copper remains • Open to TCNZ to compete head-on with LFCs

9 Key regulatory and other differences -/1 Australia - NBN NZ - UFB •

9 Key regulatory and other differences -/1 Australia - NBN NZ - UFB • Unbundled local loop (ULL) since 1999 • Unbundled copper local loop (UCLL) & unbundled bitstream access (UBA) since June 2008 • Unbundled bitstream access (LSS) declared Aug 2002 • Notional operational separation since June 2006 • Full operational separation since March 2008 • Chorus run as stand-alone business • Equivalence • FTTN rollout (10 -20 Mbps): to 80% of NZers by end 2011; $1. 4 B cost • ~$1000 per household

10 Key regulatory and other differences -/2 Australia - NBN NZ - UFB •

10 Key regulatory and other differences -/2 Australia - NBN NZ - UFB • Regulatory design is work in progress • NBNCo Special Access Undertaking • Private party contracts between CFH and Partner to form LFCs • ACCC approval • LFC Deed of Undertaking

11 NBN/UFB Wholesale Services Australia - NBN NZ - UFB • Layer 2 bitstream

11 NBN/UFB Wholesale Services Australia - NBN NZ - UFB • Layer 2 bitstream ethernet • Implementation Study recommended that NBN be built for fibre network unbundling • P 2 P • Layer 1 (dark fibre) • FTTH unbundling (full equivalence) after Year 10

12 A comment on GPON versus P 2 P • Karl-Heinz has suggested that

12 A comment on GPON versus P 2 P • Karl-Heinz has suggested that P 2 P architecture < 10% more than PON • As I understand it, this is not what Australia and NZ economics have indicated • P 2 P adds cost: • additional fibre count • Increased civil engineering costs • reduced ability to undertake aerial rollout (large fibre runs) – going underground doubles cost • reduced ability to use drill runs – needs open trenching • Power and CO costs (see over)

Comparing P 2 P, Active Ethernet, GPON Central Office Space Fiber Raw Materials Power

Comparing P 2 P, Active Ethernet, GPON Central Office Space Fiber Raw Materials Power Consumption 13

14 Just some of the complex regulatory issues • What is wholesale? • Who

14 Just some of the complex regulatory issues • What is wholesale? • Who can buy from NBN Co and LFCs • Price discrimination • E. g. volume discounts • In NZ, preventing predatory conduct by TCNZ against the LFCs • Preventing monopoly profits • Role of FCM

15 Just some of the complex regulatory issues -/2 • Does network structural reform

15 Just some of the complex regulatory issues -/2 • Does network structural reform solve competition problems permanently? • Cf Karl-Heinz comments on the multi-fibre model • How to regulate the ‘new fibre monopolies’ • Will content rights become a new bottleneck? • How to regulate for the transition period?

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17 A Basic Comparison of Four FTTH Architectures Central Office More concentrated Point -to.

17 A Basic Comparison of Four FTTH Architectures Central Office More concentrated Point -to. Point IP Active Ethernet IP Access loop More distributed Home Efficient Outside Plant Splicing § § Small street/pole cabinet No remote powering Ethernet switch Cost-effective Feeder Ethernet switch § § Smaller duct sizes, Less Ro. W, … CO consolidation Best Scalability Passive OSP, lowest CAPEX CO scalability & Consol. (20+ km) TDM PON IP PON OLT Optical splitter Wavelength per user WDM PON IP § § PON OLT Wavelength Splitter Few fibers in feeder section CO consolidation