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Overview: Since the early 2000s and the rapid rise of the Internet and broadband as platforms for the digital economy and online society, successive Australian Governments have grappled with the issue of how to achieve investment in next generation broadband networks capable of supporting future user needs. In parallel with this question, they have had to grapple with how this can be done in a manner that maximises competition recognising that much of the telecommunications customer access network, the last mile connection to individual customers which needed to be upgraded, has strong monopoly characteristics.

This means that the firm controlling that network has significant market power, in terms of denying access to would-be competitors and potentially favouring its downstream operations over those of would-be competitors who gained access but had to compete with it. In Australia this meant Telstra, which owns the majority of access infrastructure. These issues would be compounded in the rollout of next generation broadband because if the logical upgrade path was followed, to fibre-to-the-node (FTTN), Telstra’s market power would be further enhanced. This is because if FTTN is to operate at optimal levels it eliminates the ability of competitors to operate their own DSLAM equipment from Telstra’s exchanges and it would generally not be cost-effective to install competing equipment in suburban nodes. This issue has been further compounded by the introduction of vectored VDSL2 for use with FTTN networks as optimal performance from vectoring can only be achieved if the lines servicing customers are operated by a single provider, who can manage interference problems.

This regulatory impact statement addresses the Minister for Communications' proposal to consider a new telecommunications licence condition.

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