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11th ACCC Regulatory Conference

Next Generation Networks in Australia and NZ

- Alternate paths to the same outcomes?

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Objectives

• Contrast approaches to NGN policy in Australia and NZ

• Highlight some key issues

• Reflect on Karl-Heinz Neuman’s paper

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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

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NBN Snapshot – at least 90% fibre coverage

Source: NBN Co Limited

Cf Karl-Heinz data points:

•€1000-2000 per household•FTTH x5 the cost of FTTN•25% FTTH viable in France•72% VDSL viable in Germany

•Cf EU NGN Agenda:

•BSO by 2013 for 100%•30 Mbps by 2020 for 100%•100 Mbps by 2020 for 50%

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Source: NBN Co Limited

NBN Snapshot – fibre + wireless + satellite

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NZ- LFC Candidate Areas

•Layer 1 and Layer 2 services•Around NZD3000 to pass and connect•Layer 1 equivalence after 10 year concession

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Key project differences

Australia - NBN

• 100% Government funded

• $43 Billion Govt contribution

• 90% coverage

• Speeds to 100 Mbps

• Layer 2 services only

• GPON architecture

NZ - UFB

• Form of PPP

• $1.5 Billion Government contribution

• 75% coverage

• Speeds to 100 Mbps

• Layer 1 and 2 services

• GPON architecture except for Layer 1

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Key project differences -/2

Australia - NBN

• Telstra deal

• Infrastructure access by NBN

•Copper decommissioning

•Ultimately one last mile network

NZ - UFB

• No deal with TCNZ at this point

•Chorus as an LFC?

•Copper remains

•Open to TCNZ to compete head-on with LFCs

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Key regulatory and other differences -/1

NZ - UFB

• Unbundled copper local loop (UCLL) & unbundled bitstream access (UBA) since June 2008

• Full operational separation since March 2008

• Chorus run as stand-alone business

• Equivalence

• FTTN rollout (10-20Mbps): to 80% of NZers by end 2011; $1.4B cost

• ~$1000 per household

Australia - NBN

• Unbundled local loop (ULL) since 1999

• Unbundled bitstream access (LSS) declared Aug 2002

• Notional operational separation since June 2006

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Key regulatory and other differences -/2

Australia - NBN

• Regulatory design is work in progress

• NBNCo Special Access Undertaking

•ACCC approval

NZ - UFB

• Regulatory design is work in progress

• Private party contracts between CFH and Partner to form LFCs

•LFC Deed of Undertaking

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NBN/UFB Wholesale Services

Australia - NBN

• Layer 2 bitstream ethernet

• Implementation Study recommended that NBN be built for fibre network unbundling

NZ - UFB

• Layer 2 bitstream ethernet

• P2P

• Layer 1 (dark fibre)

• FTTH unbundling (full equivalence) after Year 10

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A comment on GPON versus P2P

• Karl-Heinz has suggested that P2P architecture < 10% more than PON

• As I understand it, this is not what Australia and NZ economics have indicated

• P2P 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)

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Comparing P2P, Active Ethernet, GPON

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p2p AE GPON

CO

rack

s

Small CO (1k)

Large C0 (20k)

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15000

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p2p AE GPON

Feed

er fi

bers

Small CO (1k)

Large C0 (20k)

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p2p AE GPON

Pow

er (W

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r)

SmallCO (1k)LargeC0 (20k)

Central Office SpaceCentral Office Space Fiber Raw MaterialsFiber Raw Materials Power ConsumptionPower Consumption

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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

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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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Point-to-

Point

ActiveEthernet

TDMPON

Central Office Access loop Home

IP

Ethernet switchEthernetswitch

Efficient Outside Plant Small street/pole cabinet No remote powering

Cost-effective Feeder Smaller duct sizes, Less RoW,… CO consolidation

Best ScalabilityPassive OSP, lowest CAPEXCO scalability & Consol. (20+ km)

Wavelength per user Few fibers in feeder section CO consolidation

PON OLT Optical splitter

IP

Ethernetswitch

More distributedMore concentrated

IP Splicing

WDMPON PON OLT

WavelengthSplitter

IP

A Basic Comparison of Four FTTH Architectures