Connected Research

Union policy research in the 21st century

Posts Tagged ‘Structural separation

OK, on with the show

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Though before we do, some interesting reaction to the overnight events picked up via TIGMOO by Anna Rose at Unison Active, as well as by Tom over at labour and capital.

In what is otherwise, given its timing, likely to be one of my more immediately unread posts in the one year (next week!) that this blog has been functioning, I did find this week that there were some interesting things happening in the world of regulatory broadband policy, both in Australia and in Italy, and in the world of net neutrality, in the US, which reflect some aspects of why the blog exists.

In Australia, the centre-left government has published a A$25m (£15m) report commissioned by McKinsey and KPMG that says, essentially, even if Telstra, the former incumbent, doesn’t decide to throw in its lot with the government’s plans for an initially publicly-owned national broadband network company, NBN Co can still go ahead on its own as a viable commercial entity (see here [registration required; limited viewing time] and, when that runs out, here for the basic news story].

Such a conclusion is really no great surprise, and perhaps its most important function is the practical assistance it will provide the government in its continuing negotiations with Telstra on the folding of its assets into NBN Co (although whether that’s a suitable use of public money is a different matter) – both that and the re-starting of structural separation discussions in the Australian parliament, scheduled for next week. The government’s intention to create a ‘Telstra 2’, having not so long ago sold the last one off to a lot of individual (‘mum and dad’) shareholders, with a long-term intent to do the same thing with NBN Co, is the subject of a lively debate, as the comments in The Australian show.

Meanwhile, a proposal for a super-fast broadband network in Italy was made by Vodafone, Wind and Fastweb (the latter two being existing Italian network operators) in Milan today. La Repubblica originally broke the story on Tuesday (you’ll need to speak Italian or else have a good translator – or else, if you’re quick, see either here and/or here for an English language version). The consortium of three want to spend €2.5bn on building a 100Mbps fibre network in Italy over the next five years – but che sorpresa, they want to build it only in the 15 major towns and cities. At the launch, it was also made clear that, over 5-10 years, the network could be extended in an €8.5bn investment to all towns with more than 20,000 inhabitants (representing around half the Italian population). Former incumbent Telecom Italia, which was invited into the project and which has always welcomed the notion of joint partnerships (provided that it keeps its finger on its existing network), has its own €7bn investment plans over three years but deployment so far has been somewhat relaxed.

Cynicism aside, any investment in high-speed broadband is welcome – but it does need to be part of a nationally- planned advance in fibre installation, and one that extends high speed broadband provision on an equitable basis right throughout the country: to rich and to poor; to urban and to rural; to young and to old. Where the market is allowed to dictate investment in nationally-important infrastructure, the end result can only be inequity, exclusion and a widening of the social and digital divides as a result of the inevitable cherry picking that will occur. Leaving the poor old incumbent to pick up the pieces for the rest is hardly reflective of a level playing field, while the concept of social justice – as well as that of evenly-spread economic development – deserves better treatment.

An interesting parallel between Italy and Australia is also that Agcom, the Italian regulator, has been looking at the creation of a separate, new company responsible for the country’s next generation broadband infrastructure.

Finally, in the US the Federal Communications Commission has made progress with its response to last month’s legal ruling against its sanctioning of Comcast for traffic management policies. I blogged about this here. The danger of the ruling was that an inability of the FCC to take action in this way, because broadband internet access is classed under US regulation law not as a telecoms service but as an information service (and thus subject to a different, lighter regulatory regime), left it unable to guarantee net neutrality – i.e. the freedom of internet users not to be subject to the ‘management’ of their surfing by their ISP. This impasse in turn seemed to threaten the FCC’s ambitious National Broadband Plan.

What the FCC has done, according to the BBC – a bit of a lighter read than the FCC’s own statement – is to develop a ‘third way’ (just like 1997 all over again!) which classifies the ‘transmission component’ of broadband access as a telecommunications service while taking a principled non-intervention approach to much of the rest of broadband access. The Chair of the FCC was at pains to point to the ‘narrow and tailored… cautious’ approach, and the need to overcome the difficulties posed to the National Broadband Plan by the legal decision, but even this limited compromise appears to have left the two Republicans on the FCC behind. Here, the Chair’s view is likely to be supported by the two Democrats, indicating it will thus prevail, but ISPs themselves already appear (according to the BBC report) rather unhappy.

These three highly separate, but highly linked, stories highlight the problems of regulating broadband access both in an environment of seeking control of the technology so that it serves the interest of the people, and in free market situations in which competition is supposed to prevail but which doesn’t necessarily always support the interests of the consumer, both taking place in the context of a neo-liberal dominated world view. You might wonder – just as bond markets opening in the middle of election night, as results are starting to come in, and subsequently with its intermittent results, was thought to be newsworthy as part of the BBC’s online internet coverage – just how we’ve got into this mess.

A lack of strategic thinking is one reason – and it’s clear that only strategic thinking can get us out of it.

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Australian government issues draft broadband law

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The Labor Government in Australia yesterday published its draft ownership, governance and sale framework for NBN Co, the new company being established to fulfil a 2007 manifesto commitment to form a nationally-owned high-speed broadband company charged with rolling out major investment in a A$43bn (£25bn) fibre-to-the-premises network across Australia.

The plans go hand-in-hand with a proposed – and evidently controversial – plan to compel (albeit on a voluntary basis) the structural separation into wholesale and retail arms of Telstra, the former monopoly telecoms company. A bill detailing the break-up was due to be laid before the Australian senate this week, but looks to have been delayed as ongoing, and highly complex, government talks with Telstra continue over the valuation of telecom assets being folded into NBN (leaked, apparently by mistake last October, as being between A$8bn and A$40bn, depending on assumptions). [Edit 26 February: It was indeed delayed [registration required; limited viewing time] as a result of what the Labor Communications Minister describes as filibustering by the conservative opposition – a situation which he later decried in the following terms: ‘If the opposition is serious about improving competition in the market, they need to stop playing opposition for opposition’s sake and allow the debate to begin.’ So, a centre-left government launches a Bill designed to enforce the structural separation of the telecoms company in the name of boosting competition – but this is filibustered by conservatives. It’s an upside down world.]

Meanwhile, more on the union view on structural separation and NBN appears at the pages of the relevant part of the CEPU here.

The draft framework – which has also been controversial, not least because it appears at least partly to be being used as a tool in the negotiations with Telstra – outlines that the government will continue to hold a majority stake in NBN (i.e. at least 51%) until five years after the network is ‘built and fully operational’, scheduled for mid-2018, after which point it will essentially be privatised. The ultimate decision here, however, could be delayed annually, and perhaps even indefinitely.

The key part of the draft as regards the structural separation argument is that NBN will be a wholesale company, selling wholesale products on an open and equal access basis, and that, while private participation (up to 49%) in the venture is welcome, no retail operations are allowed (though the goverment does seem to be reserving the right for NBN to sell services on a retail basis to ‘certain end users, for example government agencies’). This therefore puts Telstra in the position of either agreeing to structural separation, and folding its assets into NBN (for which the terms of engagement have already been announced), or else taking the chance of competing with it via its own infrastructure build. Additionally, the right reserved to NBN to sell retail services to government agencies also adds pressures on Telstra as a result of its own government contracts, the loss of which would clearly undermine its commercial operations.

Comment on the plans – billed as an ‘exposure draft’ – is being taken until mid-March, with legislation due later this year.

Of interest to the UK? Certainly, as regards an alternative (albeit very difficult, given the structural separation aspects) model of rolling out a fibre access network – and one owned by the government, to boot (at least in the first instance). Secondly, there is evident interest from a UK perspective given the circumstances of the creation of Openreach in the UK – when BT was forced to separate itself functionally to avoid a Competition Act reference. Thirdly, the comparative scale of the investment needs to be noticed. Rolling out fibre-to-the-premises across Australia is an immensely significant project which, if the predictions about broadband investment are right (and these things can be subject to hyperbole), should deliver an enormous boost to the Australian economy. The population spread around Australia is important – most of Australia’s 21m people live around the coast – so this changes the dynamics of the investment. Nevertheless, this is a huge sum, both on an absolute and a per-head basis, on which, leaving aside the controversial aspects with which the plans are associated, it is good to see a government taking a lead.

Written by Calvin

25/02/2010 at 1:59 pm