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11 th ACCC Regulatory Conference

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

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

  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 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: • €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% 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 NZD3000 to pass and connect • Layer 1 equivalence after 10 year concession

  7. 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 Key project differences

  8. 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 Key project differences -/2

  9. 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 Key regulatory and other differences -/1

  10. 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 Key regulatory and other differences -/2

  11. 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 NBN/UFB Wholesale Services

  12. 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)

  13. Comparing P2P, Active Ethernet, GPON Central Office Space Fiber Raw Materials Power Consumption

  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 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?

  16. A Basic Comparison of Four FTTH Architectures Central Office Access loop Home More concentrated More distributed Point -to- Point Splicing IP Ethernet switch Active Ethernet IP Ethernet switch Ethernet switch TDMPON IP PON OLT WavelengthSplitter WDMPON IP Optical splitter PON OLT

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