TelecomTV
27 Jun 2008
The incumbent Australian operator Telstra has made a pointed attack on Singapore’s planned structural separation of its next generation National Broadband Network, calling the proposed split of the network “high farce.”
Reacting to a campaign by Singapore Telecom’s Australian subsidiary Optus to have the future Australian broadband network separated, Telstra said that, on close examination, the proposed Singapore split between “netco” and “opco” is nothing more than "a charade."
In a submission to the Australian government, Telstra opines “There will be only one NetCo and while, in theory, there is scope for more than one OpCo, the general expectation seems to be that there will be just one winner of the OpCo bid. The relationship between NetCo and OpCo will therefore, by implication, be exclusive. There will not be multiple OpCos accessing NetCo on an equivalent basis. There will be one buyer and one seller, making the separation a high farce.”
The submission continues, "It appears, under the consortium arrangements SingTel is proposing, that it would build, own and finance the new network, and provide a long-term lease arrangement to NetCo. Again, that contracting task appears to be very simple: one provider, one customer and a long-term lease, with very little to negotiate over the life of the asset. It will be SingTel’s build, and SingTel’s network, with a return funded by income from a JV that itself is dominated by SingTel’s shareholder, the Singapore government.”
Telstra claims that, under the proposed Singaporean plans, “OpCo will be a wholesaler to multiple retailers, but need not itself be structurally separated. Only functional or operational separation will apply between its wholesale and retail functions – precisely what SingTel Optus says is ineffective in Australia. It appears that, as well as owning the network in the NetCo arrangement described above, SingTel also may bid for OpCo."
Telstra is particularly critical of the argument used by Optus (and its FTTN consortium Terria), that structural separation is being deployed in several comparable markets including Singapore and, thus, makes perfect sense for Australia.
Telstra says, “The (Singapore) separation relates to an entirely new FTTP build that will sit in parallel to SingTel’s existing, vertically integrated operations on its copper network. SingTel will not be required to give sub-loop access, nor be foreclosed from itself upgrading or operating its copper network, nor accept any limits on its own discretion to structure as it wishes – all of which SingTel seeks to impose on Telstra in Australia.”
The carrier also quotes SingTel’s submission to the Singapore government where it opposes structural separation of its own legacy operations.
“SingTel has no credibility in demanding that Telstra should “do as I say, not as I do”.
In its submission, Telstra puts forward an argument for the desirability of vertical integration in a next generation network. The company writes, “Efficient design of the NGN requires close co-operation between the network and downstream units in terms of identifying service and system requirements, and ensuring that they will be met as effectively as possible. It will also need to benefit from the economies of scale in procurement and logistics that only a large, vertically integrated entity can achieve.
Timely investment in upgrading the network in line with developments in technology and in usage patterns will be critically dependent on close, continuing and unimpeded information flows between vertical layers, co-ordination of network changes with applications development and the ability to spread and manage the risks, and share the benefits, of upgrading as between the full portfolio of wholesale and retail activities. The alternative is the endless buck-passing and capacity bottlenecks that have become chronic conditions in vertically separated ports and rail.”
For its part, the Optus-led Terria consortium says it recognises the caveats of the Singapore separation and the differing nature of that market in its own submissions to the Australian government.
Optus writes,“Closest to home and in the context of a tender for an NGN deployment, the regulator in Singapore is including structural separation of the network company (the owner of the passive fibre and ducts) as a requirement of proponents responding to its request for proposals.... The regulator has, however, only imposed operational separation between the operational company, the company that owns the switches and transmission infrastructure, from any of its downstream retail affiliates. It is worth noting in this regard that in Singapore there are a number of operators with local fibre loops.”
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