When the Vertigan review raised the prospect of having NBN Co charge new housing estate developers for fibre connections - instead of laying them on for free, it gave fresh hope to an industry displaced by government policy.
NBN Co's role as the so-called 'provider of last resort' in greenfields - new housing - estates has been under threat since they assumed it in January 2011.
Rather than be a 'last resort' for developers, NBN Co quickly became the first choice for furnishing new homes with fibre connections. Where established players charged upwards of $1300 for the privilege, NBN Co offered connections that were entirely subsidised by the taxpayer. Developers voted with their feet.
"Every deal that was on the books at the time went to NBN Co," fibre-to-the-home provider Pivit's managing director Peter Thompson told Information Age. "We missed out on all of them."
"Our clients, who have gone on to build tens of thousands of homes, said that although we were a good company, they went with the NBN Co option," Comverge Networks director Peter Saglietti said. "I won't tell you the financial cost to us but it was significant."
NBN Co's actions in new housing estates have won it few friends. The company ignored the likes of Pivit and Comverge when contracting greenfields rollout work and handed the entire workload to Fujitsu, only to dump them after little more than a year. The work then went to other large contractors, but almost four years on, the pace of the rollout remains slow and the Government's patience increasingly thin.
Prior to their election, the Coalition pledged a change: they would invite smaller, displaced players back to compete with NBN Co for work in new housing estates.
Almost halfway into their first term in government, the mechanics of how they plan to make this work are now clear: the NBN will no longer be free for developers.
Real costs
Developers may be asked to pay for last-mile fibre and backhaul connections as soon as March 1. The proposed costs include $400-800 to install ducts for the fibre, $400-600 for the last-mile connection (depending on whether it's a multi- or single-dwelling) and, if no backhaul already exists, "up to" 100 percent of the cost of connecting the estate to an exchange or point of interconnect.
In theory, the proposed costs are roughly on a par with what some private operators charge.
"I'm very happy with the charging regime - it's as far as NBN Co need to go in some ways," Opticomm's chief regulatory officer Phil Smith said.
"I know other players are asking for more, but I believe it has already really levelled the playing field.
"We believe we'll pick up a significant amount of business out of this. We're already seeing developers wanting to talk to us where they weren't talking to us before."
Other players have welcomed NBN Co's planned exit from free fibre connections, but say the proposed costs still mask substantial taxpayer-funded subsidies to developers.
Players including OPENetworks, Comverge Networks and Pivit are publicly represented by a lobby called the Greenfield Fibre Operators of Australia (GFOA).
Its spokesman, OPENetworks managing director Michael Sparksman, argues the proposed costs are as little as one-third of those borne by NBN Co to bring fibre to each home in a new housing estate. He is seeking - among other things - Ministerial certainty over when NBN Co will "move to a full cost recovery model".
He is particularly concerned about the wording of the proposed charges for backhaul. Rather than commit NBN Co to charging developers for backhaul at market rates, the Government's policy document says "NBN Co may [emphasis added] charge developers a co-contribution of up to 50 per cent of the first $1000 per lot of capital costs it incurs" when deploying backhaul. "Developers will be liable for 100 per cent of backhaul costs in excess of $1000 per lot," the policy states.
Such discretion doesn't sit well with Sparksman; he sees it as an opportunity for NBN Co to continue undercutting private sector players.
"It's a complete furphy to say that NBN Co must charge for the backhaul - it doesn't have to charge, and it won't," he predicted. "When we compete against NBN Co, we have to charge the developer for backhaul. It costs a couple of hundred thousand dollars to build a transit network into the local community."
Sparksman's concerns are backed by GFOA members including Pivit and Comverge.
"The only issue I have is that NBN Co should be charging full cost recovery plus overhead," Pivit's Thompson said. "The way the backhaul clause is written is a bit loose at the moment. Who is going to know if what NBN Co charges reflects the true cost of putting the backhaul in?"
Comverge's Saglietti is blunt. "The [proposed] numbers aren't real," he said. "Those numbers are just what the developer might be prepared to bear."
Opticomm's Smith sees the proposed costs as a compromise. "What I see in the draft policy is what the industry wanted in a lot of ways, but a consciousness not to go too high on price because housing affordability is still an issue."
Continue to page two for analysis on fixing NBN Co's 'last resort' role.
'Absolute last resort'
GFOA and its members are also seeking clarity on NBN Co's ongoing role in new housing estates.
"The key issue for all operators is that NBN Co was never instructed to be the provider of absolute last resort for new developments," Sparksman said.
At stake is how being the provider of last resort in new housing estates should operate. Critics argue that NBN Co should only enter new housing estates that are unable to attract the attention of the private sector first.
"The Government, through the Department of Communications, should have instructed that NBN Co only provide fibre to greenfields as a last resort," Comverge's Saglietti said.
"Instead, what we have is complete overreach [by NBN Co] of what [a provider of last resort] was intended to do.
"NBN Co could have been putting money into improving the connectivity of millions of Australians and instead they chased a market that was already serviced by the private sector."
GFOA, through a submission to the Department of Communications, wants NBN Co's role in greenfields to be clarified in the statement of expectations issued by the Communications Minister.
Unwanted distraction
For all the animosity, it remains well understood that responsibility for greenfields was effectively foisted on NBN Co; that the added responsibility was an unwanted distraction from the core task of overhauling telecommunications infrastructure in built-up parts of Australia.
"Right in the crucial part of planning for the brownfields fibre rollout, NBN Co gets hit with greenfields responsibility," Saglietti said.
"Greenfields was a substantial distraction to the NBN Co operation. It took focus away from what they were supposed to be doing. It was a bad decision then and it's still a bad decision today."
NBN Co did not respond to a request for comment.
Fujitsu Australia was also asked to comment but declined, other than to say it remains in the FTTx market and "currently" has no construction work from NBN Co.
