th 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 Source: NBN Co Limited Cf Karl-Heinz data points: € 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%

5 Source: NBN Co Limited NBN Snapshot – fibre + wireless + satellite

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 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

8 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

9 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

10 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

11 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

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?

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17 Point -to- Point Active Ethernet TDM PON Central OfficeAccess loopHome IP Ethernet switch Ethernet switch Efficient Outside Plant  Small street/pole cabinet  No remote powering Cost-effective Feeder  Smaller duct sizes, Less RoW,…  CO consolidation Best Scalability Passive OSP, lowest CAPEX CO scalability & Consol. (20+ km) Wavelength per user  Few fibers in feeder section  CO consolidation PON OLT Optical splitter IP Ethernet switch More distributedMore concentrated IP Splicing WDM PON PON OLT Wavelength Splitter IP A Basic Comparison of Four FTTH Architectures