ACCC approves $800m Optus and NBN Co agreement

An $800 million deal between NBN Co and Optus has been approved by the Australian Competition and Consumer Commission (ACCC).

The agreement involves steady payments to Optus for migrating its customers to the National Broadband Network (NBN) as and when the service becomes available in areas currently serviced by Optus’ HFC service. The initial migration is expected to commence in 2014 and will take up to four years to complete.

While ACCC chairman Rod Sims has previously stated the Optus and NBN Co deal is in breach of the Competition Act, Sims stated the benefit of decommissioning Optus’ HFC network outweighs the detriments, with the HFC unsustainable in the long-term.

“…NBN Co will only be able to fully recover the costs of its investment if, over time, users demand and migrate to higher speed services with greater data usage. If such demand does not eventuate, then NBN Co will incur a loss,” the ACCC said in a statement.

“The ACCC concluded that if it did not grant authorisation, competition between the HFC and the NBN would be unlikely to endure in the long term due to the pervasive and enduring economies of scale associated with the NBN."

Tthe ACCC looked to quell concerns about the anti-competitive nature of the agreement, stating the NBN will be a regulated network.

“…the HFC agreement removes a potentially significant fixed line competitor to the NBN in Brisbane, Sydney and Melbourne. Competitive pressure from the Optus HFC network may have resulted in positive outcomes, notably prompting NBN Co to improve its performance,” the ACCC said in a statement.

“The ACCC has looked at these issues closely, both at the draft and final determination stages, and there are unique reasons to conclude that the detriments are likely to be considerably less than usually expected,” Sims said.

This includes limited scope for growth of Optus’ HFC network, with Optus unlikely to further invest in the network and the HFC unlikely to be expanded beyond the current 400,000 broadband subscribers.

Decommissioning the network would also help encourage Optus subscribers to migrate from the HFC network to the NBN and avoid the cost of operating the network for services the NBN can provide.

“The Optus HFC network would, therefore, only provide a close substitute to the NBN for customers seeking broadband services at the lower end of the range of services that the NBN will support,” the ACCC said.

Optus customers on the HFC would also be likely to demand faster services in the future and eventually migrate to the NBN regardless, the ACCC said. Once the Optus HFC network lost customers to the NBN when critical mass was reached, it would then become even more uneconomical to operate the network, according to the ACCC.

The ACCC also stated the agreement was unlikely to impact on consumer choices as consumers are more likely to choose products and services based on product and services, not on which type of network their services use.

Malcolm Turnbull, shadow minister for communications and broadband, has previously slammed the ACCC’s decision to hand down a draft determination on the agreement, stating: “It is difficult ... to think of anything more anti-competitive than a new government-owned telco, the NBN [Co], paying Optus $800 million to shut down the HFC network, which is currently offering high-speed broadband services comparable to those that will eventually be offered by the NBN itself."

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