A number of events that have occurred over the past month has me very annoyed when it comes to the behaviour of some telecommunication carriers in Australia. Our Fibre to the Home market is rapidly growing (abet more slowly than our neighbors), but the behaviour of some organisations is causing confusion for the market and in particular the developers. Our complex regulatory regime has created an opportunity for some to create Fear Uncertainly and Doubt (FUD) - a situation we don't need in this time of slowing economic growth and tightening monetary policy. If backers are confused and unclear about an investment decision they go back to the basics and lower their risk. In the FTTH market, this means housing estates lose out on having fibre reticulated.

Just this week I have had calls from two developers and a client; and participated in two meetings (on opposite sides of the country) where the information people have been provided is at least confusing and in some cases substantially misleading.

The first is an assertion that Australia's longest running FTTH operator - Broadcast Engineering Services/E-Wire - has gone bankrupt and all their estates have been turned over to Telstra. This has been reported to me by a developer in Western Australia, two senior government representatives in Queensland, and a client in New South Wales. All the same claim but from different sources. In speaking with Tim O'Dea the General Manager of BES, he said "BES is very much alive and well and continuing to expand our customer base". Granted they lost Ellenbrook to Telstra and one of their clients - Satterley Group - also signed with Telstra, but that was only for future estates. They continue to grow their business with new estates soon to come online.

The second issue relates to the NBN and advice - and I use that word lightly - given to a client by a third party whereby they were informed "Optus would win the NBN and roll out the network within a year". Now I must say this assursion was not made by Optus and I don't think they would appreciate their name being associated as it was. However this did certainly cause concern for my client and the investment they are considering in their estate. More alarming was the statement that followed which allegedly claimed FTTN was a better technology, offering faster and more services than the technology they were considering. Why would you invest your own money when the government was going to do it for you?

The reality is the NBN will only deliver a fraction of the services that a true broadband network using FTTH can offer. Furthermore, the NBN is currently focused on reticulating faster broadband services into existing brownfield areas, and it is unlikely to service new greenfield estates. The communications minister, Stephen Conroy, said back in March, "if it were within my power, I would mandate FTTH in greenfield estates". He went on to indicate this would be done outside of the NBN process.

The last issue which is very confusing for developers are misleading claims about the Universal Service Obligation. One developer who wished to remain anonymous to avoid repercussions said "Telstra told us only they have the USO and it is mandated for them to deliver services to every household in Australia". "They gave us the impression we had to deal with them [Telstra] for our telecommunications needs".

While it is true that Telstra has the Universal Service Obligation, it is only for the delivery of the "Standard Telephone Service" and does not apply to products such as Internet, TV, PayTV or any other advanced service. As the name implies the "Standard Telephone Service" is just that "a service". It is not a product or technology, and any suggestion that it must be delivered over a copper or fibre network is misleading.

The STS is currently delivered today over many forms of technology including fibre, copper, and wireless. The Act was specifically written to ensure it was technology neutral. The USO also applies were a customer requests the service from the Universal Service Provider and only if that service cannot be provided by any other carrier in Australia.

So does Telstra have to provide the USO? Yes. Does that mean they have to build an underground cable network in an estate using copper or fibre? Not necessarily. Are they mandated to build an underground network to deliver the service? Absolutely not! They are mandated to deliver a telephone service using what ever technology is appropriate and only if no other provider is willing to deliver the service.

I have recently completed a twelve page white paper which addresses eight frequently asked questions in regards to the telecommunications act and building local access networks. Anyone wishing to get a copy of this paper can contact me directly.

The Universal Service Obligation (USO) is a legislative requirement for the nominated Universal Service Provider (currently Telstra) to ensure every household in Australia has access to a Standard Telephone Service (STS).

In an address to the National Press Club on 27 June 2007, then Communications minister Senator Helen Coonan announced the commencement of a review of the USO. The review was to look at the obligations on industry and determine whether the load is being shared equitably as was its intention.

For example, should one carrier be required to be the Universal Service Provider in a Greenfield estate when another company has been awarded the contract to be the infrastructure provider for that estate? Or should the company that wins that contract also bear the responsibility for the provision of a telephone service in that estate? In my opinion NO! I am with Telsta on this one and it should be the responsibility of the local carrier.

In August 2007 the Communications Alliance (formally ACIF) hosted the USO in Greenfields workshop to generate discussion with the industry as to the requirements of the service obligation within new housing estates.

It has become increasingly common for developers to build their own local networks or outsource that via a contract to another carrier which may not be Telstra. There are now 58 communities in Australia which are serviced predominantly by other carriers. Generally these companies will provide a full suite of services including broadband, television and voice over that network. In some cases, as an incentive to invest in these areas which take time to grow and become economically viable, the developers grant an exclusive license to the carrier for a fixed period of time.

Despite the fact that these companies have put in brand new, state-of-the-art fibre optic telecommunications infrastructure, the legislative requirements still demand that Telstra provides the Universal Service Obligation. In most cases, to do this, Telstra would have to duplicate infrastructure to provide a Standard Telephone Service which is manifestly inefficient, uneconomic and unfair. The problem is further exacerbated where the provider does not make voice services available (e.g. in the case of Somerly, Western Australia) and Telstra as the USP is then required to provide those services.

At the Greenfields workshop and in their public submission to the review, Telstra voiced their opposition to the duplication of infrastructure, instead suggesting it should be the local incumbent carrier’s responsibility to provide the Universal Service Obligation. It has also been suggested that Telstra could seek wholesale access over that network to provide the USO, but they have rejected this based on:

• Not sound from and economic perspective;


• Puts more cost into the USO system;


• Increased contractual arrangements which add to legal fees;


• Complexity of interconnecting with multiple different networks.

As the current situation stands, Telstra is required to provide every household with a Standard Telephone Service and will do so until the legislation is changed. However what is happening in many of the estates where the telecommunication contract has been awarded to another carrier, Telstra prefers not to duplicate the infrastructure. Instead where a resident demands to be serviced by Telstra with a telephone, they are using wireless technology (most likely NextG) to deliver that Service Obligation; a reasonable situation particularly if they had to install infrastructure throughout the estate to service only a few customers.

To ensure the effective operation of the USO in Greenfield estates Telstra has proposed a number of legislative changes which could automatically require the local access infrastructure provider to become the USP for that area. The following is their outline for such a legislative provision extracted from their public submission to the USO review:

• identify the point in time at which an access infrastructure provider would be determined to be the USP. Appropriate time may be on appointment as an access infrastructure provider by a developer. Where there is a delay between the appointment and the provisioning of telecommunications services, the USP be required to provide interim services;


• provide a mechanism to confirm the identity of the access infrastructure provider;


• provide a mechanism to identify the universal service area in respect of which the access infrastructure provider becomes the USP;


• set up a central, public register for USPs so that it is clear which USP operates in which universal service area;


• reinforce that there is one USP per universal service area;


• provision for termination, suspension and transfer of USP status of infrastructure.

Most of the providers would welcome taking on the USO responsibility for their designated areas, however only if their obligation is matched by receiving a contribution for taking on that obligation and also not having to contribute a portion of their revenue to the USO as is currently the case.

The review of the Universal Service Obligation is still continuing.