The only NBN monopoly seems to be on ignorance

If you listen to Opposition carping about the National Broadband Network (NBN), you might imagine that we're about to see the end of competition in the telecommunications industry. Nothing could be further from the truth.

The key to understanding the NBN - a point that the Opposition tends not to emphasise, because it's in their interests for people to remain ignorant and confused - is that NBN Co is not an internet service provider (ISP). It's a wholesale provider of a customer access network (CAN).

Let's step back a bit...

Put very simply, a telecommunications network has three pieces:

    The CAN that connects everyone to the local exchange. This was traditionally copper wire, but it now includes the hybrid optical fibre and coaxial cable (HFC) networks like the ones originally laid for pay TV, or optical fibre all the way such as the NBN is laying or, in the case of wireless data and mobile phone networks, towers packed with radio gear.
    The backhaul network that runs between cities connecting the exchanges together. That's mostly optical fibre these days, though historically it's been microwave radio links and, before that, big fat multi-strand copper cables.
    The core network that ties it all together, connecting to the rest of the world, and providing administrative functions such as metering customers' usage. This sits in data centres in the major cities.

These days, that's all called the wholesale network. Building and maintaining it is essentially an engineering and systems administration job.

Separate to all of that are the retail operations - that is, dealing with end customers and taking care of sales and marketing, billing and customer support.

Historically, big telcos like Telstra and, at least in the capital cities, Optus have run all three parts of their networks and handled retail too. The next tier like iiNet and Internode have run their own core networks and arranged their own backhaul, and have installed their own equipment in Telstra's exchanges, but have used Telstra's CAN for the "last mile" to the customers' premises, paying wholesale rates. The mid-ranking and smallest telcos have no networks of their own. They just buy wholesale capacity from, say, Telstra and handle only the retail operations.

That's perhaps overly-simplified, But the point is that there are wholesale telcos who have just a handful of customers, namely the retail telcos, who in turn have thousands or millions of end customers. If those retailers provide data services they're an ISP, if they provide voice telephone services they're a phone company, and of course these days many if not most telcos are both.

The concept of the NBN is very simple, provided you ignore what happens in the most densely-populated parts of the major capital cities, and provided you remember we're taking only about fixed services, not mobile.

In most parts of Australia, the only CAN has been Telstra's copper network. The NBN will replace that with NBN Co's optical fibre CAN - at least for 93 per cent of the population, roughly any location with a population of 1,000 or more. In other words, the NBN replaces an ageing CAN that's reaching the limits of its capacity technically, with a new one that provides vastly increased capacity for the future.

What doesn't change is the fact that customers, both domestic and business, can still choose whichever retail telco offers the best deal for them. That is, there's still the same capacity for competition between telcos. The only difference is that those retail telcos are provisioning their services via NBN Co fibre rather than Telstra copper.

That competition can take the form of different pricing for a different quality of service, or different bundles of services.

There will still be some ISPs charging premium rates for premium service and support - such as high-capacity international links with a low contention ratio and a phone number staffed 24/7 by qualified systems administrators. There will still be cheap ISPs offering over-crowded international links and a call centre in the Philippines that might finally answer your call after an hour on hold, only to present you with a human who barely understands what email is.

There will still be telcos that bundle together services delivered via the NBN - let's say a 25Mbps internet connection, two voice phones and a selection of 40 pay TV channels - with additional non-NBN services like mobile phones and web and email hosting. Heck, maybe new models will emerge, where telcos include pay-by-the-month computers along with technical support.

All that's different is that the retail telcos, instead of dealing with Telstra Wholesale to get access to its copper CAN and suspecting that Telstra arranged things to preference its own retail operations, they now deal with NBN Co - which is mandated to treat all its wholesale customers equally, and to have consistent entry-level pricing between the city and the bush. Rather than Telstra's habit of keeping its plans secret, we have NBN Co's very public consultation with the rest of the industry over what it's building and how it'll work.

Sure, things aren't quite as clear-cut in inner-urban areas. There, Telstra and Optus ran HFC networks. The deal has been done, or nearly done, to close them down. They and other providers were running fibre to the premises in cherry-picked highly-profitable areas. That will essentially end, since the only way NBN Co can maintain its regional prices is to cross-subsidise the bush from the city.

Whether you agree with that policy or not is another question, of course. But that was one of the NBN's stated policy goals. Personally, I'm all for policies that help regenerate declining regional centres and reduce the population pressure on Sydney and Melbourne and their creaking transport networks. You may disagree.

But to claim that telco competition will end because of an "NBN monopoly" is as silly as claiming there's no competition in the road transport industry because everyone has to use the same monopoly public-funded roads. Different freight companies use those same roads to deliver different styles of service at different prices, and competition seems healthy enough.

Competition won't end. It'll just be different. And perhaps, on the balance of things, better for consumers. We shall see. Amongst all the details of the Telstra-NBN and Optus-NBN deals released Thursday there are bound to be things we should be concerned about. In the NBN project more broadly, there are plenty of things we should question. But the death of competition isn't one of them.