ACCC approves Optus HFC to NBN deal

Fixed line competitor to the NBN to be removed

The Australian Competition and Consumer Commission has given tentative approval for the migration of Optus’s hybrid coaxial cable (HFC) customers to the National Broadband Network (NBN) and the subsequent decommissioning of parts of the HFC network.

The approval, which the ACCC couches as draft determination, comes almost a year after Optus reached an $800m agreement with the NBN Co for the migration of its HFC customers to the NBN.

The agreement involves steady payments to Optus for its migrating customers to the 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.

In a statement to the Australian Stock Exchange, the ACCC’s chairman, Rod Sims, acknowledged that the draft determination represented a “finely balanced decision” which drew on public information and submissions as well as confidential information supplied by the NBN Co and Optus.

“A wide range of arguments were put to the ACCC by Optus and NBN Co, but in essence our decision was based on weighing carefully two clear public benefits arising from the HFC Agreement against a potentially large but less clear detriment,” he said.

According to the ACCC, the benefits are that the agreement will avoid the cost of operating the Optus HFC network to provide a service the NBN is also able to provide, and the delivery of a lower-cost HFC subscriber migration to the NBN.

The detrimental aspect of the agreement is that a “potentially significant” fixed line competitor to the NBN -- Optus's HFC business -- in Brisbane, Sydney and Melbourne is removed, along with the potential pressure on the NBN to improve its performance.

According to Sims, the ACCC views the regulatory approach which will be applied to the NBN will substitute for market pressures and “provide strong incentives for NBN Co to promote utilisation of the NBN and to be responsive to customer needs concerning speeds and other aspects of service quality.”

Optus chief country officer, Australia, Paul O’Sullivan, said in a statement that the ACCC's draft decision recognised the practical outcome of Optus' agreement with NBN Co.

“Approving the deal will pave the way for true market competition and innovation in an NBN world," he said. "Australians can look forward to greater value and enhanced retail competition, while the NBN will be able to achieve early scale and deliver affordable pricing uniformly.

O’Sullivan said the decision would also allow the company to redirect resources away from having to maintain its existing HFC network.

“ACCC approval will pave the way for a genuine win-win deal, freeing up resources that can be used more effectively to open up retail competition on a single advanced network that covers the country," he said.

"Locking carriers into smaller-scale wholesale competition with the NBN founded on existing network platforms would never offer such nationwide benefits because existing HFC networks only cover certain regions."

In October Optus said anti-disparagement provisions included in its agreement with NBN Co would not restrict the telco's ability to market wireless products and services.

The clauses are designed to prevent Telstra and Optus from marketing a replaceable, substitutable service to fixed-line broadband delivered through the NBN.

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