A new report shows the economic benefits of broadband competition
Australia's GDP would receive a $3.5 billion boost from a national competitive DSL network using the 'unbundled local loop' (ULL) service, according to research by economic consultants The Allen Consulting Group.
But the right decisions by Government - including a ULL price which is based on Telstra's costs and varies by geographic band - are vital to secure this economic benefit for Australia.
In a report issued today, The Allen Consulting Group have analysed the economic benefits of a competitive ULL roll out and concluded that it would have a large positive effect on the Australian economy, boosting GDP by 0.3 percent or $3.5 billion by 2016 - 17.
The modelling assumed a roll out to all 642 Telstra exchanges in Band 1 and Band 2 around Australia, at a cost of $360 million.
"The economic boost would occur because a competitive DSL roll out would increase business take up of broadband - which in turn would deliver productivity benefits," said Dr Jerome Fahrer, Director of The Allen Consulting Group.
The report highlighted two critical Government policy settings to stimulate such a competitive roll out.
- A ULL price based on sound regulatory principles - including a deaveraged, cost based ULL price
- Maximising the impact of subsidies under Connect Australia to stimulate a competitive national rollout
A 642 exchange network would allow Telstra competitors to deliver competitive telephony and data services to around 80 per cent of Australian households and businesses. Rather than the incumbent's network being the only option for voice telephony and broadband DSL, those customers would then have a choice.
"Today most broadband competition is simply reselling the Telstra service. By contrast, competitive data and telephony networks using the ULL service offer the prospect of much stronger competition," Dr Fahrer said.
"In turn, though, the rollout of such competitive networks is dependent on the right - geographically deaveraged - ULL price structure.
"Getting the right ULL pricing outcome has the potential to deliver substantial benefits to the Australian economy and Australian consumers," he said.
"Optus commissioned this research to highlight the benefits of a national competitive ULL-based roll out," Paul Fletcher, Director of Optus Corporate and Regulatory Affairs said.
"Australia's broadband penetration is poor by world standards - reflecting Telstra's network dominance. A competitive ULL based roll out is critical to lifting our national broadband performance.
"Optus has already rolled out to over 100 Telstra exchanges, and we are on track for our target of 340 exchanges by the end of 2007.
"Unfortunately, Telstra is working hard to destabilise the investment climate for ULL.
"It is vital that we get an early, clear statement from Government that it will not be overruling the ACCC on ULL price setting," Mr Fletcher said.
"Government must also be wary of Telstra using fibre to the node (FTTN) to destabilise ULL based competition.
Mr Fletcher said while discussions about a FTTN network are important, broadband technology is only half the story - with market structure being the other half of the story.
"The incumbent has an extensive DSL network; and ULL offers the chance for an extensive competitive DSL network in a reasonable time period. The Allen report shows the clear benefits of securing that outcome.
"If we are serious as a nation about driving to an outcome where most Australians have access to high bandwidth, competitively priced broadband, the next step is very clear - create the conditions for ULL based networks to flourish," he said.
Media contact:
Melissa Favero
Optus Corporate Affairs
Tel: +61 2 9342 5030