ACCC set to approve Optus/NBN Co HFC subscriber transfer deal

28 May 2012

The Australian Competition and Consumer Commission (ACCC) has announced the publication of a draft determination in which it proposes to grant authorisation for an agreement between NBN Co and SingTel Optus for the migration of the latter’s HFC subscribers to the National Broadband Network (NBN). The determination will also reportedly cover the decommissioning of part of Optus’ HFC network.

As previously reported by CommsUpdate, in June 2011 Optus revealed that it had reached an agreement with NBN Co, the public-private company overseeing the NBN project, regarding the migration of its HFC customers to the fibre network. Under the agreement, Optus said it would begin the progressive migration once the network is rolled out in a given area and is ready to provide services to customers currently served by its HFC network. The initial migration of customers to NBN infrastructure is likely to commence in 2014, and the programme is expected to take up to four years to be completed across Optus’ entire HFC footprint. Optus estimated the total value of the agreement as AUD800 million (USD780 million).

Commenting on the latest development, ACCC chairman Rod Sims noted: ‘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.’ The regulator noted that the main public benefits of the agreement included the avoidance of the cost of operating the Optus HFC network to provide a service the NBN can also offer, while it will also ‘deliver a lower cost HFC subscriber migration to the NBN’. By contrast it did, however, note that the HFC agreement will remove a ‘potentially significant fixed line competitor to the NBN in Brisbane, Sydney and Melbourne’. Further, the ACCC also claimed that competitive pressure from Optus could have resulted in ‘positive outcomes notably prompting NBN Co to improve its performance’.

Despite the possible downsides to the deal, the ACCC said that there were a number of unique mitigating factors, with the watchdog noting that Optus’ HFC network is unlikely to be extended beyond its existing coverage area, which in effect would limit the potential for its subscriber base to grow.