Extraordinary: Optus signs up to National Broadband Network gag order

A government business must not be criticized???

OPTUS has promised not to criticise the National Broadband Network in key regions for 15 years under a deal that raises new warnings the $36 billion project will stifle competition.

Just a week after the competition regulator warned that parts of an $11bn deal with Telstra could prove detrimental to competition and consumers, official documents reveal that an $800 million deal with Optus includes an "anti-disparagement" provision.

The provision, designed to help shore up the number of customers using the NBN, stops Optus from being "expressly critical of" or making "any express adverse statement" about the performance of the network.

The ban would apply in the areas where the No 2 telco has agreed to shut down its cable network, which presently passes 2.4 million premises, and is also likely to affect the 504,000 Optus customers who would be migrated to the NBN.

The deal also stops Optus from marketing its wireless data services to target those households in a way that criticises the NBN. But Optus is still "free to compete in the market for the supply of wireless services".

Telstra has promised not to promote its wireless internet services as a direct substitute for the NBN for the next 20 years.

But last week the Australian Competition & Consumer Commission warned Telstra that a clause in its deal with the NBN Co, which is building the network, had the potential to undermine the competition for wireless services.

The development comes as The Australian can reveal that despite forecasts in the NBN Co's corporate plan that up to 35,000 premises at new housing developments would be connected to the NBN by June 30, the first development was not connected until August 8.

NBN Co's executive general manager of new developments, Archie Wilson, said when the corporate plan was issued in December last year it was expected developments already under way would receive fibre.

But the government later clarified that only developments that received council development approval after January 1 would receive fibre, typically about nine months after works start on a new estate.

Mr Wilson said there were already more than 2000 applications to connect about 175,000 premises on so-called greenfield estates over the next three years, with about 50 new applications a week.

The first fibre rollout to a major housing development will be unveiled today at Bunya in western Sydney.

Yesterday, NBN Co said it had reached 600 premises as part of its main rollout on the mainland, 200 more than expected.

The comments came as NBN Co chief Mike Quigley said it had awarded two key contracts that would take to 60 per cent total construction activity to have been allocated.

NBN Co yesterday signed construction contracts for work in Victoria and in Western Australia, following a deal to build in Queensland, ACT and NSW. The timing of the awarding of contracts for the Northern Territory and South Australia remains unclear.

NBN Co has asked the ACCC to authorise its $800m deal with Optus. This is where the ACCC provides immunity for otherwise anti-competitive arrangements on the grounds that the public benefit outweighs the detriment.

The restrictions that NBN Co is seeking with both Optus and Telstra are more akin to the types of clauses found in severance arrangements in employment contracts that restrain employees from speaking negatively about a former employer.

They can also be used in other contracts to protect an investment where the size of the investment is particularly large.

Last night, opposition communications spokesman Malcolm Turnbull lashed the provisions as anti-competitive and said they were evidence that federal Communications Minister Stephen Conroy would "sacrifice consumers so that the holes in the NBN business case don't become a political problem before 2013".

"The NBN Co's deal with Optus has not been provided with the same statutory waivers from ACCC oversight that the Telstra deal was granted. I would expect that the ACCC will find these anti-competitive measures to be very objectionable," he said.

Prominent economist Henry Ergas said the clause appeared to be designed to restrict Optus's ability to comment freely "because it will create the fear that the comment they make could be viewed as disparaging".

NBN Co spokeswoman Rhonda Griffin would not comment on whether the company would seek to revise the restraint clause in the Optus contract after last week's ACCC concerns, saying the "marketing of Optus wireless services will continue in their HFC (hybrid fibre coaxial) areas and elsewhere".

"What it does is restrict the use of adverse statements about the performance of the NBN, and even then, only within the confines of Optus HFC service areas," she said.

Optus defended the provision as limited in scope.

An Optus spokeswoman said that to the extent that further developments in wireless technology enabled faster wireless services to be provided to consumers, Optus would be free to offer those services to its customers.

NBN Co has admitted that wireless internet services in some areas could reach 12 megabits per second -- the NBN entry-level speed -- although in reality advertised rates of 10-25Mbps for wireless connections can drop to less than 2-3Mbps when there are more users.

NBN Co insists that the anti-disparagement clause will have no effect on competition for wireless broadband services because the plan was "to support the migration of customers by ensuring a discouraging marketing environment does not arise".

"In this regard, it is important to note that Optus does not currently promote its wireless services with reference to either its HFC network or Telstra's copper network," NBN Co has told the ACCC.

"On the contrary, Optus promotes its wireless network in terms of speed, coverage, reliability and the value for money that it provides."


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