NBN REPORT: A new report prepared by KPMG and McKinsey for the federal government claims that the National Broadband Network will have problems if there is not a level playing field for retailers.

They say that if gear is located in Telstra exchanges there could be problems.

The report says that practical access to a point where the Internet connects requires the co-location of customer equipment at the POI.

This will create another potential bottleneck in the form of limited physical space at the POI. If NBN Co secures space for its POIs that is merely sufficient for its own equipment, the difficulty in obtaining space for retail service providers to locate equipment could impede competition, particularly at such point as physical unbundling is permitted.

This problem will be exacerbated if many NBN Co POIs are located in current Telstra exchanges. In this scenario, Telstra would enjoy a unique advantage over its competitors in gaining access to the NBN.

The report writers say that the government’s objective of a level playing field for retailers will not be achieved. To resolve this problem, it is important that retailers only be allowed to connect to the NBN at points where they and their competitors will face similar backhaul costs. In practice, this means that NBN Co should not allow access to its network except at points reached by competitive backhaul.

They claim that is not a trivial matter to determine whether a particular backhaul link is genuinely competitive. We propose that NBN Co should build backhaul on links that are clearly not competitive.