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May 30, 2005

Telstra's joke

When I read in the Australian Financial Review that Telstra is negotiating partnerships with Hollywood film studios and major television studios to deliver television, movies, and interactive services over the internet I thought that it was some kind of joke. I had a good laugh over coffee. Media policy and reform is all about protecting established interests than enhancing the public interest.

I understand that Telstra has big ambitions to transform itself from a telecommunications to a fully fledged media company. I can see a carve up of the media industry happening in the near future, as the new electronic internet media drive change and competition. And the media market needs radical reform to open it up and allow a lot more diversity.

But pay-TV movies over the internet to my computer down a highspeed internet line? You have to laugh at the high tech spin designed to show Testra's high tech creditionals.

Pay-TV movies over the internet is not going to be done with the current top broadband speeds of 1.5 megabits through DSL, with limited downloads and costing $80 upwards a month. Why, it would take those in the capital cites all night to download the movie, and you'd pay excessive fees for exceeding the download limit. That is not affordable access to high speed broadband. Remember, most of the country has no broadband service (they have unreliable dial-up if they are lucky). So who is kidding who here about downloading movies over the Internet?

Australia's broadband infrastructure is, slow, expensive, unplanned and bounded by anti-competitive practices and contraints to protect Telstra's monopoly. And the Howard Government has no intention of ensuring competition by structurally separating or breaking up Telstra.

As far as I can tell Telstra is in no hurry to increase the broadband speed to 8, 12, 26 megabits per second; there is little movement on laying new fibre optic cable; and the Federal government has no e-strategy to deliver high speed broadband to the nation within the next five years. The market, not government, is going to drive the high speed broadband rollout in Australia, and that means minimal services appearing slowly with Telstra working to block all competition.

A reality check is needed to counter the spin of media commentary that is largely driven by commercial self-interest. Some services will not be offered by Telstra: why would they develop cheap high speed broadband when it would lead to the widespread use of internet telephones and thus threaten their landline or voice telephone business? Why would the cable companies offer cheap high speed broadband when online video and movie offerings threaten their core business?

Broadband is doomed to be developed very slowly, with minimal service at great cost. The best you can can get in Australia, with all the constraints on broadband development, is the short jerky video streaming experienced when watching federal Parliament.

Japan and South Korea lead the way in broadband development.They have households linked to high speed broadband (26 megabits per second) for about $US22 per month, and they are moving to have a comprehensive nation-wide ultra high speed (up to 100 megabits per second) by the end of the year. Australia is nowhere near this.

In Australia, from what I can gather, the best that will be offered by Telstra and Optus is DSL broadband (ADSL 2+) at around 5 megabits a second. And that will take around 2 years to come on line.

So Australia is not in a position to reap the benefits the broadband era in terms of increased productivity, technological innovation and economic growth. The jobs and businesses associated with developing new services, products and content will be in North-East Asia. Once again Australia will apply the technology other countries develop.

Posted by Gary Sauer-Thompson at May 30, 2005 11:33 AM

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