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hotwiring the country « Previous | |Next »
August 18, 2005

All the focus in Canberra this week has been on Senator Barnaby Joyce and the $3billion fund he was able to negotiate around the T3 sale, whilst Telstra was cut out of the deal. Suprisingly, some of the judgements about what Joyce has achieved with his resistance from within the Coalition ranks are quite harsh:


I guess that Barnaby Joyce probably did the best he could in the circumstances. But they said nothing about Costello's Future Fund being weighted with Telstra shares and little about network separation. There was very little debate about the regulatory regime of the telecommunications market after the privatisation of Telstra.

Yet Telstra will still dominate the market, continue to frustrate competition in the delivery of broadband, drag its heels on upgrading its infrastructure and continue to act as a gorilla in the marketplace. And most of the $3billion ($2 billion of the sale proceeds to establish a fund dedicated to upgrading infrastructure in the bush, as well as $1.1 billion to plug gaps in services, above all, broadband) will be spent outside the cities.

Yet we still have no broadband access in the fringe suburbs of the capital cities---eg., Victor Harbor in Adelaide--due to a failure to upgrade its infrastructure. What is required beyond fair access for competitors to Telstra's network, is a modernizing of the network by competitors. Alternative networks will not be built under the current regulatory regime.

Telstra's recent tactics indicate that it has not changeditys strategy. It tried to leapfrog the Minister of Communications (Senator Coonan) cabinet submission with its "take it or leave counter-plan" for a $5.7 billion broadband rollout in return for greatly relaxed regulation; made a last minute assault before the cabinet decision to scuttle the government's reforms about operational separation between the operational and retail divisions; and made threats to stop investing if it did not get its own way. The sttrategy is to ensure Telstra's dominance is cemented.

Telstra got off lightly. It is difficult to accept that Telstra is really concerned about implementing a strategy to build wall-to-wall broadband in Australia. It's actions indicate that it is more concerned with making a profit, protecting sharholders' interests and throwing off what it sees as onerous regulation.

The big problem is that the $3 billion package is nothing in relation to to the long-term need for investment in the network to deal with the backlog of refurbishment; let alone make a world-class broadband internet service available to the cities, regions and the bush. That problem has not really been addressed by the Howard Government's telecommunications policy, even though it managed to tak a pro-competition stance.

| Posted by Gary Sauer-Thompson at 8:10 AM | | Comments (4)


In the US the entrenched providers (copper wire, cable and even power lines) have opposed any creation of city WiFi networks. They have used federal, state and local legislation to get any city roll-outs of WiFi quashed. This appears to be what the capital intensive, "in the ground" communications providers fear most - data moving through the air.

It is probably time to open up some spectrum to the public in the same way that WiFi is. That would kick start innovation.

We do have some city WiFi networks but they still deliver a poor service. Wifi is more used inside a building at the moment. That is why I plumped for upgrading to ADSL=2.

The sale of Telstra was done badly because:

(1)The new regulatory regime has no cost-benefit analysis. And why this regulatory regime rather than that?

(2) The sale was mmore about the price it could fetch in the market, rather than the future of telecommunications.

My guess is that Telstra share prices will be under pressure as it is facing falling revenues in its core business, intense competition in mobilies and the internet, and lower profits in 2006.

The neoliberals say that is due to the Government still owning Telstra: it should have been sold a decade ago etc. Little is said about bad corporate management at Telstra.

I cannot see much in the way of innovation happening for some time. There is so much complacency.

Gary, Why is government so inept in telecommunications policy? Is it because there is no political advantage in any method? We are bobbing at a half/half at the moment, kinda regulated and kinda private. Which is just holding up investment and innovation.

Telstra should be split into a couple of different companies for competition purposes, if not regionalised as well. The half/half isnt sustainable, at least the market has a better chance of killing Telstra than politicians do.

But we had Alston who ran Telecommunications, and he was pretty ludditical. Surely his advisors and civil servants arent idiots though. Is it ideological blinders? Or is it because it is not a political hot-button or an issue that political capital can be made out of?

Than again maybe this is being used to split the National up, so they arent a political force any longer, in the same way the GST ended up splitting the Democrats.

you write:

Than again maybe this is being used to split the National up, so they arent a political force any longer, in the same way the GST ended up splitting the Democrats.

That political strategy is certainly in play as few citizens in regional Australia really want Telstra sold.

[As an aside, my judgement is that the Democrats would have probably been in a better position today if they held firm, as the GST money is now flowing into the state's coffers. It is the right wing led ALP governed states who are not spending the money on hospitals, education, infrastructure, mental health.]

Earlier on (circa 2004) Costello and Minchin were a sticking point, as they wanted to spend all the proceeds on debt--and not on asset repair (infrastructure) or the environment(eg., restoring ecological health to the Murray-Darling Basin).

They since changed their tune with Costello's Future Fund designed to eventually pay for the currently unfunded public servants' pensions.The Fund has been given an investment mandate to invest in things like equities, bonds; some of it may be overseas; some of it will include Telstra shares. Costello says that he will quarantine the fund's assets and its earnings until at least 2020, by which time all unfunded liabilities should be met. Over those 15 years, the fund's value may well have climbed to $140 billion.

On your general point about the incompetence of the Howard Government re telecommunications policy I woudl hazard a guess that they had no idea about the need to build the the telecommunications highway for the new information economy. They were backward looking and failed to understand the importance of a digitalized economy.

Even a year ago the talk about spending $10n billion hotwiring the nation was seen as being of the fairies at the bottom of the garden by both the political and financial class.