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Telstra pulls the plug « Previous | |Next »
August 7, 2006

I've just returned from my holidays in Robe to the news that Telstra has pulled the plug on its high speed fibre-to-the-node broadband network. It has suspended long-running talks about the regulatory environment within which such a network could be built with the Australian Competition and Consumer Commission (ACCC ) even though it appeared that Telstra and the ACCC had resolved 98 per cent of the issues surrounding the regulations governing the project.

It's a political standoff, isn't it. Was Telstra's plans a device to leverage a light regulatory regime? It looks like it. Does that mean the so-called group of nine or G9 consortium continuing to talks with the ACCC on its detailed plans. If the G9 model goes ahead will it provide open access to all who are willing to pay an access charge approved by the ACCC? Will the Howard Government take the policy initatiive and encourage alternative infrastructure investment by helping a rival telco construct a fibre network? They should put $3-6 billion aside from the sale to ensure that Australia has a good high speed public broadband network that people can access. With Telstra pulling the plug we can concentrate on the more important business of entrenching competition in the ADSL broadband we are now using, and extending the access of ADSL2.

My judgement is that the G9 will not build their own fibre network. Governments in Australia won't build telecommunications infrastructure anymore, no matter how sensible it might be. Telstra will rollout ADSL2+ services in Australia, and the copper wire network will remain with the current regulatory framework. Telstra will quietly build a fibre-to-node network that ensures it has monopoly control---ie., no sharing with competitors. That is what the telcos achieved in the US. Telstra's aim was to lock competitors out of its next generation fixed broadband network. The FttN network would not support the current wholesale arrangements and Telstra had hoped that, under the pressure of the T3 sale, the Howard Government would give them some kind of FttN monopoly.

That political play has just come to an end.

Update: August 8
Crikey points the policy finger directly at the commonwealth government:

Thanks to federal government inertia and ignorance, Australia is hobbling along the information superhighway in a dilapidated horse and buggy. Not only do Australians have limited access to broadband internet (the basic platform for the information revolution that is unfolding across the globe), but the speed and bandwidth of our broadband is among the slowest in the developed world.Today Telstra announced it won't be building the national high-speed internet network that Australia needs in order to leave its buggy. So? The responsibility for ensuring that Australia resides in the 21st century of communications lies with the federal government, not with Telstra. It's the government that has been elected to provide the infrastructure that paves our roads, ensures our security, maintains our health ... and delivers modern communications.

That's to the point and bang on target. What should have happened is the separation of Telstra the competitive communication services company from Telstra the national infrastructure network company before selling the former off to investors. It's to late for that now.
Kenneth Davidson in The Age writes:
Upgrading the [copper wire] network, which is the enabling technology of the 21st century, is being sacrificed to the illusion of competition. While broadband of sorts might work over the copper network while it attracts 30 per cent of customers, by the time the broadband share reaches 60 per cent, interference and cross-talk will severely degrade the service even if the copper is well maintained.

The illusion of competition? ADSL2+ is a lot better than Telstra's slow speeds. What will happen is that the ACCC will facilitate Telstra's competitors installing multiplexers in Telstra's exchanges to create their own networks with its interim decision on ULL pricing. This is expected to lower the price for wholesale access to the unconditioned copper wire in capital cities. As Alan Kohler argues in the Sydney Morning Herald 'broadband internet business in Australia will become something like the mobile phone market with its competing networks driving prices lower with capped plans and lower call rates.'

| Posted by Gary Sauer-Thompson at 7:48 PM | | Comments (4)
Comments

Comments

Helen Coonan was on am this morning, basically saying that the cities don't need this technology! Making this decision sound like a good thing because Telstra didn't plan to roll it out to the regions anyway.

Typical of the extreme short sightedness of our incumbent government she prattled on about ADSL2 and 12 Mbit access speed - she obviously had no idea about the severe limits this has. i.e. you have to be 5 km from an ADSL2 exchange (same as the older ADSL), that your access speed degrades very quickly as your cable gets longer, etc.. She also graciously told us that we didn't need any more than that. Which, of course, we don't if we just wish to remain the world's great source of raw material.

Coonan is almost as bad as Alston.

I've said it before, and I'll undoubtedly say it again, the last ten years will go down as the biggest wasted opportunity this country ever had. Our children and their children will look back on our behaviour and severely question what we did.

BigBob,
I would say that the Howard Government is in a state of shock from Telstra terminating talks over its proposed high speed fibre optic network.But Coonan is right. Telstra was only going to do it for the cities--the 3G mobile network was meant to cover the regions.

I'm not suprised by the ditching. Telstra has been bashing the government and the ACCC over the lightening up the regulatory regime. Regulatory relief----or a "satisfactory regulatory outcome"--- for Telstra means monopoly control.

Remember they tried to achieve a fibre optic network with the government contributing $2.6 billion? That proposal last year to upgrade its national fixed network to provide broadband at speeds up to 6mbps (mega bits per second) to 98 percent of Australian homes using fibre to the node (FTTN).

Then they changed their tune. The whole point of the new proposal was to put the old copper in cold storage to prevent competitors from still using it. It was a power play by Telstra.

I have ADSL2+ in Adelaide (I live in the city) but not in Victor Harbour, nor in Canberra. Telstra cap their ADSL. I see ADSL2+ as a stop gap---it can keep us going until the next generation of broadband in Australia is introduced properly and competitively.

The G9 would be happy with all of this---they can continue to build ADSL2 enabled exchanges and move towards ADSL2+ They G9 cannot build their own FTTN network without Telstra's cooperation, since Telstra owns that last mile of copper.

Adelaide is looking good these days. It looks as if free city-wide web surfing is likely to be available in Adelaide within a year under a collaboration between Adelaide City Council and Internode, which plans to boost its wireless broadband internet coverage from 40 to 140 sites across the city by June next year.

Yes, let the government put it in and let ownership of the line remain with the landowner back to the node/exchange. That way we won't again have the ridiculous situation where an $80 piece of wire (12c per metre is about retail, 8c/metre wholesale, for average of one km) costs $120 per annum to rent and gives monopoly rights to some organization that knows how to use monopoly powers.

Glenn,
I watched Senator Coonan in Question Time in the Senate last night and she more or less repeated what BigBob said re her comments on ADSL2+. She was not looking beyond ADSL2+---to the point when the copper wire network becomes dysfunctional.

The implication of her remarks is that the government has around $3billion to spend on developing broadband, but that it is going to be built by private companies competing against each other. Competition is thriving in the telecommunications industry on her account.