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broadband blues « Previous | |Next »
November 25, 2008

And so we continue to struggle and crawl our way to a national broadband network (fibre to the node) that offers minimum speeds of 12 megabits per second and covering 98% of the country. It's a big infrastructure investment built on a second rate concept and half measures and a tender process that doesn't spell out the regulatory framework in which competition will operate. Things look a mess for this cart before the horse scheme even though the tender bids are due in at high noon tomorrow.

Telstra continues to pay its high stakes game of bluff on regulation and separation---it will not bid unless there is a guarantee that it will not be structurally separated into separate companies - one limited to offering the network hardware and the other offering retail services to customers in competition with other retailers. Telstra continues to demand 1an after-tax 8% return on its investment and to talk in terms of a wholesale access charge of $59 a month and charging competitors $85 for a basic service of 512 kilobits per second. Monopoly prices for nothing special.

Doubts persist about the ability of the Optus-led Terria consortium, which is suffering credibility problems due to questions over its ability to source funding during the credit crunch and Telecom New Zealand, TPG-Soul and TransACT pulling out. The financial crisis has removed any outside industry bidders, and possibly the Optus-lead Terria bid, due to the unwillingness of the banks willing to lend much money at all to anyone. Most analysts and investors believe Telstra remains the only party capable of building and coughing up the money for a network which is expected to cost at least $15 billion.

It's in Telstra's interests to stall the competition, to eliminate their existing competition and to block open points of presence. This is a company that still thinks in terms of a being a monopoly and it has has sought to drag out the process time and again. It will continue to pull its usual stunts of legal challenges, go-slows, refusal to put its traffic on the new network and threats to build its own network if anyone else wins.

Since there is little talk of encouraging initiatives to build fibre or other high speed options in the last kilometre or two from the node to the home and business, it is unlikely that Australia will emerge from the looming recession with a 21st century communications industry.

| Posted by Gary Sauer-Thompson at 5:01 AM | | Comments (11)
Comments

Comments

Conroy developed his broad band plan for a national broadband network early last year as a political play to take advantage of the Howard government's poisonous relationship with Telstra and its gross stupidity in leaving the telco intact at the time of the T3 sale.

It still looks as plan to adopt Telstra's early proposal that the Government hand over several billion dollars and let it build the network to increase value for its shareholders.

yeah Telstra now says that it may take five years to build the network in the five major capital cities and maybe three more for the rest. 8 years! And it estimates that initial $5.7 million cost may rise to as much as $25 billion.

We already have high speed broadband in the capitol cities----ADSL2+ gives us speeds of up to 24Mbps. So the national network is really about the regions.

I can't find it now, but there was a report yesterday that a Canadian company had decided to bid. It's possible that there are others out there who've been watching to see what stance the govt would take with Telstra before they made a move.

It really would be wonderful to see a handful of bids come in at the last minute - early enough to get a bid in but too late for Telstra and its fans to trash them.

Lyn,
The Canadian company is Axia Netmedia, ad it has confirmed it is making a bid to build the Federal Government's national broadband network.

The chief executive of Axia, Arthur Price, told a Senate Committee that his company has built a similar high-speed network in the Canadian province of Alberta---so it has expertise in the regions outside the metropolitan cities. Its bid will probably be folded into the winning one.

A fourth bidder for the Federal Government's $4.7 billion national broadband network tender is Acacia, which is backed by Solomon Lew. Lew's Acacia consortium also involves former Berri boss Doug Shears and Leon Kempler, who heads the Australia Israel Chamber of Commerce, former Telstra Countrywide chief Doug Campbell and the founders of jobs website Seek, Paul and Andrew Bassat.

Then we have the regionally based bids---The Tasmanian Government said it would lodge a state-based bid. Telephone and internet provider TransACT is understood to be bidding for the ACT.

The cost of rolling out the network to rural Australia was likely to far exceed the $4.7billion contribution earmarked by Government and there would be regulatory issues for Telstra if it won. It is unlikely that the Government will contribute $4.7 billion of taxpayers' money without enforcing some kind of structural arrangements guaranteeing equivalence of access to the National Broadband Network between Telstra and its competitors.

2 things have been proven.

1. Telstra is the only company in a position to get the job done.

2. Rudd is full of rhetoric.

Les
you may well be dead right. Telstra knows its non-participation in the tender would threaten to derail it entirely and trigger a major political headache for the government.It will wind the tender and build the network cos it has the cash flow. It will try to use its negotiating power to win an even bigger subsidy than the $5 billion and to lock in total domination of telecommunications in the 21st century in Australia. So we are going to experiencing massive price gouging by Telstra for its broadband services.

I take it that you are in favour of monopolies and opposed to competition in the fixed and mobile broadband industry? I would like to see the regulatory system organized so that it fosters competition not stifles it to ensure that broadband is affordable as well as available.

Gary,
I really don't care who gets my $60 a month or if it goes up to $120 a month. I like the majority of people use Telstra because they are the best chance of providing a constant reliable service.

Eventually technology will provide a fast and reliable service to remote areas that can be delivered cost effectively. We may be 20 years off that point or more. The bush will have to wait and take what they can get in the meantime.
Water infrastructure is very much more important than broadband.

So Telstra did not make a proposal within the definition of the tender process the Rudd Government is running.

It's 13 pages made a proposal to make a proposal, to bid to build a cutdown national broadband network that will deliver broadband to between 80% and 90% of the Australian population, and high-speed broadband to only 65% to 75% of that.

The high stakes game continues. Telstra has given ground though as it says its new network would be open access, and that along with all users it would negotiate arm's length access deals. However, that new network must an integrated part of Telstra's entire operation, not run as a legally and structurally quarantined entity.

Malcolm Maiden in The Age says that:

Giving in to Telstra and allowing to own, operate and integrate its network, albeit with an access regime imposed, would mean that Telstra's domination of the market here will be transferred from copper wire to the next generation of telecommunications, and chief executive Sol Trujillo and chairman Don McGauchie will have secured Telstra's future.

Peter,
Telstra's proposal is a city-centric network, built to the budget set by the Government's $4.7 billion pledge. The unstated implication is that it can be extended towards the 98 per cent target Communications Minister Stephen Conroy says remains in place — but only if more public funds are committed. Telstra believes 98 per cent coverage is a $20 billion-plus project.

Telstra wants to own all of the new network, and apply the Government's $4.7 billion as debt funding, not equity as the Government originally intended. Any rival bidder needs access to the exiting Telstra infrastructure and particularly the last few hundred metres of copper that run to every household and Telstra's letter says that it will not agree to give a rival bidder access to that copper and in the absence of that agreement.

So there can be no rival national broadband network. Impasse. So the standoff continues.

The federal Government has excluded Telstra from the bidding process to build a $10 billion-plus national broadband network. Telstra deserved to be excluded given its refusal to bid properly--their non-complying proposal was not qualified to be considered by the “expert panel”.

Telstra has warned of dire consequences for Australia if it remained excluded from the process to build a national broadband network. Telstra claims that it continues to act in the best interests of shareholders because the single most value destroying development is the structural separation of Telstra's local loop assets.

If Telstra is not the builder, it will almost certainly mount lengthy and costly legal challenges to any third party that seeks to cannibalise Telstra's existing network. The basis of the legal challenge will be that pieces of its existing copper network cannot be annexed for the construction of new broadband network, breaking up the national copper circuit, and forcing Telstra onto the broadband fibre, as a third party user

No doubt it will cut back maintenance and development spending on the copper wire network that broadband would supersede and continue to build its Next G mobile wireless network.