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The NBN rolls on « Previous | |Next »
March 17, 2010

As expected the Coalition has declared its automatic opposition to any move to split Telstra using legislation that functionally separates a non-co-operative Telstra into wholesale and retail businesses, deny it new wireless spectrum and force it to sell its half-share of Australia's dominant pay TV operator, Foxtel. The Opposition's is a futile bid to preserve the Telstra status quo.

Though this opposition gives more bargaining power to the cross-bench senators, Senator Steve Fielding continues to oppose the reform, the legislation, which was rejected by the Senate, has been withdrawn until ---when?

The NBN Co has begun its network rollout in Tasmania and is on its way to become the dominant 'access' network provider. However, as expected, the negotiations with Telstra on the question of how much Telstra should be paid to co-operate with the network's construction are going b nowhere---as expected. Malcolm Maiden says that:

The commercial equation is unchanged: there is a maximum price NBN Co can commercially justify paying Telstra in return for access to Telstra ducts and pipes down which the new broadband fibre will run, and for the progressive adoption of Telstra customers as Telstra's existing network is overrun. That price is significantly less than Telstra says it can accept.

Stalemate as expected as they are billions apart and it is becoming less and less likely that Telstra and the NBN Co will agree on a deal.

Where to now? It's either the structural separation of Telstra, as the dominant incumbent, and/or the transfer of it's wholesale customers (which would include making the dominant incumbent a wholesale customer). Telstra could go it alone even though a stand-alone copper network would have little point once the NBN is built without Telstra. The NBN is going to be built and it will displace Telstra’s fixed line network – which means that network has already been substantially devalued even as the NBN is being built.

| Posted by Gary Sauer-Thompson at 5:42 PM | | Comments (8)


Minister Conroy was on Lateline He comes across as a party strong arm --dictatorial even. They appear to be moving to building the NBN with no Telstra involvement. The NBN is going forward, with or without the gorilla.

Does that mean that the NBN Co will stand on it's on two feet and fight against Telstra for business? How will it gain as many customers as possible in the shortest time?

Then the Labor Government is going to sell the NBC Co. down the track--after the 8 year build is complete. Who then owns the wholesale fibre to the premises broadband network?

The Labor Government has set up the NBNCo as a commercial enterprise.It appears that the government's contribution will be an investment not a grant, ie. it will attract a return and will eventually have to be repaid.

The Greens have said that they were considering withdrawing support of the legislation to force the split of Telstra into two after the government snubbed their request to release a study into the national broadband network.This study is a $25 million implementation study carried out by McKinsey and KPMG. This is a comprehensive document, hundreds of pages long, deals with the ownership and structure of NBN Co, the company that will build and operate the proposed broadband network.

The Greens have also said that they would consider opposing the Telstra legislation unless separate legislation to establish the broadband network did not include provisions compelling its eventual privatisation.

Stephen Bartholomeusz in Telstra's ticking clock in Business Spectator observes that from Telstra's perspective there is:

no point in striking a deal with NBN Co that can’t be sold to Telstra shareholders as fair compensation for the progressive displacement of their network and the cash flows it generates. In fact, trying to sell a deal that confirms too big a loss of value would probably cost both of them their jobs.
So, NBN Co is trying to negotiate a deal based on a conviction that Telstra’s copper network has already been massively devalued, while Telstra is trying to negotiate an outcome that salvages some of that value.

He adds that the negotiations aren’t helped, and shareholder emotions have been inflamed, by the legislative threats to Telstra’s structure and its wireless and Foxtel businesses that are piling up in parliament.

I've just come across this comment made in 2009 from Simon Hackett from Internode. He says that:

Leaving the copper network in place will maintains the current ADSL2+ competitive broadband environment, so that Internode and its rivals have many more years of useful ADSL2+ network building ahead. As the new network emerges, we'll have access to it on an equal footing with everyone else. Bypassing the copper network also avoids the need for regulatory changes – this means the existing access regime can continue unchanged while the new network is put in place, in parallel.

Progressively replacing the copper network over that long period will allow the industry to recover its copper-based broadband investments in a smooth manner. Existing customer services will remain in place in parallel, providing competitive pricing tension, rather than cutting off ADSL2+ abruptly.

It seems that they--the NBN Co are building the new network 'outside in' – fixing blackspots first and installing where ADSL2+ is present, later. This means that people with no broadband get it, while people who already have broadband can use the ADSL2+ competitive landscape in the meantime.

Services on the NBN in Tasmania will be offered in July 2010.

However, the top end prices just offered by iiNet are way too expensive for the promised 100Mbps-- the ISP will charge $129.95 per month for a 100Mbps service with a total of 120GB of included data.

Those like myself who download a lot of data and use the internet constantly for work purposes are on $69.95--$79.95 plans with ADSL2+ . I'm on the former with speeds I'm relatively happy with today in Adelaide. I would find it very hard to justify virtually doubling my monthly broadband cost simply to get higher speeds and better latency.

Telstra's strategy is to stall until the next election, gamble that there will be a change in government, and that the Coalition would make a policy decision to stop building the NBN. Telstra wants to stop the NBN Co in its tracks.

Malcolm Maiden in the SMH says about the negotiations between the NBN Co a+ Telstra that:

Telstra is believed to be asking for $12 billion-plus, as much as $4 billion above the NBN Co offer. NBN Co cannot offer more without creating a network build cost that is higher than its estimate of the cost of building the network without Telstra's help. Telstra is unwilling to sell its co-operation for an amount that is below its own higher valuation and would face opposition from its shareholders if it did.