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Telstra accepts the inevitable « Previous | |Next »
June 21, 2010

In a deal worth $11 billion Telstra has finally agreed to migrate its copper and cable broadband networks to Government-owned NBN Co. This eliminates Telstra as a fixed-line wholesale competitor to the Government-owned entity, allows Telstra to maintain its cable network exclusively for the purposes of its Pay TV joint venture, Foxtel, and frees Telstra from being required to meet most of its Universal Service Obligation costs.

Telstra lose their monopoly and a more level playing field has been created. The deal resolves Telstra’s monopoly, its integrated retail/wholesale nature, ensures a speedy and convenient fibre rollout through the use of Telstra’s ducts, and delivering the NBN a guaranteed massive customer base. Customers will benefit from service on an open-access basis (not just when it suits the incumbent monopolist), getting fibre broadband faster and with more competition.

This transforms Telstra from an engineering company which primarily builds and operates telecommunications networks into a retail service provider that needs to focus on delivering the best customer service and value-add products in Australia’s telco sector. The problem for Telstra is that it cannot compete with the likes of smaller telcos like iiNet, Internode or even Optus when it comes to customer service.

Telstra can now begin to transform itself into a structurally separated service company. No doubt Telstra will now focus on building its mobile infrastructure instead of fixed — due to the ACCC’s light regulation touch there.

The Coalition, of course, has continued with its naysaying and said that it would cancel the deal if elected. Presumably, they are opposed to the government owning the basic digital infrastructure, continue to see the national broadband network as a white elephant and a looming financial disaster.

However, their case is weaker now Telstra is on side. It also underplays the competitive boost provided by the structural separation of Telstra's wholesale operation from its retail arm and that fibre is the future even in a wireless world.

| Posted by Gary Sauer-Thompson at 11:03 AM | | Comments (4)


The Coalition is the do nothing party on national broadband reform. They have nothing substantial to say on telecommunications. There is no point in listening to them.

The Liberals have an antipathy to the structural separation of Telstra. That's the legacy of Nick Minchin.

The cable market will become very competitive and less profitable. Wireless will be much more of a money spinner and with 11 billion to pump into it sounds like a good deal to me.
Time to buy Telstra shares maybe.

Telstra is likely to have succeeded prior to the switchover to the national broadband network in signing its existing customers up to bundled plans of voice, telephony, mobiles and content/pay television services.

The NBN model just about ensures that all things being equal on price - some customers would find that being able to keep their existing billing relationship, phone numbers, email addresses, subscription television etc will make Telstra an attractive choice compared to its competitors.

Telstra's retail competitors will need to invest in new products and services, or offer significant discounts, to compete.