Economy

Telstra shows how to play monopoly: Kohler

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Let’s be clear about what the National Broadband Network “bidding process” has really produced; the Government has received four requests for an infrastructure monopoly.

Let’s be clear about what the National Broadband Network “bidding process” has really produced; the Government has received four requests for an infrastructure monopoly.

It’s not about the money, at least not yet. All the bidders need the Government’s cash, of course, even more so now that credit markets have shut, but they need legislation (or the lack of it in the case of Telstra) more.

Each of the bidders, including Telstra, has put in an elaborate request for permission to run a statutory broadband monopoly.

If they get that, they are saying, we’ll find the rest of the money, no worries.

Communications Minister Stephen Conroy said yesterday he feels vindicated, a word that in politics translates as “relieved”.

He could quite easily have ended up with nothing because of the financial crisis, but he was able, in a happily smiling series of interviews and doorstops yesterday, to claim “competitive tension” instead.

Now, he says, the expert panel will assess the bids – from Optus, Acacia and Canada’s Axia – and report back.

Then, well, the panel will presumably rank them on a variety of criteria and might even knock one of them out.

Telstra can’t be knocked out because it has carefully refrained from actually bidding. Presumably the panel will solemnly look at it, determine that it’s not a bid, and give the paperwork back to Senator Conroy with their compliments.

By the way, it has been quite amusing to watch Telstra stand behind the shelter sheds occasionally yelling out that it’s jolly-well not going to play, and then when it sees that the other kids are, indeed, happily playing skippy, running out to join in while spraying abuse and ridiculing them for being TOTAL LOSERS. We all knew someone like that at school.

The three actual players all require two essential pieces of legislation; the prevention of an overbuild (by Telstra) and a requirement that all of Telstra’s copper wires will be forcibly switched across to connect to the fibre at the nodes.

This does not mean, as Telstra claims, that Telstra will be robbed of its customers, but it does mean that it would be forced to use the FTTN network to deliver its services and therefore to compete on a level playing field with anyone else who buys capacity on it.

In other words, there will only be a wholesale fibre network not owned by Telstra if Telstra is prevented by legislation from building one of its own and if Telstra is forced by legislation to use it.

None of the three non-Telstra bidders has any money, as Telstra chairman Donald McGauchie colourfully pointed out to us. They are simply saying to the Government that if they get a legislated monopoly, someone will give the money to them. And they are probably right.

Telstra, meanwhile, is saying; if you don’t like any of the bids because you are worried about them getting the money, come and talk to us. We’ve got the money from gouging our customers using our existing fixed line monopoly and we don’t need legislation to create a new one – it will just happen because all of the ADSL multiplexers currently sitting in our exchanges and competing with us will have to be scrapped.

So the choice for the Government is simple – legislative non-Telstra monopoly or non-legislative Telstra monopoly.

Except there is one very big complicating factor; Telstra’s Next G network. This is the wireless broadband network that they say currently works at 14.4Mbps (the minimum for the fibre NBN is 12Mbps) and will soon go to more than 20Mbps.

That cannot be legislated out of existence, and if someone else wins the legislative right to build an FTTN fixed line monopoly, Telstra will do its best to spoil the capital raising by scaring the investors.

With capital markets likely to be difficult for a couple of years, this may not be hard to do.

Once it wins the NBN bids, Optus, Acacia or Axia will have to round up the money.

They’ll be doing so against the background noise of Telstra shouting from the shelter sheds again – promoting the living daylights out of Next G as an alternative “fixed line” data network for homes and businesses.

It will probably cut the price, extol the speed, upgrade the capacity and switch its own cable and ADSL customers across to it as fast as the network will bear. In the meantime Telstra’s lawyers will be fighting like schoolyard bullies in the courts.

It’s hard to avoid the feeling that the awarding of the NBN tender will just mark the beginning of the next phase of the battle to break Telstra’s stranglehold on Australia’s communications, not the end of it.

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