FYI | Aug 08 2006
By Greg Peel
When I bought my very first mobile phone many years ago I bought it from a Telstra shop. Within a year the battery died for some reason. I returned to the Telstra shop and was informed it didn’t carry that make anymore. When I asked where I might be able to get another battery, I was met with “Dunno”.
I switched to Optus.
I still had a Telstra fixed line however, over which I originally accessed the internet. As soon as Telstra introduced broadband my dial-up connection began mysteriously dropping out – up to five times a day. Each reconnection attracted another call charge. Telstra told me there was no problem. I was left with little doubt as to what the “problem” was.
I then connected to broadband – using Optus. I switched my fixed line too.
For weeks Telstra harassed me, ringing to ask me why I’d switched. They weren’t happy with “because you kept disconnecting me”. When I angrily insisted they stop calling, one operator said “We will call you until we get a proper answer”. Only after I threatened to call the Ombudsman did they stop.
Just last week I bought a new handset for said fixed line. The salesman at a well known electronics franchise showed me through the various choices. When he reached a certain point he said “These are the Telstra phones, but I wouldn’t sell them to anyone”.
I said “Don’t worry, I wouldn’t touch Telstra with a ten foot pole”.
Sol Trujillo is viewed by most as a brash, arrogant Seppo. To many the term “arrogant American” is tautological but either way Australians have been left incensed with the new CEO’s smug attitude as the value of their T2 investment continues to diminish.
Telstra (TLS) has now suddenly announced it is binning its plans to rollout a fibre-to-the-node (FTTN) high-speed broadband network. It cannot reach an agreement with the ACCC.
This is probably just a ploy – a way of making the government sit up and take notice. We will yet find out whether Telstra’s FTTN plans have truly been “binned”.
However, in this instance, Telstra has a point. What the government is effectively saying is that Telstra, presently a partially-private company but soon to be fully private (supposedly), can spend billions of dollars building the infrastructure but it must let its competitors access the network at a reasonable rate in order to ensure competition and reasonable prices for all Australians.
It’s a bit like passing a law that KFC must divulge its “secret recipe of eleven herbs and spices” so Hungry Jacks can be on an equal footing. Ayn Rand would have had a field day.
But then the government has a point too. If Telstra were allowed to price access to its infrastructure as it saw fit, it would sufficiently secure a monopoly in high-speed broadband access and ensure Australians would pay high prices “in the interests of the shareholders”.
So where does that leave us? Up that famous creek without a paddle for starters.
Australia is already a joke when it comes to the information age. Does everyone remember the episode when the Simpsons travelled to Australia? If you were quick you would have noticed an Australian stamp which read “Celebrating 20 years of electricity”. At the time I thought the jibe was a bit unfair, given that Australia has caught up to the US in many ways. Now, however, I think it rings very true.
The Keating government managed to completely stuff up Australia’s access to cable television for many years under the banner of “providing competition”. Hence both Telstra and Optus spent millions rolling out parallel cables, the cost of which ensured cable access would remain too pricey for the average Australians for a decade or more. Only recently have the two providers reached an agreement to some extent, with government approval, so they are not competing on content.
Has the government not yet seen the folly of “competition” of telco infrastructure in a country of vast size and insignificant population?
We are still years behind the world when it comes to cable TV access at a reasonable price. It’s a chicken and egg situation, as until cable can provide something Australians are willing to pay for they can’t sell enough advertising to bring the price down.
Yet this government, with its 2012 plan for future media services, has shown to be just as much a dithering bunch of Mr Magoos as the last lot. While it continues to bow to the wishes of free-to-air TV, Australia will be trapped in a time warp, and average Australians – exactly the people the government is supposedly trying to protect – will be the big losers.
Now it’s the same for FTTN. The increasingly irrelevant Helen Coonan has done nothing. Rapid access to information is what is driving commerce in the twenty-first century. Forget about downloading DVDs. Australia needs an internet access system equivalent to the rest of the world simply to remain relevant.
Of course there was no such thing as broadband in the 1950s, so its no real surprise this government lacks any foresight in the changing world of technology. We’re not supposed to be playing computer games at night, we’re meant to be on the job.
Australia needs to build an FTTN network. If Telstra were still government-owned, we may have even been half finished by now. Although I’m sure many would argue that a government bureaucracy would have been moving glacially anyway. One needs private interest to get things done. But what we have is this ridiculous quasi-private set up.
Even if, by some miracle, the government can sell T3, it would still impose regulatory controls that would leave us in the same position anyway.
There may be an answer in the so-called “G9” – the consortium of nine interested parties (see below) that threatened to build their own FTTN network a few months ago. At the time, Telstra labelled G9 threats as a ruse – a way of extracting more leverage from the government. Whether or not it was, the G9 are, by their own admission, a long way from actually producing a fully costed business plan, let alone laying a cable.
Now here’s an idea: what if, under government direction, the G9 was forced to become a G10? There would no doubt be a lot of wrangling, but we might just get a network built.
If there is one country that mirrors Australia in a number of ways it is Canada. Vast distances, small population. Surely Canada is having the same telco problems at the moment?
Canada now has broadband access speeds amongst the fastest in the world. Australia’s is amongst the slowest. Why?
Because a wily Canadian government had the foresight to separate telephony and media a long time ago. No one company could provide both, so what resulted is the cable TV providers and fibre optic (and other technology) providers fighting it out in a broadband market. Yes – competition – but competition that was constructive, not destructive.
In Australia, Telstra is also a major force in cable TV – the “tel” in “Foxtel”. It is not in Telstra’s interest to compete with itself. The government allowed this situation to become entrenched.
Stock analyst reaction to the Telstra announcement has been fairly consistent. With no FTTN infrastructure the focus turns back to old-fashioned ULL, and the competitors will ensure a fight that will force Telstra to reduce its prices and lose revenue accordingly. JP Morgan noted that it had not even bothered to price in value for an FTTN network, as the regulatory battle would still leave Telstra a loser anyway.
The sale of T3, to anywhere other than the Future Fund, is in jeopardy once more. Are there any winners from this debacle?
The winners must be those shifting to higher-speed forms of broadband delivery that do not require fibre. They will be faster than what most people are operating now, but still not as fast as fibre at this stage. Optus (STG), for one, is shifting to its new high-speed delivery over cable. Iinet (IIN), for another, is delivering faster service over copper wire. Unwired connection providers such as BigAIR (BGL) and Unwired (UNW) are also moving to compete without massive infrastructure outlays.
Presently, Telstra provides a range of different delivery systems, right up to satellite, each costing varying amounts. It’s a given that the more remote you are, the more you will pay. Is that fair? The government thinks not.
But the government only thinks not because any other system would be blocked by the National Party, thus jeopardising an election win. Hence we can’t even have CBD FTTN infrastructure in the meantime, because the cockies are revolting.
Of the brokers in the FN Arena database that issued new reports on Telstra today, there are three Holds and two Sells. Of the remainder, there are three Holds and one Outperform (Credit Suisse). CS has set a target of $4.78, contributing to an average target of $4.00. Not quite sure what the thinking is there.
The coalition formally known as G9 comprises Telecom NZ’s (TEL) AAPT, Internode, iiNet, Macquarie Telecom (MAQ), Optus, Powertel (PWT), Primus, Soul (SOT) and TransACT.