Kenneth Davidson, a senior columnist with The Age always writes a compelling article. The one below is available at
http://www.theage.com.au/opinion/politics/how-highspeed-broadband-will-be-the-death-of-telstra-20100314-q60n.html
How high-speed broadband will be the death of Telstra March 15, 2010
The national broadband network will come at much too high a cost.
THE opposition is doing the government a favour by blocking the legislation that will allow Telstra to be broken up - misleadingly called the Communications Legislation Amendment (Competition and Consumer Safeguards) Bill 2009.
The legislation's intent is to force households and businesses that rely on the copper network to take the service from the $43 billion national broadband network.
Why? The cost to telephone users will be at least double that of their existing service. Users who want a high-cost, high-speed broadband network can get it now. Telstra (and others) already supply such a service.
Large businesses, government departments and utilities, research institutes, universities and even schools have access to high-speed broadband on fibre because they can make productive use of this technology.
Households and small businesses don't need this service.
A year ago Telstra announced a huge upgrade to the cable TV network to give a wider range of customers a 100-megabits-a-second service, equal to that planned to be offered by the NBN. The upgrade is available to a million customers in Melbourne, if they want it. It has attracted only 200. Plans to extend this service to other cities have been mothballed.
The whole NBN project is mad. It was concocted between Broadband Minister Stephen Conroy and Prime Minister Kevin Rudd, and discussed in the kitchen cabinet - comprising Rudd, Julia Gillard, Wayne Swan and Lindsay Tanner - the day before it was announced last April. The decision was made without any business plan and with only the most rudimentary costing.
It appeared at the time that the announcement was designed to cover up the scandal of the failed original tender for a high-speed fibre network, which cost taxpayers $20 million. The failed tender showed that the NBN couldn't be built without Telstra's co-operation.
Even in high-income, high-density markets overseas, the take-up of high-speed broadband on fibre has plateaued at 30 per cent of households.
On this basis alone, there is no way that the NBN could be anywhere near viable, even with the wanton destruction of Telstra's network.
The consequences of this madness are far more serious than simply burning up Telstra's $20 million asset and wasting $43 billion on an all-singing, all-dancing network that nobody wants. It means the destruction of the universal service available to poor people, as well as people in the bush.
The government says that 90 per cent of households will be serviced by fibre and the remaining 10 per cent via satellite.
For starters, this means that a million customers will lose their fixed-line services. Building this network has provided a universal service to customers in rural and remote areas at a cost equal to capital city customers.
The reality is that Telstra could meet this commitment only because it had a national network generating profits from retail services to cross-subsidise rural and remote access. Now the government wants Telstra to roll up its copper network and become a mere retailer. If it does, how can it be obliged to provide a national retail telephone service, let alone cross-subsidise rural and remote customers?
Can the NBN provide a universal telephone service? No. It can't deal with retail customers if it is a wholesale-only operator.
The so-called consumer safeguard legislation that the government is trying to ram through Parliament is silent on this. There is no government policy to fill this void. All we hear is the mantra of structural separation and competition.
The government justifies this destructive policy by claiming that Telstra is the most vertically integrated carrier in the world.
It has offered no independent evidence to prove this. In fact, other countries that adopt evidence-based policies have allowed telecommunications companies to become more, rather than less, integrated because this generates real benefits to consumers, if guided by sensible regulation.
Australia is fighting regulatory battles that were decided in Europe and the US a decade ago. Canada, with the same challenges of distance and demography that we face, discounted structural separation 20 years ago.
Telstra can't voluntarily put its head in the noose offered by the government, even if it wanted to.
The policy, if implemented, will materially affect Telstra's profitability and its share price. Its chief executive is legally obliged to take any government deal to the Australian Competition and Consumer Commission, which may have to hold a public inquiry. If the legislation passes, it will destroy Telstra and could damage the government as mortally as WorkChoices destroyed the Howard government.
Kenneth Davidson is a senior columnist.
[email protected]
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