Introducing the Minister for Optus By an independant analyst..
'Minister for Optus' is unlikely to score on NBN KEVIN MORGAN November 25, 2009 . WHAT are we to make of Senator Stephen Conroy as Communications Minister? Bold reformer prepared to go where no one has dared by breaking up the recalcitrant monopolist Telstra? A visionary intent on delivering 21st century infrastructure - super fast broadband on a national fibre optic network?
Or a minister who has delivered little other than rhetoric about nation-building and spent over $100 million on a national broadband network (NBN) policy that has, as yet, not delivered a single additional megabyte in broadband speed or added one new user?
In fairness, his visionary, nation-building $43-billion fibre-to-the-home network is a work in progress, as is his machiavellian scheme to dismember Telstra. But two years into the Rudd Government's first term, it's looking increasingly unlikely that either his fibre-to-the-home vision or his assault on Telstra can succeed.
While the minister (pictured above) believes that building the NBN and splitting Telstra are essential reforms that will deliver more competitive services, questions are emerging about the need for the network and the wisdom of breaking up Telstra.
Paul Broad, the head of AAPT, Australia's third largest telco, recently described the planned NBN as "rubbish", and even the minister's friends are voting with their feet. Last week the NSW Government signed a $280 million deal with Telstra to roll out fibre to all schools and TAFE colleges. Surely if the NBN will deliver the benefits Conroy claims, his ALP colleagues in NSW would have been happy to wait.
They probably made a quick reality check on Conroy's $43 billion fibre network and decided it was preposterous. Schools need broadband now, not in 2020. Despite Conroy's hype, building a national telecommunications network in eight years that will replicate the coverage and exceed the capability of Telstra's is in the realm of fantasy.
Similarly, the belief that forcing an incumbent telco such as Telstra into structural separation is an article of faith that would make the most ardent neo-liberal blush.
The plan to split Telstra, underpinned by a legislative threat to deny it access to wireless spectrum for high capacity mobile data and voice services if it doesn't voluntarily separate, was an ambush. A stunned Telstra was supposed to meekly surrender over $7 billion in revenue to the NBN company.
But, as with any ambush, once the surprise wears off, it can become a protracted battle, and with Telstra's failure to immediately see the compelling logic in Conroy's offer, the chances that the telco will do a meaningful deal to support the NBN are diminishing daily.
The separation legislation is still before Parliament and if it is held over until February, the potency of Conroy's threats will have diminished.
In summary, there is little real support for the NBN, and the separation policy is predicated on pulling very clever policy levers to deliver a dumb outcome. Either the national telecommunications operator destroys itself by accepting structural separation and gifts its revenues to the NBN or the largest wireless network operator in Australia can't grow.
Yet to Conroy, splitting Telstra has become the holy grail. How did a left-of-centre minister become obsessed with a policy that failed to attract Thatcher, Bush or Howard?
The answer lies within the flawed Beazley policy that saw Telstra's predecessor, Telecom, exposed to competition from Optus. However, the flaw in that earlier policy isn't the one Conroy claims - the failure to initially split Telecom into wholesale and retail companies. The unfortunate legacy of Beazley's policy is the massive power Optus can exercise as the duopolist.
Given the unique nature of the Australian market, considerable regulatory favours were required to get Optus into the market and it has demanded continued favours to keep it in the fixed line business and to keep investing.
Optus well understands its power, for without the number two telco, there would be little if any competition in fixed lines and 20 years of competition policy in the sector would evaporate.
In many respects, the inordinate power yielded by Optus has captured Conroy and set his policy agenda. It was Optus that created the fiction that the original $4.7 billion NBN could be put out to tender and Conroy readily embraced that fiction. Now Optus has demanded the separation of Telstra and again Conroy has responded willingly.
The ability of sectional interests to capture ALP communications ministers is not without precedent. In the early 1990s, during his time in the portfolio, Graham Richardson was known as the minister for Packer. Now Conroy, after two years in office, might justifiably be seen as the minister for Optus. Certainly it would seem there is no else he is listening to.
Kevin Morgan is an independent analyst.
Source: The Age
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