There seems to be little analysis of the consequences for...

There seems to be little analysis of the consequences for Telstra should the Government select another company to build a new NBN (National Broadband Network).

In the High Court’s judgment in March, relating to third party access to the Telstra network - Telstra Corporation Limited v The Commonwealth [2008] HCA 7 (6 March 2008) – the court made clear that “Telstra succeeded to the ownership of the assets comprising the PSTN under legislative arrangements which may be described (not inaccurately) as requiring Telstra and its predecessors to buy, and pay for, those assets.” This and other remarks in the judgement make clear that when the Government sold Telstra to the public the sale included the ownership of the network (be it with obligations relating to granting others access to the network on conditions equivalent to those Telstra enjoyed).

If Telstra builds the NBN, in simplistic terms, all they need to do is replace with fibre cable the wires running from their exchanges to the nodes (obviously there is far more complexity to a build than this). Telstra owns the existing wires, access and connecting infrastructure, so presumably the agreement of others is not required.

What is the situation for any NBN builder lacking the open cooperation of Telstra? How would they gain control and access to the existing wires? Would the Commonwealth compulsory acquire the wires and necessary infrastructure? If so how much compensation would Telstra be entitled to, given that the High Court stated in the March judgment “ s 51(xxxi) of the Constitution extends to protect against the acquisition, other than on just terms, of 'every species of valuable right and interest””? Presumably Telstra would hold out for the maximum level of compensation and explore all legal avenues to this end – this would of course take years.

Telstra could continue to deliver to consumers Internet services over the existing wire network, using ADSL or other more sophisticated technology, in competition with the new NBN. They could simply undercut the tariffs of the new NBN owner, which would, presumably, over time, drive them out of business. To make the new NBN work commercially any non-Telstra NBN builder would require, at the minimum, legislation to prevent Telstra from continuing to make use of it’s existing network. This could also attract legitimate compensation claims by Telstra and lengthy legal proceedings.

To be viable, the new NBN owner would need Government to require Telstra to become a wholesale client. Without the Telstra client base the new NBN would hardly be commercially viable. It would be hard to imagine an Australian Government legally requiring an Australia company to make sole use of another competing company but, if were to do so, more compensation could be involved. In the absence of such exclusive compulsion there would be little to stop Telstra from using its existing capital city cable (Foxtel) network, combined with wireless or other technology, to establish a viable competitor to the new NBN. Long standing competition policy would stand in the way of Government forbidding the use of existing Telstra owned infrastructure to deliver Internet services. Again, compensation could be involved if competition policy was turned on its head.

Given the above, if Government were not to select Telstra, could a situation arise where Telstra attracts massive Government compensation and also a new cable/wireless internet network?

Will Government compensation to Telstra be built into the tender costing of the non-Telstra bidders?