His view was naturally Telstra-centric, but contained wisdom & insight.
It would make sense to have just one local access loop with just one maintenance organisation to which all Telco's have equal access. And it couldn't be owned by any one or two commercial players, that distorts the market.
He described an asymmetry: how new Telco entrants can build their own infrastructure and deny access to all others, but Telstra was obliged to provide access to 'their' copper network to everyone. He sited the sad case of a pensioner needing a phone and waiting for quite sometime (and paying a big fee) while Telstra dug in a cable that the developer should've installed... All the time there was physical cable to the premises owned by another Telco, but inaccessible.
The 1994/5 HFC cable TV rollout by Optus & Telstra (80-90% duplication) shows the insanity of Telecomms commercial arrangements and regulation in Australia. Behaviour that you wouldn't tolerate in school children.
That it was never a commercial decision is shown by the subsequent huge write-offs by both players. If they'd be ordered to "play nice" and construct a single infrastructure with bilateral access, the face of Australian Telecomms would be fundamentally different today. Cable TV would be a real force - possibly covering 80% of houses and making real profits.
The Telco regulators have allowed the same pattern to be repeated with mobile phone operators. In the USA & Europe, operators allow competitors access to their networks and make good income from it. It's called "roaming" and is supported by all the standards, hardware and handsets...
Everyone benefits, it's a positive-sum game. It doesn't stop operators extending their networks when they know they'll make more money by building their own infrastructure. [They have hard data on their customer call patterns.] It also means new entrants are 'born global' and have time to build-out their network and manage their cash-flow and CapEx. It encourages and enables real competition, which again benefits everyone.
Only it doesn't happen in Australia. There are 4 or more independent networks, everywhere, and no roaming agreements. It's not about commerce or service, but sheer bloody mindedness. All these Telco's have roaming arrangements with overseas operators. They have both the technical and commercial knowledge to do local roaming. [There is some for mobile wireless internet.] Everybody loses - it's a negative-sum game.
Regulators should not allow "Coverage" to be a marketing differentiator.
Failure to cross-connect/access should lead to heavy fines and eventual revocation of a Telco license. Telso Licenses, like Banking, are granted so commercial entities to primarily provide a public service. In return, a limited monopoly is granted.
It's all about providing public services, not about the profits of licensees.
Back to the NBN.
What's the long-term impact on Telstra if Kevin Rudd & Co forcefully construct "The One True Local Access Network"? If I were Rudd and was forced down this path, I'd deny Telstra access for forcing the issue in the first place.
Everybody loses, comms prices are high, services are limited and national economic competitiveness declines.
There is a 'critical point' of market share at which Telstra cannot continue to maintain and operate a parallel, full-coverage network - even with more limited services. As their market share declines, their profits reduce, putting pressure on maintenance, operations and customer service. This leads to more limited offerings, poorer service and unhappy customers, leading to yet smaller market share, decreasing profits and an inevitable "death spiral" that can only be broken by massive capital injection or embracing the NBN.
Telstra embracing the enemy seems very unlikely. Over several decades, the Telsra Board and Management have demonstrated they will not work with others, sometimes even after ACCC action and court directions. The have proven to be obstinate and recalcitrant.
There is also the competitive services problem: if the NBN provides desirable services that Telstra cannot deliver, then an increasing number of people leave Telstra, leading to the 'death spiral' by another route. Telstra can buy market share by dropping prices, but at the price of longevity - they destroy their profits and the ability to fund growth & new services.
The Federal Government and its regulators must know these things.
Are they taking Telstra on head-on with the intention of putting it out of business? (It can only be a 'take no prisoners' struggle to be won by the deepest pockets or a change of political direction.) The last thing Australia needs is the NBN being privatised before it is the dominant player. Without unlimited financial backing, Telstra would win, even if mortally wounded itself.
Or is it just a Power Play to force the Telstra Board and Management to wise up and 'play nice'?
We'll only know in hindsight.
Australia shouldn't have to bear either the massive cost of duplicating the local access loop or of Telstra failing.
Update 1. Sunday May 3, 2009. Senator Kate Lundy points to this piece by Richard Alston (Minister for Communications etc 1996-2003). Alston notes that Telstra aggressively duplicated the Optus Cable TV roll-out. He doesn't say that as the responsible Minister that he could've acted to prevent or change that.
Update 2. Tuesday May 12, 2009. The Australian reports :
The federal Government will offer Telstra the chance to buy up to 49 per cent of its national broadband network, if it agrees to voluntarily hive off its wholesale arm.Telstra undertakes "structural separation" - into Wholesale & Retail arms. In return for its current Fibre Network, gets 20% of NBC (National Broadband c/o).
With both a new CEO and a new Chair (now Donald McGauchie is gone), Telstra may be able to resile from its "never, ever separate" position.
That values Telstra's 'Fibre Network' at $8.6Bn and allows them another $12.5Bn investment.
After the original $4.7Bn for NBN 1.0, the Govt. needs an additional $12.4Bn - half public, half private.
Guesstimates for NBN components:
- Domestic subs, 9M @ 100Mbps ($1,500/house): $13.5Bn
- Exchanges, 1,000 @ ($500/sub + routers/uplink): $5-8Bn
- Backhaul/Interstate upgrades (10+Tbps scale): $5Bn
- International cables - 10Tbps (1Mbps/household): $5-$10Bn
- Peering & ISP interconnects (20-100): $2Bn
- Rural/Remote radio/Satellite, 1M @ 12Mbps: $5-10Bn
- Content provider feed network: $2Bn
- High bandwidth subs: Business, Schools, Hospitals, Govt: $5Bn
- Network Operations, Maintenance & Test spares/depots/equip, Training: $5Bn
- Billing, Call record & traffic analysis, Line management & other IT systems: $2Bn
Update 3. Friday May 15, 2009. Stephen Bartholomeusz in "Business Spectator" reports:
Lindsay Tanner has confirmed what was suspected. In arriving at its estimate that the cost of the revised national fibre-to-the-premises broadband network would cost $43 billion, the Rudd government essentially dreamed up a big number and then added to it. ....If Telstra agrees to "structural separation" & buys in, the economics change.
The evaluation that should have preceded the commitment will now occur, with the government commissioning an "implementation study", which one assumes will consider the complex economic issues involved and come to a conclusion whether the NBN is a viable commercial proposition.
If not, there's enough money in the bucket to do this thing "right".