Broadband barney begins

Labor’s promise to build a fiber to the node network danced around the elephant in the room: what Telstra was going to think of giving up its effective monopoly over the “last mile” from the exchange to people’s homes.

Now we know:

The first is that the Government can forget any idea that Telstra will enter into any form of joint venture or public private partnership in exchange for getting taxpayer funding, even $4.7 billion worth, to build a network…

Not only that, Trujillo is arguing that it is happy to pay for the whole investment itself, just as long as it can charge its competitors and its customers what it believes is reasonable. Graeme Samuel remains in place as the devil incarnate at the ACCC.

History suggests that Telstra’s idea of reasonable charges is to gouge its retail customers, and price wholesale access such that resellers are priced out of the market.

Perhaps Telstra’s continued intransigence might prompt the new government to do what the previous government should have done ages ago – split Telstra up into at least two separate companies, the monopoly infrastructure owner, and the retail business.

UPDATE: The Possum analyses this issue in an extended manner, with all the extra snark I didn’t have time for today – though I did a few months ago.

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Posted in government, politics
41 comments on “Broadband barney begins
  1. Chade says:

    To describe Telstra as a bunch of arrogant monopolists is too kind…

  2. Paul Burns says:

    Time to nationalise Telstra, the sack Trujillo.
    I know the ALP gave up the Socialist Objective years ago, but please, Mr. Rudd, get annoyed and do a Chifley. This time you’d hve the people behind you. Those T2 and T3 shareholders would probably be grateful, so long as you offered a good buy back price.
    Fat chance, of course. Howard must be rolling about in glee in his Wollstonecraft Cottage. You have kicked out of Kirribilli by now, haven’t you? Code of conduct and all that.

  3. This privatise natural monopolies has been nothing short of disastrous. In the name of ” marketplace efficiency ” we have lost any kind of long term planning for these essential services. That the Liberal party has been interested in this is explicable since they are always interested in delivering the top end of town i.e. themselves , a truckload of cash ,but why the Labor party ever get involved in this is beyond me.
    Quiggers , as ever, would have the true story.

  4. Paul, I can’t agree.

    Nationalise the last mile, sure.

    Nationalise the rest? And bring back the old Telecom? No thanks!

  5. joe2 says:

    Yep ,Paul, even the threat of nationalisation might do the trick.

    Proposed legislation to do away with executive share company rorts is another avenue. Trujillo plays hard, but may be bent by leaning on his wallet.

  6. joe2 says:

    Robert, in Victoria we have a premier who is talking about a public/private partnerships to build public schools, for goodness sake. Surely, it’s time to allow government to provide good services without the business/middleman skim.

  7. joe2: because nationalised telcos are every bit as bad as private telcos.

  8. Paul Burns says:

    Yeah, but Rudd would get his roll out of the thingamajig to the node and the internet and moble phones would be cheaperif Telstra was nationalised, wouldn’t it?
    And Trujillo and his amigos would go home?

  9. […] Over at LP, they’re having a nice chat with a cup of tea and a few Iced VoVo’s (suddenly the biscuit de jour in political circles) over Telstra’s chest thumping demands regarding Labor’s proposed new Fibre-to-the-Node broadband network. Rather than clogging up their comments section with a vast monologue (and eating all their biscuits) I thought I’d blurt my contempt for this policy mess out over here instead – but I encourage all to go and have a squiz at the LP post. […]

  10. Look simple matters of logic : it’s not a matter of either or.
    We need to have forms of ownership for essential services where the shareholder is not the final arbiter. This debate needs to be had as so many of these services have been taken over by private monopolies or cartels e.g. the banking system

  11. David Rubie says:

    Robert Merkel wrote:

    because nationalised telcos are every bit as bad as private telcos

    I don’t think this is true. Look at the mobile phone situation in the US: even now interoperability is low and during the 1990’s you could get better mobile service in Dubbo than you could in New York. It was the first real “big infrastructure” challenge after the Bell monopoly was broken up, and private industry made expensive mistake after expensive mistake, eventually fracturing and botching it in a snarling fued that meant the completely ridiculous idea of renting a different phone whether you were in NY or LA. Meanwhile, the govt. owned Telstra sat back and quietly rolled out the old Analog system here to a much smaller audience and it was fabulous.

    The botched delivery of GSM/CDMA/3G here by the slowly privatised entity and it’s private competitors has been nothing short of a joke, especially for rural customers. Also factor in the pathetic “cable tv” rollout in the cities that meant Optus and Telstra ran different kinds of optical over the same telephone poles until they both ran out of money. Competition is useless for infrastructure building – it just promotes waste, hasty decisions and sub-par technology.

    Meanwhile, the only thing that actually runs into every house, their copper twisted pair lines, ages and disintegrates with reduced investment. As bad as the government owned Telstra was, it was acres better than the disaster we have now.

  12. Paul Burns says:

    Couldn’t agree more, David. Years ago, when I moved Telecom refused to connect my phone because I had owed them some money, which I’d been a bit slow in paying,at a former address. But I did pay it. Ian Sinclair, then our local member,made a phone call and I got connected the next day.
    Now, it costs the earth if you’re not a pensioner. I put an STD block on my new phone, so I’d stop ringing psychic hotlines, and arranged to get a monthly bill.
    Now Telstra writes me letters or sends me e-mails telling me I’m one of their best customers. They’ve even stopped ringing trying to sell me things because I told them I’d ring them if I wanted to buy something from them..
    Australia is too large a country to have a privatised national telecommunications system.
    JWH has done us all a massive disservice through his mad privatising ideology.

  13. David Rubie says:

    Paul Burns wrote:

    Australia is too large a country to have a privatised national telecommunications system.
    JWH has done us all a massive disservice through his mad privatising ideology.

    You just reminded me of the bit that really annoys me: There are now literally dozens of private “telcos” that resemble competition, but are merely very inefficient generators of bills. They all rent the same lines or mobile infrastructure from Telstra, they all pay the same wholesale rates, they all send out a Telstra guy to fix the phone when it’s busted.

    I was fascinated by the concept of a “cargo cult” – right up until I saw it in action in telecoms policy in Australia. The south sea islanders building air strips out of coconuts made more sense than the madness we’ve fallen into. I’m turning socialist on this one: buy it all back, slap Trujillo back into the cave he crawled out of and rename it the PMG.

  14. derrida derider says:

    PC Authority runs a survey every year of customer satisfaction with internet providers. Telstra just triumphed in this – they rose from being rated worst in the country last year to third-worst (of dozens) this year (DoDo got the wooden spoon).

    Pretty well all of those “inefficient generators of bills” easily surpassed Telstra in their customer contentment. That’s because they consistently provide better value for money, even though forced by law to depend on Telstra for their infrastructure. Shop around a bit, Paul.

    I can’t see how abusing the government – on whose anticompetitive regulations all your shareholder value depends – can possibly be wise for Telstra. Trujillo would be much smarter to focus on providing his customers with better value.

  15. David Rubie says:

    Shop around a bit, Paul.

    That was me Derrida. I did shop around for my broadband although options are severely limited in reality. In a regional area, try ringing one of the “contented customer” telcos for ADSL broadband. The Telstra tech will sadly inform them that you are “too far from the exchange”. Ring Telstra bigpond, and magically you’re close enough for them to “give it a try” and lo! It works. There is rampant dishonesty at work, although with a measure of plausible deniability that turns my stomach.

    In fact, back in Sydney, we couldn’t get broadband at all (3 years ago) and had to wait for Unwired to get started before we got off of a very poor quality 28.8k dialup.

    In Sydney.

    In 2003.

    The reason? Telstra decided to install exchange technology in *2001* in our area that couldn’t handle broadband to save a few bucks. In a decent world, Telstra would be disbanded entirely, but we need the wires and cables and switches, so we should just buy them back and rent the capacity to those “contented customer” telcos. I might start one myself, all you need is a laser printer and an oily salesman.

  16. joe2 says:

    “Trujillo would be much smarter to focus on providing his customers with better value.”

    With respect, dd, you have it wrong. He has the correct focus. His main concern is the shareholder and he will/should do his best for them. The privatisation of the communications hub of Ausralia was a mistake because there is no way the interests of the citizens can be reconciled with what is best for shareholders.

    The government has the role as a provider of critical and basic human services and should stop trying to pass the buck.

  17. Pollytickedofff says:

    “Iced VoVo’s (suddenly the biscuit de jour in political circles)”

    I’ve never been particularly fond of Iced VoVos but the things they put in packages and call Iced VoVo’s these days do not deserve to be called such!

    “There are now literally dozens of private “telcos” that resemble competition, but are merely very inefficient generators of bills.”

    Reminds me of my $4,000,000.00 phone bill.

    I had changed business names and next thing you know I had received an 11,000+ page bill from Telstra for over $4m. Somehow they had changed the details of the provider’s account details instead of our sub-account so I got the bill for the whole ‘telco’.

  18. joe2: the point is that in non-monopoly situation, a business that doesn’t keep its customers happy will go out of business.

  19. joe2 says:

    I understand that Robert. All I am suggesting is that there is a place for government in the provision of basic services on a not for profit basis. How mad is it, for instance, that in a drought crisis people are being allowed to buy up and sell water rights?

    In the case of Telstra, you imagine that the only way forward is to hand the chook further over to the market forces. Maybe this monopoly would be better handed back to the public for general community considerations. Just because privatisation madness has taken over we do not need to take it to it’s total chaotic conclusion.

  20. Jacques Chester says:

    The other point people overlook, and I keep pointing it out, is that broadband economics in Australia is dictated by the pipes we’ve run to the USA and Japan. There just aren’t very many and the upstream providers charge a lot, which flows through ISPs to customers.

    It’s not going to be much use to have a 100Mbps connection when it’ll cost you well north of $200/month.

    The whole thing is a monumental clusterf*ck. The liberals never put a person with a clue into the Telecommunications portfolio. They gave us the bizarre mix of privatised Telstra + Universal Service Obligation + Nationals fiddling & pork barreling. A most unedifying spectacle.

  21. Evan says:

    Since Telstra shareholders have considered it proper to bring in a bunch of Yanks to operate and maintain their little monopoly, I reckon the Ruddster should take a leaf out of another Yank’s book to deal with the problem: Teddy Roosevelt’s.

    Now here was a dude who knew how to break-up monopolies.

    Bully!

  22. philiptravers says:

    I actually like Sol,but hate Telstra,and I think he is now the fall guy,I predicted he would become.And criticisms of him hear are ranging into the ugly Australian.If the man is overpaid,and I will agree,is because he woke up he was a fallguy.Get off his back,and only cricise the services etc.They have shareholders who just want some value.I hatemy bill..lightning around my ears as I type..signing off.

  23. Jacques: that’s a fair point, but Telstra are still a bunch of rapacious private monopolists with appalling customer service and a Microsoft-like attitude to competition.

  24. smokey says:

    Philiptravers (22), nope, Sol has gone the last mile with this latest PR catastrophy, and shown his true colours for all to see. All he appears to consider is some brain dead American thinking that the market must be paid exorbitantly well for doing stuff all. Why do you think people are deserting Bigpond? Or that it looks like he thinks the gov here is supposed to bow down and worship at Telstra’s feet as the oracle of American financial ideology? (you know, like that sub prime thing?)

    Sol is a loudmouth American who should go back to America where he belongs. Give him the golden handshake, whatever, just get him the hell out of this country and away from our infrastructure.

    That’s not ugly Australian, that honest Australian telling the truth about an ugly American.

  25. Graham Bell says:

    Robert Merkel and All:

    Just bring back the Post-Master General’s Department.

    At least they were capable of running a communications system that actually worked worked. They brought in new technology that was needed, when it was needed, where it was needed. They gave service …. and “service” is a swearword in Australia’s third-world communications industry these days.

    As for all the faux-CEOs, IT gurus and all the other gee-whiz ratbags who have stuffed up our communcations system, just round them up and dump the lot of them in one place where they can’t do us any more harm nor loot our money. Baxter? Pacific Solution? Abu Ghraib? Guantanomo Bay?

  26. Andyc says:

    Graham Bell: “bring back the Post-Master General’s Department”

    Hear, hear!

    Essential strategic infrastructure -> exploitation-prone natural monopoly ->
    should be run by government on an at-cost basis, employing non-crony, competent not-for-profit management.

    The idea that “competition” and the proft motive are universal panaceas is a total crock, and always was.

    Specific points to note:

    Someone else making a profit on your essential service means that you are being charged too much.

    And if their shareholders’ demands are comign first, that means that maintenance of the infrastructure and quality of service are further down the list.

    Multiple companies providing the same services are reduplicating administrative load and wasting money on advertising.

    “Choice” between a large number of nearly identical crappy products is not inherently better than one decent product.

    ““service” is a swearword”

    As in: “Geez. That’s pretty well serviced, isn’t it?”

    Love it 🙂

    And the Pacific Solution for the Telecom Carpetbaggers?

    Only if they dissolve properly.

  27. bahnischba says:

    I heard Paul Budde on the radio and read Brian Toohey in the Fin Review saying that Telstra is about the only structurally integrated monopolistic privatised company left.

    The solution, according to them, was to separate the infrastructure from the retail operation and to have separate privatised companies. This will cost the taxpayer nothing. The infrastructure company would be regulated by the ACCC and have to get its charges approved. This happens now with other infrastructure companies, does it not?

    I still own a small parcel of Telecom NZ shares I didn’t get around to selling (it’s one of my least well-performing investments.) Last year, from memory, the company was split. They didn’t see it coming, but they just got on and did it. There was no hysteria. Some of my shares were compulsorily acquired for less than I paid for them but more than they were worth on the market. No big deal.

    I’m sure structural separation was Labor policy under Beazley, but never got around to checking it under Rudd. I just assumed since it was sensible it would stay the same.

  28. Graham Bell says:

    Andyc [on 26]:
    An old saying “If it works, it’s good engineering; if it doesn’t, it’s junk.”

    I’m fed up with being offered flashy toys as a substitute for state-of-the-art technology, with being offered great plans and fantastic new services which aren’t. And I’m fed up with being ripped off. What about a communications system that is affordable and that works well?

  29. Brian, this post has some of the historical background. Yes, Tanner was pushing the idea, but it wasn’t popular with the telco unions.

    As to the costs, I expect the shareholders will get a pound of flesh courtesy of taxpayers if structural separation happens. Regardless, it’s still probably the cheapest and best option.

  30. bjohns says:

    I’m for the separation of the infrastructure and field services and having it put up for sale to a consortium of companies that rely upon it. It would be nice for the Government to possess a majority share in the new entity. However I agree with other comments that this may come with a hefty price tag although being able to regulate it through the free market is more efficient than bashing it into conformity with that rather heavy, blunt, object known as the judicial system.

    Telstra are forever reminding us that the Australian network costs a lot to maintain and expand for little or no benefit – by taking this ‘profit sink’ away from them and sharing the costs around should in fact drop their operating expenses and increase profits for a while, until true competition kicks in that is. I would be interested to see the cost/benefit comparison; how much does possessing the infrastructure benefit Telstra and would they be better off without it – especially if they are forced to provide services in rural areas?

    If anything – don’t look to America for advice on how to split a telco.

    Having said all that – in no way can this occur without paying close attention on Australia’s links to the outside world. These are in dire need of upgrading and involve all sorts of negotiations with international conglomerates. Any ‘weakening’ of Telstra may entice these parties to hike up prices and charge individual companies based upon their individual demands – Telstra would be getting a good deal with their monopoly status.

  31. Zarquon says:

    in no way can this occur without paying close attention on Australia’s links to the outside world

    Hey, we could have a single desk negotiator for this – let’s call it the Overseas Telecommunications Corporation or OTC!

  32. david tiley says:

    There was an interesting campaign run by some ISP heavies before the election saying that FTN doesn’t matter. The real issue is the provision of the big pipes with more bandwidth, so we don’t have the choke points they anticipate. In theory, a corporation relying on large scale data transfer simply buys bulk bandwidth – but now they can’t find it under any terms.

  33. Harmless Cud Chewer says:

    I find the talk about Telstra a bit of a distraction. Telstra isn’t *worth* being nationalized.

    We don’t need to own, seize, rent or otherwise obtain access to an aging copper last-half-mile.

    Instead we need to build a FTTH network based on the best available technologies.

    The details are in my post on Possum’s blog.

  34. Harmless Cud Chewer says:

    Jacques @20, this is quite correct.

    Any serious FTTN or FTTH network must keep a few hundred million spare for an international link.

    It should be pointed out that there are already some private players interested in breaking the current international link duopoly. Have a look at the efforts of pipe networks and google.

  35. Graham Bell says:

    Harmless Cud Chewer [on 33]:
    I’ll drink to that …. if it supplies workable communications everywhere and at a reasonable price.

    By analogy, no sense in seizing/rebuying ox-carts in the age of jet airliners. 🙂

  36. bjohns says:

    HCC@33 It’s not all about the actual copper/last mile. It is the supporting infrastructure such as exchanges and existing fibre that is worth it. FTTN with that infrastructure becomes an exchange suburb matter, without it it’s a capital township suburb issue.

    The G9 consortium based a great deal of their planning on access to dark fibre – the unused fibre ‘strands’ in the ground that Telecom/Optus had laid all those years ago and continue to upgrade needlessly. Neither company will lease this excess capacity to anyone because it’s their way of assuring market dominance – the threat of having so much excess capacity will make any potential competitor think twice before investing. You can imagine the cost of surveying and digging the 1 meter deep trench and laying fibre to every township in Australia, duplicating Telstra’s fibre network which has plenty of unused capacity and is fully amortised. Telstra can simply drop their charges and force any new network to fail.

    When Optus was bidding on the second telecommunications carrier license in 1991 they were up against one other serious bidder – Kalori. However Kalori pulled out sighting that they couldn’t compete because Telecom already had four-times the interstate telephone capacity that Australia could possibly need before the year 2020 (ref: http://www.abc.net.au/http/sfist/shwy4.htm). I believe the same problem exists today even with current demands.

  37. Ambigulous says:

    Pollytickedoff @ 17

    Did you offer to pay the $4 million in small monthly instalments? 😉

    MINUTES OF DA LITTLE CHAT DA BOYS WAS HAVIN’
    AT KUMBAYA LODGE WID DA BIG SPA ‘N DA NICE GOILS

    Big Sol said to send round a van to park outside Big Kev’s house, justa reminder. Big Sol said “this fella’s gotta learn, He’s gotta learn quick, If he’s so damn bright how come he duzzen learn? That’s not bright!”

    So maybe we do some more leaflets for da shareholdas? Glossy, privately addressed, fair and square shove the message right up someone’s big, ignorant… [drinks waitress arrives, all tasty attributes not for attribution; drinks ‘n nibbles; some guy decides he should ‘go powder his nose’]

    So Sol says “that other gang, at least ya knew where ya didn’t stand – jeeeeez that Coonan broad she was somethin’ else, yeah?”

    Then Big Sol gets sentimental ‘n stumbles across to his briefcase and brings out a snap of his FIRST violin case, ‘n starts gettin’ choked up and the New Joisey accent gets thicker, and such stuff “this little sh*thole place…” sobs a bit

    And da Boys all go home.

    THIS CHAT NEVER HAPPENED AND ANY GUY SAYS IT DID HE MIGHT NEED TA SEE SOL PRIVATELY OK?

  38. Paul Burns says:

    Ambigulous,
    That’s hilarious. Trust Big Sol and the Boys will become a regular LP feature in their efforts to deal with Big Kev snd dis Gang rather than da other Gang and dat Coonan broad?

  39. Ambigulous says:

    YOU NEVER HOID IT Mr Burns AND IF YOU DID DA BOYS NEED TA COME ROUND AND “LOOK INTO” YOUR PHONE SERVICE, OK?

    seems like it may be misbehavin and we wouldn’t want no trouble, OK?

  40. 2 tanners says:

    I recall with zero fondness the days of Telecom (Telescum as they were less than affectionately known by anyone trying to use the internet). Their service was lousy, on an international scale they were uncompetitive, they were about as technologically innovative as a rolling pin and their workmen were rude and lazy.

    Competition came and most of the above changed – after a while.

    I reckon we’d still be on twisted pair if PMG was running things.

    I’m not suggesting I have an answer, but I shudder when I remember how bad things were.

  41. Harmless Cud Chewer says:

    bjohns @36, check out Nextgen networks. They laid thousands of km of fibre for a surprisingly good price (I *think* less than a billion). Where they failed was that their fibre only made sense if it served as the internet backbone to everyone in the country and that wasn’t going to happen given Telstra’s monopoly over the last mile.

    Nextgen’s methods are an example of how to do some serious cable laying at a reasonable price. This is what happened near me. One dozer rips the ground. The next dozer has a specially designed ripper/feeder that lays the cable. The third dozer simply cleans up. Fascinating to watch in person.

    So far as I know their fibre is still not being used to more than a fraction of it’s capacity.

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