Has Turnbull already negotiated FttN NBN concessions with Telstra?

Summary:Stephen Conroy and Malcolm Turnbull's online debate proved that there's no love lost between the two NBN visionaries — and that Turnbull's strategy is based on blind optimism about Telstra's generosity.

It's a good thing Malcolm Turnbull and Stephen Conroy were in different states during their ZDNet Google Hangout debate , or shoes might have been thrown. Yet as post-debate analyses focus on the love obviously not lost between the country's two warring NBN visionaries, a far more significant point must be made.

Turnbull-Hangout
Image: Screenshot by David Braue/ZDNet

That point is, simply, that Malcolm Turnbull is sharing nothing about his plan to convince Telstra — a century-old monopolist that has shown remarkable agility in delaying the competitive market and in bending government to its will — to completely rework its $11 billion contract with the government for its transition to a fibre-to-the-node (FttN) policy.

If you watch the very interesting debate between Conroy and Turnbull, you will notice that Turnbull, when first asked about the complications of renegotiating the largest telecommunications agreement ever penned in Australia, simply dodged the question — utterly and completely.

This is par for the course with Turnbull, and it took a follow-up question from moderator Josh Taylor, delivered towards the end of the debate, to get Turnbull to confirm that he believes Telstra will simply give the Coalition its copper access network (CAN).

"We are absolutely satisfied we will get access to the D side copper without any further payment," Turnbull said. "We are very confident we can access their copper without any additional charge."

I don't know about you, but I've never rented a car for several days, returned to the office, and had them say, "don't worry about it; keep the keys and take the car home with you". Maybe I'm just using the wrong rental car company.

Yet, this is exactly what Turnbull seems to expect from Telstra — and he was quick to then dismiss Conroy as a negotiating ingénue, who: "If he were competent, would have negotiated an option over that copper."

Had Turnbull been negotiating the contract, he would apparently not only have secured unfettered access to Telstra's CAN, but would have done it at a vastly reduced price. And, I guess, had David Thodey washing his car on weekends for 10 years as an added concession to the thunderous negotiating power of the Coalition government.

In his defence, there have been suggestions that Labor may not have been as hard on Telstra during negotiations as it should have — but Labor did not want to buy the CAN, and the Coalition shouldn't either .

I don't know about you, but I've never rented a car for several days, returned to the office, and had them say, "don't worry about it; keep the keys and take the car home with you". Maybe I'm just using the wrong rental car company.

Given the immense market power that Telstra can retain simply by dragging its feet, the fact that the contract was signed at all was no small achievement. For Turnbull to suggest from Opposition that he can simply bend the company to his will, seems hopelessly optimistic — but that's exactly how his cocksure arrogance plays out.

I can only imagine David Thodey sitting deep in his C&C bunker, quietly chuckling to himself and stroking a purring chinchilla.

Interestingly, Tony Abbott is on the record saying that the Coalition isn't "interested in going to war with Telstra".

"I think we have seen too much conflict between government and Telstra in the past."

Well, OK, then: Turnbull is just going to ask Telstra nicely to hand over its entire network. For no more money than the $11 billion that Telstra has already negotiated from the government in an arrangement under which it retains ownership of the network. It's a nice theory.

After the ZDNet debate, I asked Turnbull how he can be so confident about his ability to negotiate the outcome on which his FttN strategy absolutely depends. His explanation: He believes Telstra will be happy to negotiate because under Labor's plan, it only gets paid as customers are switched from the CAN to the NBN — and as Turnbull put it, "At the current rate of FttP [fibre to the premises], they will be waiting to get paid for decades".

This is one view, but it assumes a fair bit about Telstra's motivations. Telstra has already been riding out its CAN business for years, savouring its stranglehold on the ADSL market. Turnbull assumes that Telstra will behave in a perfect commercial sense by getting its $11 billion in the short term — presumably, if his belief that time is an incentive, as a series of lump sum payments rather than outcomes-based payments.

The Coalition always did favour industry subsidies. But if FttN proves harder to deliver than Turnbull believes, this policy will leave taxpayers holding the bag — and Telstra shareholders laughing.

And what if Telstra decides that it's happy with the current arrangement, and will simply keep its customers on the CAN until the FttP NBN is built?

It's not as though the network isn't generating money for Telstra now: The company's DSL services continue to dominate Australia's broadband market, and each month the NBN is not-built means more revenues for Telstra. This contradicts Turnbull's assertion that Telstra sees no value in its network — something that I don't think the company meant literally.

Turnbull is repeatedly painted as the shrewd business man, but if he is indeed that shrewd, he needs to consider one simple fact: The only time it would make sense for Telstra to give that business away would be if the costs of maintaining the CAN outweigh the benefits Telstra is getting from holding on to its copper monopoly. Until then, the government will be fighting an uphill battle — and I suspect an incoming Coalition government would soon discover this all too painfully.

His blind optimism begs the question of what Turnbull knows that the rest of us simply do not. And this begs a simple, further question: Has Turnbull already been negotiating with Telstra to ensure its support for its FttN network?

The thing is, Telstra is watching this debate, and it knows how desperately Turnbull wants it to be flexible. This puts the power squarely into Telstra's hands — and opens the way for Turnbull to be significantly embarrassed.

When I asked Turnbull what the Coalition would do if Telstra simply dug in and refused to gift the Coalition its network, Turnbull was short and succinct: "David, they won't."

This may simply be the words of someone who has convinced himself that things are a certain way — but his blind optimism begs the question of what Turnbull knows that the rest of us simply do not. And this begs a simple, further question: Has Turnbull already been negotiating with Telstra to ensure its support for its FttN network?

This question has far broader implications: If Telstra has in fact signed a contract with Labor, but is already negotiating access to its network by the Coalition, this would seem to be a massively duplicitous course of action. It may be shrewd business, perhaps, but it's not the kind of thing that would endear our favourite monopolist with the Labor government it has signed up with.

Just as he pulled into his shell when initially asked during the debate, Turnbull stopped talking when I asked him how he is so confident that Telstra will roll over for a Coalition government. Yet, as we get closer to the election, Turnbull may need to start getting more honest with his constituency: Promises that he can go back in the ring and wrestle Telstra to the ground again seem hopelessly optimistic.

It's something that the previous Coalition government wasn't unable to do despite its best efforts, and it took the current government several years to effect the arrangement that's already in place. If Turnbull has through some negotiation masterstroke already ensured his FttN policy as Telstra's imprimatur, he should let us know — or start giving Telstra the commercial respect it commands and deserves.

What do you think? Has Turnbull already negotiated Telstra's support for the Coalition NBN? Or is he just talking tough and crossing his fingers?

Topics: NBN, Australia, Government : AU

About

As large as the US mainland but with a smaller population than Texas, Australia relies on ICT innovation to maintain its position as a first-world democracy and a role model for the developing Asia-Pacific region. Award-winning journalist David Braue has covered Australia’s IT and telecoms sectors since 1995 – and he’s as quick to draw le... Full Bio

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