McGauchie's tough Telstra task

Don McGauchie's appointment earlier this week was met with a torrent of bile from electioneering opposition politicians anxious to paint the new man as a coalition "mate" with an agenda to silence the vociferous opposition from rural and regional Australia to the sale of the remaining 51.05 percent of the telecommunications carrier.

McGauchie, 54 -- a former president of the National Farmers' Federation and director of the Reserve Bank -- replaces acting chairman John Ralph, who stepped in after Bob Mansfield resigned amid controversy over proposed investment in media heavyweight John Fairfax Publications.

However, his appointment immediately copped a spray from opposition spokesperson on communications, Lindsay Tanner, who told a radio station this week "I think it's a bad appointment.

"I don't think he's got the right qualifications for the position and I don't think Australians will be fooled by having a farmer in charge of Telstra as some sort of alibi for privatising Telstra".

However, crucially, Tanner stopped short of saying a Labor government (if elected) would get rid of McGauchie, saying "He's entitled to serve his term and fulfil his responsibilities and I'd be judging his performance on its merits and making my decisions about reappointment on that basis".

The Prime Minister, John Howard, lent weight to the belief that McGauchie would not stand in the government's way on full privatisation, telling a Brisbane radio station "It's government policy to sell ... our remaining interest; it's not the policy of Telstra, it's government policy.

"He won't be in any way antagonistic to that policy, he supports that policy, I know that".

However, the genuinely pressing question of how the new chairman will assuage rural and regional people's sensitivities over perceptions of lower service levels than their city cousins as the privatisation agenda moves forward is just one of many he faces.

The carrier is looking at massive threats to its existing copper network, which is ageing and heading towards redundancy (one Sydney business commentator says the cost of replacement by fibre is in the order of AU$30 billion), while eager competitors are nipping at its heels in relatively new-era services such as third-generation mobile networks and broadband Internet.

(Yet another pinprick reminder of the eagerness of smaller rivals to chip away at Telstra's business came through on the Australian Stock Exchange Web site yesterday, with wireless broadband provider Unwired Australia announcing its Sydney network had grown to the point that it was the world's largest commercial non line-of-sight broadband wireless access network, in coverage and capacity terms.)

McGauchie will be well aware that the sector heavyweight is treading a fine line legally in how it uses its market influence in these areas. The Australian Competition and Consumer Commission (ACCC) on Monday renewed its competition notice in relation to Telstra retail broadband price cuts that rival providers complained took BigPond prices below the wholesale prices they were being charged for access to Telstra's infrastructure.

In essence, the new chairman -- like his predecessors -- is heading an organisation whose chief asset is deteriorating fast and requires replacement at prohibitive cost, while its efforts to secure its position by dominating new-era telecommunications services all but inevitably brings it into expensive, damaging conflict with the competition regulator. Its unwieldy structure -- in which it owns a wholesale arm supplying network services to those who also compete with its retail arm -- is a product of the government's desire to maximise the value of its property, but hardly the optimum form to manage. There are plenty who advocate a more formal degree of separation of Telstra's arms than the fine-in-theory, useless in practice accounting separation presently applied.

There will be plenty to keep McGauchie away from his dairy cattle farm during his term.