The old men and the T

Like the protagonist of Hemingway's "Old Man and the Sea", Stephen Conroy has finally reeled in his biggest catch ever after an epic battle. But has he tamed Australia's largest telco at last, or will a cashed-up and liberated Telstra simply regroup, biding its time until it can come back stronger than ever?

A simple photo can often say more about a situation than words can manage. Take, for example, the photos of the announcement of the government's deal with Telstra: there was the Prime Minister, the finance minister, the communications minister and several NBN Co bods.

With all the fervour of a shark hunting party, but with more teeth, they fronted the media to proclaim their victory for common sense, their subduing of the Telstra menace before Conroy's promised June deadline, their dogged pursuit of the right and good in the name of the Australian people — and the hope of re-election. They may also, it appears, have cracked a few jokes: this picture from news.com.au shows Conroy with head reared back and mouth open. Either he was preparing to devour the brains of a few nearby journalists in a ritualistic sacrifice, or Kevin Rudd had just cracked an absolute corker of a joke. Because, you know, he's a funny guy.


(Original image by Dale McDonald,
no known copyright restrictions)

So, the government was clearly enjoying the moment. But where, in all this, was Telstra? A second news.com.au image shows chairperson Catherine Livingston standing at attention next to Conroy, with CEO David Thodey book ending the announcement party and looking, in this picture at least, intent and serious. Read the body language and it really seems the announcement was more of a victory party by the government than a celebration of a promising new partnership.

Telstra CFO John Stanhope suggested as much during his conference call with Thodey: "there wasn't a negotiation [on price]," he said. "We have had to accept what NBN Co [thought] might be the price range, and had to calculate on that range."

Either way, the picture highlights the ongoing schism between the government and Telstra, which this week, despite the agreement, managed to restore Telstra's share price and create the perception of government action. Of course, the agreement has so many potential escape mechanisms that it will be useless if Labor isn't re-elected, or either party decides to change its mind.

This announcement seems less like the reunification of Germany than peace talks between North and South Korea, where both parties and their interceding helpers realised long ago that they will share a common geographic border forever and that they have to at least grunt civilly to each other to get by. I don't expect that the parties involved will be sending each other Chrissie cards, but they have nonetheless figured out a way in which Thodey can save face with shareholders — and Conroy, after a month of policy farces that he would probably rather forget, can save face with an electorate that can at least see a government taking concrete steps to bring them better broadband.

Thodey can save face with shareholders — and Conroy, after a month of policy farces that he would probably rather forget, can save face with an electorate that can at least see a government taking concrete steps to bring them better broadband.

Is Conroy the hero of this story, or will he end up like Santiago, the protagonist in Hemingway's Old Man and the Sea, who hooks a massive marlin and fights it for days only to have his prize ripped away from him by the time he returns to shore?

Reactions to the deal have been mixed but more positive than negative, with most hailing the long-awaited breaking of the impasse that has held Australian telecoms in its grip for the past decade. The agreement may not be perfect, but at least it outlines a broad set of plans that would facilitate construction of the NBN; provide much of the long-awaited regulatory certainty for which Telstra has been clamouring; modernise the Universal Service Obligation scheme; fund worker retraining; and do many of the other things that would seem to be necessary to bury the hatchet and move on.

Never mind that Thodey might have preferred to bury the hatchet somewhere else entirely. Signing onto a deal like this is a significant change of tack for Telstra, which has simultaneously starved and retained heavy-handed control over its copper network — and, in so doing, kept the government shining its collective shoes and picking up its dry-cleaning for years. Selling that leverage will finally force Telstra to step into the harsh sunlight of the competitive telecoms market and do its best.

Which, by the way, isn't necessarily going to be hard for the company. With $11 billion of taxpayer money to play with, Thodey certainly has more than a few options. He's already flagged a continuing investment in high-speed wireless. Telstra will be able to transfer its competition-crushing business philosophy into a wireless world where high-speed long-term evolution (LTE) seems to be fast becoming everything 3G and WiMax aren't.

No matter how self-assured Rudd and Conroy may have looked in the photos, when it comes down to it Telstra has scored a major victory with this agreement. The $11 billion price tag for the copper network and related provisions is hardly pocket change, and all that money will facilitate major changes in Telstra's asset and employee base. In exchange Telstra just had to give up a network it hasn't really wanted for years, except as a weapon to brandish against the government.

This money represents the buying-back of Telstra's copper network that shareholders have been spitefully calling for since the long-visioned but short-sighted Howard government so royally screwed up the privatisation of Telstra. At least we now know the price of that mistake — and everybody can move forward at last.

It was, unfortunately, a price the government had to pay: this money represents the buying-back of Telstra's copper network that shareholders have been spitefully calling for since the long-visioned but short-sighted Howard government so royally screwed up the privatisation of Telstra. At least we now know the price of that mistake — and everybody can move forward at last.

There are always concerns, however: for example, if a cashed-up Telstra is able to dominate the spectrum process and shut out competitors — or even if competitors aren't that hard done-by and just need something to whinge about — one imagines the competition concerns over wholesale ADSL2+ could be replayed in the wireless arena; however, it's unlikely that Telstra will start wholesaling Next G, and it has none of the natural monopolies in wireless that it had in the landline. This means the company may well be able to face the future and make full use of those assets it does have — and there are many of them.

"We have enough confidence that we will not be constrained in the future," Thodey said during the conference call. "We are just trying to deal with the hand that's been dealt to us... This is a fair outcome that allows us to look at things before we go to shareholders... It is our intent to move to finality on this."

For now, however, the ball is very much in Labor's court: if it loses the election, as it seems to be working so hard to do, all this to-ing and fro-ing will be for naught. The Coalition will follow through with its ridiculous and regressive anti-everything policy, sending us back to square one — saving money but restoring Telstra's dominance and ensuring Australian telecoms will never be more than an embarrassingly awful white elephant.

But if that doesn't happen? Maybe, just maybe, we can finally move forward — and Thodey and Conroy will be able to normalise relations and join each other for a nice Saturday doing normal things like angling for fish — instead of angling for each other.

Has Telstra come out on top, or has the government? And do you think the agreement will actually manifest? Or will one party pull out in anger before or after the election?

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