Trujillo aims to 'blow everyone out of the water'

Telstra's plans to switch on ADSL2+ across 900 exchanges throughout the country may have a destabilising effect on the comms market and alter the national carrier's relationship with government and regulators, according to an IDC report.

"We believe that the announcement from Telstra to activate their remaining ADSL2+ ready exchanges as a result of Ministerial assurance and the Government's requirement to cull more than AU$10 billion of funding are related. As a result the OPEL funding will potentially be a casualty of larger macro economic inflation management processes," said David Cannon, Programme Manager of Telecommunications at research firm IDC.

According to the analyst, one of the first effects of Telstra's announcement may be that Optus cancels its plans to construct a new 3G network -- intended to provide 96 percent coverage to Australians -- as a means of competing with Telstra in rural and regional Australia.

"This effectively provides Telstra with a competitive stay of execution in regional and rural Australia," said Cannon.

"The activation of the ADSL2+ exchanges gives regional and rural communities metro-like broadband services and will counterbalance any negative public sentiment should the OPEL funding be withdrawn," he explained.

Geoff Johnson, research VP at analyst firm Gartner believes that Telstra's move may not only stifle competition in the bush, but may lead to an increase in prices. He said that the announcements made by CEO Sol Trujillo at the World Mobile Conference in Barcelona this week were aimed at unsettling the Australian market.

"If he keeps pushing the envelope like this he's going to damage OPEL's WiMax environment significantly, and that's going to push prices up for rural and city users.

"It just looks to me as though Trujillo is trying to blow everyone out of the water with this," said Johnson.

IDC's Cannon claimed that not only will Telstra's decision affect OPEL's operations but also Vodafone's intentions to build its own 3G coverage through Optus, which he says may result in Vodafone "reassessing its commitment" to that particular undertaking.

Cannon expects that not only will this change Telstra's relationship with its competitors but with the government and regulators as well, saying that the decision will put further strain on the telco's relationship with the ACCC and the federal government -- after its decision to provide assurances to Telstra, which he believes may have been interpreted by the carrier as a "backdown".

"This could encourage Telstra to ignore the regulator and engage in legal sabre-rattling for extended periods of time while it enjoys market share monopoly and profits," he added.