Conroy: architect of the accidental telco

Conroy: architect of the accidental telco

Summary: As expected, Senator Stephen Conroy -- who made a career out of picking holes in the actions of his predecessor Helen Coonan -- was named to Kevin Rudd's front bench, bearing the interesting new title of Minister for Broadband, Communications and the Digital Economy (BCDE).

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As expected, Senator Stephen Conroy -- who made a career out of picking holes in the actions of his predecessor Helen Coonan -- was named to Kevin Rudd's front bench, bearing the interesting new title of Minister for Broadband, Communications and the Digital Economy (BCDE).

It may have that cutesy quality that suggests an education portfolio, but at least it's the kind of title that a person charged with delivering high-speed information services should get; it was never really clear why IT was lumped in with the Arts portfolio. However, I might suggest a better title would be Minister for Bear Handling, since the first week of Conroy's reign, so to speak, showed that he still has a fight on his hands when it comes to the biggest bear of all.

To escape political evisceration, that bear could well push Conroy in a completely unexpected direction. Here's why.

In the week before the election, Conroy was quoted as optimistically saying a Labor win would mean starting "on a fresh foot" in the government's relationship with Telstra and other telcos. Post election, however, Phil Burgess made it clear that Telstra has no intention of changing its relationship with the government -- slamming Conroy's suggestion of a financial partnership with Telstra and telling Conroy to keep his paws off the company.

"We're not going to do consortiums, or equity or things like that," Burgess was quoted as saying at an industry conference this week. "It's not the way we do things."

That's something of a slap in the face, and probably not the way Conroy was expecting to be received by Telstra, which has clearly had enough of talking with the government. Burgess' message is clear: give us the AU$4.7 billion and scram, or we'll just do it our way.

This all leaves Conroy in something of a quandary: he no doubt thought the availability of massive amounts of money would lure Telstra into a public/private partnership that would allow Labor to fulfil its broadband promises. Burgess not only canned that idea in no uncertain terms, but at the same event promised that Telstra would duplicate any broadband that's rolled out anywhere in the country.

Much of that broadband will come courtesy of OPEL, whose fibre-and-WiMAX solution Conroy spent much of his tenure in Opposition slamming vigorously. Just before the election, presumably believing Telstra would be on his side if he were elected, Conroy told ZDNet Australia that it would be "up to OPEL what they're going to do about the fibre network that will run by their door."

Having made it clear Labor's fibre network will compete with OPEL's, and now having been rebuffed by Telstra, Conroy faces a significant problem: he has the cash, but nowhere to spend it. Telstra doesn't want it, and has promised to duplicate any fibre Labor funds. Pouring the cash into OPEL, which seems a logical way to counteract Telstra's stated ambitions, would run contrary to Labor policy and stand as a backflip of immense proportions.

The way I see it, in braving the bear's claws -- and being pushed into a corner -- Conroy is being pushed in a completely unexpected direction: funding a third fibre-optic network, to be built in partnership with a yet-to-be-determined provider that could, if it's more willing to partner with the government, become the next Optus.

Fifteen years ago the government helped create Optus and pull it out from the weight of Telstra's shadow. Since it would be totally irresponsible for Conroy to hand over AU$4.7 billion of public money without retaining some measure of control over how it's spent -- as Telstra seems to expect -- he may just find himself repeating the past.

I'm guessing there are more than a few telcos in Australia that would be happy to get in bed with the government, given that kind of funding. Of course, Conroy's previous policy pronouncements would limit the field: surely, the promise of funding and favourable government conditions would convince many overseas telcos to partner with the Australian government, but after years spent criticising Optus's Singaporean ownership it would seem Conroy has closed that door.

This means that some time, probably not too far away, a domestic telco is going to get a very nice (late) Christmas present. And so should Australia: a three-way infrastructure competition -- between Telstra, OPEL and the yet-to-be-named carrier -- would have to push down prices and, more importantly, improve the quality of Australia's broadband.

Telstra will languish in self-imposed isolation while pouring capital into duplicating its competitors' infrastructure; OPEL will ignore Labor's indifference and get on with its rollout, and the new telco will have access to buckets of public money, and the support of its new partner the government, to build a new network Labor's way. Resellers of OPEL and the new telco's services will bask in healthy margins again, and the government will once again be in the telco business.

The only question that remains: what to call the new firm? BearTel? Conroy's Legacy? Oops?

Topics: Broadband, Government, Government AU, Networking, Telcos, Telstra, NBN, IT Employment

About

Australia’s first-world economy relies on first-rate IT and telecommunications innovation. David Braue, an award-winning IT journalist and former Macworld editor, covers its challenges, successes and lessons learned as it uses ICT to assert its leadership in the developing Asia-Pacific region – and strengthen its reputation on the world stage.

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7 comments
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  • Well written analysis, but...

    ... your hypotheses seem to be based on the assumption that the government won't just ignore the easy potshots it took while in opposition and take a pragmatic approach. When it comes to spending $5billion I'm sure Labor will swallow its pride and parter with whoever gives them the best result. Criticising the Singtel thing was an easy mark for an opposition shadow minister, but when it comes to making real decisions Labor will probably make many of the same decisions the Howard government did.

    And of course, Telstra must know it has no hope at all of getting the $4.6 billion of public funds without ceding any control of the project, so it's a bit puzzling why it supported the government's publicly-funded-network plan so enthusiastically before the election. On the surface it looks like Trujillo and Burgess might have just been keen to get rid of the government they had completely and thoroughly alienated, in the hope of getting an easier bullying target in the new government.
    anonymous
  • Telstra shareholders have most to lose..

    Well, if Telstra fails to gain the billions of Govt. money going begging, then the shareholder value will diminish.Why? Because as Telstra has stated, they will match any FTTN (or FTTH) roll-out and so have to duplicate the Network totally at the companies cost.

    And as Burgess has stated, Telstra is NOT interested in being a cut-price Telco, but a PREMIUM price one. Therefore one would suspect that customers would flock to the Govt. supported consortium. It does have a 'Govt.' brand as 'Telstra' has its brand.

    Where does that leave the value of Telstra? Given also, that they have 'value added' products that they push along with the purely ISP base.

    Better get the pension funds out - and invest in WA iron ore to China! :)
    anonymous
  • Erratum

    I believe there is a factual error here: the Author has assumed that the Howard

    administrations OPEL deal included a fibre rollout. OPEL was actually intended to be 'a mix'

    of products - but not including fibre :

    "The OPEL network will operate on a shared spectrum, and will employ a mix of technology,

    including ADSL2+, WiMAX, and wireless mesh networks in densely populated areas." (ARN, 29

    AUG http://www.arnnet.com.au/index.php/id;1601507379;fp;16;fpid;1)

    So when commenting upon a 'third fibre rollout' in the above story there is an error if that

    fibre is attributed to OPEL. The fixed line component of OPEL was for extending ADSL2+ -

    ostensibly in areas that were liberal edge seats and often areas with ADSL2+ already.

    I'd like to take an aside here and state I believe there is no difficulty with OPEL under

    Labor if all the money is spent purely on wimax, OPEL could be directed to 'not overbuild'

    certain existing networks and thus the uneccessary cost of duplication is removed, and also

    competition with other Labor plans.

    This way the benefit to consumers is increased as the new Labor govt wont be spending twice

    on the same connection, making the best use of funds available.

    In this scenario the focus of the OPEL deal returns where it ought - those who do not have

    any services and who will be uneconomic for adsl/fibre rollout plans.

    Thus there is no NEED for Labors fibre to compete with OPEL's network, if OPEL becomes

    strictly a wimax play, they have or should continue to have the mandate to fill in blackspot

    areas - strictly NOT fibre rollout areas.

    So i suggest we should discard that scenario, and forget about what OPEL will do about that

    'fibre by the door' - because that outcome shouldnt be happening, and if it did it would

    again make a mockery of Conroys posturing before the election (servicing areas again that

    are already served instead of actually increasng the footprint of access to those currently

    without).

    Labor also does not have to be concerned about a backflip by tossing more money into the

    Opel pit; that shouldnt happen either.

    It would be completely unnecessary: instead of <i>spending</i> out of their own pocket all

    that needs to be done is <i>limiting</i> OPEL expenditure to Wimax gear only.

    That would essentially be a 'free' way of obtaining the same effect - more bang for their

    buck, *and* where it is needed, without wasting part of that near billion on services

    already extant or earmarked for upgrade anyway.

    However I do agree on this: in rebuffing the idea of a $4.7bn partnership, Telstra have left

    Labor with a hot pocket of cash. This may not have been a bright move.

    Labor can certainly opt for an alternative - not third- fibre push. And indeed they appear

    to be already positioning themselves to make sure that particular duplication outcome doesnt

    happen (again, a la the Cable rollout) anyway: "...that there will be a public tender for

    the money and the right to build the <i>only</i> network"

    (http://www.businessspectator.com.au/bs.nsf/Article/Broadband-Just-do-it-9M268?OpenDocument)

    .

    The G9 proposal is certainly amenable to PPP arrangements; there is no need for Labor to

    compete with that proposal. The same is the case for the rumored Deutsche Telekom interest -

    they are also willing to use a PPP vehicle - no contest there also.

    Telstra really are the only entity any fibre rollout could conceivably be competing against.

    There would be little reason for Labor to build a third pipe if just about every other

    non-Telstra was (and is) happy to take their money, in return for commensurate interest or

    return.

    You could even leave Telstra on their copper and build around them completely with a PPP

    FTTH proposal - a fitting end to a company who - despite all the pre-election noises - is

    just as dour on working with Government as it ever was.

    As indicated already if you <i>really</i> wanted to put the boot in, you could then
    anonymous
  • Opel and Fibre

    Many good points although I would dispute the contention that Opel is solely about WiMAX -- WIMAX was seized upon by Labor as a target for political mockery, but the Opel plan also includes 4700 km of new fibre -- read about it on Optus' own page at http://www.optus.com.au/portal/site/aboutoptus/menuitem.cfa0247099a6f722d0b61a108c8ac7a0/?vgnextoid=e0282ad29cf63110VgnVCM10000029867c0aRCRD. Granted, this won't all be for a FTTN type deployment, but there is a significant fibre component to the rollout.

    Your suggestion re limiting OPEL to WiMAX is a great one, but I wonder whether it is practically enforceable? OPEL was given the government go-ahead based on its proposed architecture so attempts to arbitrarily limit that rollout, whether to avoid duplication or not, could potentially be troublesome. Of course it would be ideal, however, since it would allow the $4.7b to be spent on fibre where it's needed without overservicing areas where WiMAX will in fact provide adequate coverage.

    It will of course be fascinating to see how Conroy gets Labor out of this one while saving face and putting the boot into Telstra. Played correctly, all of this jockeying and investment could finally break Telstra's market stranglehold and create a robust bandwidth economy -- a great opportunity and one we all hope Labor won't squander.
    anonymous
  • Nice speculation but...

    Sorry, this is nice speculation, but I think the real point is not being discussed.
    Pre-election we heard all the talk, and now suddenly there is no walk. All this backtracking and changes of direction are obvious symptoms of ignorance followed by denial.

    Conroy is not the messiah. "Ubiquitous" FTTN will never be financially viable in Australia - anyone who has worked in the industry knows it, and has known it for 20 years. Comparisons with Singapore and Korea are grotesquely ignorant or deliberate lies aimed at manipulation via mass media. In a country this size Wireless is the only chance we have of high levels of coverage.
    anonymous
  • Ignorance? Denial? In politics?

    Surely not. Are you implying that the esteemed Senator just said he was going to fibre the whole country to get our votes? And he isn't going to be able to do anything useful about it now that he's in office?

    Perish the thought.

    :-)

    Much of this is indeed speculation -- if I instead wrote about what has actually happened, it would be an extremely short blog indeed.
    anonymous
  • On the other hand

    On the other hand Conroy could accept Telstra's proposal to get the job done at Telstra's expense.

    There are 1.5 million Telstra shareholders, most of them Australian voters.

    So the voters are happy; and the users are happy. What's not to like?

    Singtel+clones could duplicate if they wish at their own expense.

    Gift horses all over town.
    anonymous