Conroy faces a showdown at the FTTN corral

Conroy faces a showdown at the FTTN corral

Summary: Say what you will about Senator Stephen Conroy, but he is clearly not a man afraid of confrontation. Well, he'd better not be, because by killing off the OPEL WiMax project he has just set himself up for a battle with Telstra of Biblical proportions — or a big meal of crow washed down with a $4.7 billion gift to SingTel Optus.


Say what you will about Senator Stephen Conroy, but he is clearly not a man afraid of confrontation. Well, he'd better not be, because by killing off the OPEL WiMax project he has just set himself up for a battle with Telstra of Biblical proportions — or a big meal of crow washed down with a $4.7 billion gift to SingTel Optus.

It's a huge step backwards for Australian broadband, but the inevitable decision to axe regional Australia's first viable alternative to Telstra's decaying copper local loop came sooner — and with less guile — than I predicted a few weeks ago.

By claiming that OPEL hadn't met coverage objectives, Conroy was able to exit the politically unpalatable (for Labor) contract despite his earlier assertions it would remain. This dropped AU$1 billion into the laps of his party taskmasters, who will relish the money to fund its efforts to build Labor's support base by bribing schools with PCs.

We'll be well through two elections — and, at this rate, probably still lacking proper broadband — before everyone realises the $1 billion that could have created fixed-line competition was blown on hundreds of tonnes of eco-junk. Instead of teaching Australia to fish, to borrow a catchphrase, Labor is buying everyone flake and chips.

If I were a cynic — perish the thought — I would demand that Senator Conroy follow through on his oft-uttered support for transparency and publish the full report documenting evaluation of OPEL's plan, the results of the government's technical WiMax tests, the due diligence on the implications of a contract cancellation, and so on. Come to think of it, these documents will likely come out during discovery after SingTel and Futuris rightly sue the pants off the government. So much for saving money.

Senator Conroy will decide just how open he wants to be. For now, though, Australia's broadband policy is in limbo. As usual. Several months ago, I theorised that Conroy's anti-OPEL rhetoric, softened by the need for the government to honour the contract, would lead to the creation of a third, separate local loop network; Telstra, after all, had indicated it was not into partnering with the government, and OPEL was at that point going ahead so the only way Conroy would get an open fibre network would be to fund a third one.

Now that OPEL is out of the picture, Conroy is free to use his $4.7 billion to put fibre into the diet of regional Australians from Broome to Hobart. But this time around, there's a catch: he can either fund creation of a parallel network, which is highly unlikely, or he can put on his iron fists and get ready to hammer the bid's eventual winner into submission.

To promote competition, Conroy needs to frame the contract around provisions that Telstra has already publicly refused — things like open access, competitive pricing for access services, a method for faster dispute arbitration, and performance targets that will ensure the winner can no longer use stalling tactics to bury competitors in procedural molasses.

Count on Telstra to put forward a strong proposal; its directors are practically salivating at the thought of fibre-ising their network in a government-subsidised project that will clinch Telstra's fixed-line monopoly and boost shareholder dividends.

If the bid comes out on top, Conroy's in for a tough fight. His handling of that fight will be his legacy — or his downfall.

Why a fight? Because, there is no way Telstra will just roll over and suddenly play nice. Remember the experience of Comindico, the nationwide wholesale network operator that won rabid support from ISPs but eventually imploded after years that executive chairman John Brennan characterised as "a period of constant disputes with Telstra".

Telstra has maintained its market strength by using its unparalleled size to fight wars of attrition against one would-be competitor after another. That's why Conroy will need to manage the FTTN contract with an iron fist and not be afraid to come down on Telstra like the proverbial tonne of bricks. Predicating the FTTN contract on anything less than full and open access would make a mockery of competition law and be a shameful abdication of Conroy's responsibilities to the Australian public. Conroy could mandate the functional separation of Telstra, as I suggested last week.

Funding an independent infrastructure arm of Telstra, and even giving it the FTTN contract, would solve many problems for everybody — but Telstra would almost certainly tie up any such change in massive lawsuits that would suck millions of dollars out of the public coffers whose protection Telstra claimed to want.

The other choice? Conroy could do the logical thing and give the whole swag to Optus. Well, not directly; his panel obviously has to complete his transparent evaluation process, and given his anti-Coalition rhetoric he can't afford to be anything less than procedurally robust.

Barring an epiphany from Telstra's management, however — and barring sudden interest from overseas players like Verizon or BT — Optus seems to be the heir apparent for the FTTN contract as it's likely to be the only large bidder willing to conform to conditions of openness. OPEL was, after all, going to be a wholesale operation so I don't see why Optus would object.

Crunch time is coming to both sides of this debate. Conroy must decide how committed he is to changing the status quo, and Telstra must decide just how badly it wants to maintain it. Will Telstra take the $4.7 billion in exchange for actually providing a fair and competitive access to the market? Will it opt out of the bidding process altogether, sticking with its guns and charting its own destiny? Will Conroy trump Telstra by imposing the functional separation that should have been implemented a decade ago?

OPEL would have avoided all of this by giving Senator Conroy an 'out' — a second local loop that would either have brought broadband to new corners of Australia, or given him anti-Coalition ammunition had it failed. Heck, rural Australians have gotten so used to waiting for broadband that a few years more aren't going to hurt, right?

In the meantime, cook up some popcorn, put up your feet, and watch the carnage. Conroy has made it clear he's the new sheriff in town — so this mess is his to clean up.

Topics: Government, Broadband, Government AU, Telcos, Optus, Telstra, IT Employment


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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  • You call yourself a journalist?

    This is an appalling ,biased and innaccurate diatribe...

    1. On what basis do you claim the fed's coverage claims are wrong as you assert.

    2. Why is providing disadvantaged school students with essential technology a bribe?

    3. You appear to be a legal expert, claiming Optus/Futuris have some cause to sue and that they will

    4. Your fish/flake and chips analogy is meaningless and prententious

    5. Who said Telsta will be gifted $4bn to fibreise their network. You have made little reference to the expert panel commissioned to produce a strategy paper with broad reaching terms of reference including competition policy.

    6 Opel was a piecemeal approach to broadband policy, It was concocted in a hurry with inadequate consultation. It is questionable whether even if it did work, whether it would have provided substantial competition due to its limited coverage.

    Next time, get some facts, stay independent and provide some balanced insight.
  • Codswollop

    I agree with the previous writer. What a load of bollocks. it's hard to know where to start. Most importantly, the tender Opel won was never meant to subsidise competition to Telstra, it was set up to expand broadband coverage in regions. Something Opel clearly failed to do. Telstra has maintained its market strength by serving its customers well in a competitive market. The company has always promised its FTTN proposal would be an open access network open to competitors. How you can someone writing such uninformed biased nonsense call themselves a journalist?
  • Simplex Braue

    The previous writer hit the nail on the head. The Broadband connect tender, subsequently awarded to opel, was to address broadband blackspots in rural and remote australia. The howard government for political purposes decided to change tack and grant $958M to Opel to overbuild in areas where Telstra was already providing DSL and overbuilding a wireless network where Telstra had already built a 3G wireless broadband network. Good luck with your claim to give the FTTN project to optus given in 9 months they couldnt build a single service through Opel. I'm not sure how you think they could complete the FTTN project, a quantam leap in scale and complexity.
  • The Australian Telecommunications Scene

    Why do Australians, especially rural Australians, have to put up with Telstra. Most of us loathe the company, how it is run and its reason for being,yet we're shackled to it like a ball and chain.Let's hope that the Labor government has the moral fortitude to facilitate a sea change in telecommunications by creating some much needed genuine competition in the industry.
  • good article

    I wonder how many of the commenters here are actually doing their net browsing on an ADSL or cable net connection....I wonder how many actually use Telstra 3G as a home fixed net connection..I bet none at all...They are probably Telstra shareholders more concerned about their shares than the wealth and future of the country...

    Apparently it is OK to give laptops to students who already have schools full of PC's yet rural and regional school children are not even allowed to have broadband to use for their education... Once again the bush is treated as being full of peasants worthy of nothing...Where is conroys transparency now..

    .How was his department able to say Opel was not going to cover 900 000 houses when ACMA and the University of Melbourne had approved Opel's figures...I is pretty obvious conroy's department is full of employees that need to see an optometrist.
  • good article

    Yes, very good article.

    Conroy had a once in a lifetime opportunity to provide real competition to Telstra in rural areas, and blew it.

    It will now be years before rural consumers get adequate broadband.

    Conroy has clearly ruled out structural separation of Telstra, which means that if Telstra gets the FTTx contract (as increasingly seems likely) they can continue to obstruct competitors at every opportunity, as well as price gouge the consumers: this time backed up with billions of government money.

    What a mess.
  • Don't let negative comments put you off

    Why exactly does a blog need to be independent or balanced? David's post is an opinion piece and I, along with many non-Telstra groupies I'm sure, actually concur with many of his views.

    Yes you may disagree with David, which is fine and it's great ZDnet allow you to post these comments, but I'm sorry I think it's wrong for you to criticise his ability to be a journalist simply because his views clearly do not match your own.

    1. On what basis do you claim Opel's coverage claims did not in fact meet the contractual requirements?

    2. What is the point in providing disadvantaged school students with essential technology if they have nothing to connect the hardware too (i.e the Internet)?

    3. I've read a number of articles which indicate Opel will be exploring all avenues, including legal ones and quite frankly I couldn't blame them for seeking compensation from the government given how long ago the contract was awarded.

    4. I believe his analogy relates to the fact that the current government is quite firmly set on a technology which by the time it ever gets rolled out may effectively be redundant. I don't know about you, but I don't want to have to wait 5 years to get speeds slower than what many are already receiving today and on top of that paying more for it!

    5. Telstra made many references to the $1 billion Opel "gift". I don't see this tender being any different, besides being substantially more money which Telstra will be even more keen to get its hands on.

    6. So you're saying Broadband Connect was concocted in a hurry, yet have no comments about the speed of the latest tender process which is awarding nearly 5 times the amount won by Opel?

    Good blog David. Pay no attention to this Telstra funded rubbish and continue posting your thoughts.
  • tender documents

    The FTTN tender documents are very disappointing in that they do not require structural seperation of wholesale activites. Unfortunately, it looks incrasingly like a done deal for Telstra.
  • More lame excuses for lame duck OPEL. Wake up!

    Blogs obviously don't need to be impartial, of which David Braue is living proof. However there would be some out there who believe there is a needed level of journalistic integrity, in regards to impartiality, which some journalists uphold and some, again like David Braue do not. Typically, when ever the question of impartiality is raised the usual excuse of, this is only a blog, is the simple reply. How convenient. Thing is, some will read this trash and believe it 100% factual! So perhaps a disclaimer that this is a fictional, personal view, rather than a factual piece, should be provided. But since when have the Hel$tra haters ever worried about facts? In fact some curiously contradict themselves, by advocating one set of competitive rules for Telstra and another set of rules for others?

    So to answer your naive and somewhat mundane questions!

    1. A. Proof they didnt comply is that the duly elected Government (sans a pending election) have now canned the flawed and meaningless OPEL! The Gov. would not have done so, without due consideration.

    2. A. Something which the new FTTN network, hopefully ably built by Telstra will remedy. As surely this Government wont fall for the same 2 card trick, by giving these OPELesque type clowns another go!

    3. A. OPEL arent doing a Telstra are they, by launching a vexatious legal challenge? But seriously, it is every citizens and companys right to do so. Therefore OPEL are entitled, as are Telstra, if they feel they are wrongfully treated. Your comment #3 advocates my above point that people like you; strangely believe there should be one set of rules for Telstra and another set for the rest.

    4. A. Telstras NextG was ahead of schedule. The recent ADSL2+ enabling likewise. OPEL? However, unfortunately, being superseded is part of technology, be FTTN Telstra built or otherwise. But what you are therefore admitting is, had bleeding hearts like you not whined about Telstra building FTTN some 3 years ago, we would now have it and it would be current. So thanks a lot!

    5. A. Telstra initially not only offered to build but also fully fund FTTN! But agreed the new tender includes a handout, to whoever wins! A handout which is required a) because the previous government and ACCC, did not give Telstra the go ahead to build it using their own funds 3 years ago. Then b) the OPEL bungling. So the new Gov now has to do something to patch up the ****up. But I believe Mr. Samuels contract is up in June, so read between the lines! Q. If the government do again fall for the 2 card trick and award the tender to the G9, will you then do yet another about face and claim it not to be a handout?

    6. A. Yet another contradiction from you. You say by the time it is built it will be superseded but complain that its being organized too quickly? Once again, Telstra offered to build it 3 years ago. But no! So all up it will be 4 years + in the planning and probably another 5 on top, for construction. Compare this to the slapped together pre-election OPEL fiasco? Dont think so!

    As for negative comments, if the boot fits! David, typical amateurish, sensationalist journalism (oh sorry, blog)! Please either go over to APC and sit alongside another of your brethren and do some back slapping, or wander over to ZDNets Suzanne Tindal and ask her for some pointers on actual journalism. As the efforts I have seen from Suzanne, have been most commendably impartial, blog or otherwise!
  • Just Compensation

    The only problem with gifting Optus the FTTN is it also involves gifting to Optus Telstra's network, a network that I as a shareholder paid good money for. As a result it's fine to do this but it will cost the Governement 30 to 40 billion in compensation.

    James Bell, It's funny how hear you defend the rights of an anti Telstra Blog yet elsewhere describe a pro Telstra Blog as "mythical as an Enid Blyton children’s novel". What vested intrest do you have?
  • Oh dear lord

    SJT, Please at least come back with some semi-decent arguments.

    1. Conroy's decision to terminate the Opel contract would be a lot more credible if he'd actually release the details behind the decision and allow independent analysis as Opel have requested. It has also been reported by Opel that since they submitted the business plan in early January, they had very little correspondence from the department. If the department had any concerns with the plan and actually wanted the network to proceed then I'd imagine such correspondence would have taken place to address any of the concerns.

    2. You seem to have missed the point of this argument. The FTTN (as this is likely what the solution is going to be) is not going to provide the same sort of coverage as Opel, period. How do I know? Well a basic understanding of capital that would be required to match the coverage is one for starters, and even then those who are lucky enough to be in a covered area are then likely to face the problem of affordability.

    3. There is a difference between one corporation that has a legal budget over double that of any other company in this country, to another seeking compensation for being "wrongfully treated" as you put it. In addition to this Telstra has already been caught out using the court as a means to slow down a process through compulsory acquired documents in a recent court case.

    4. NextG was rolled out using existing CDMA backhaul and base station sites. The entire network was built and maintained with the assistance of government aid. I don't care who wins the FTTN as long as broadband remains affordable and the regulatory conditions allow competition to flourish. The reason I like many am not super enthusiastic about the winner being Telstra is simply due to their previous track record.

    6. Call it a contradiction if you like, but I was not the one questioning the timeframes, PistolPete was. If you really want to get to the nitty gritty of it all I'm sure you know that what Telstra offered was not acceptable. First they requested the government to give it $4.7billion to fund the FTTN, then they wanted to create the FTTN with their own capital, but with a series of conditions you have conveniently neglected to mention. Building the FTTN would have been fine and dandy had Telstra not wanted to build it over the declared PSTN, while also being granted a regulatory holiday and blocking competitor access.

    SJT if you are so against David’s blogs which you clearly are then I suggest you simply don’t read them and go to NWAT where I’m sure you’ll be much happier with its fair and balanced journalism.
  • My Vested Interest


    I don't have a problem with people posting their views anywhere and even pointing out when others are categorically wrong; hence you have found comments of mine on another forum built upon spreading its point of view. What I am against however are people personally attacking David's ability as a journalist simply because his point of view does not match theirs.

    My vested interest is having affordable broadband in this country (i.e. pro competiton); which by defaut supposedly makes me "anti Telstra"
  • Even the Lord won't save you I'm afraid

    Ooh I didn't hit a nerve did I?

    Au contraire` I'm not against David's blogs at all. I find both his and particularly your contradictory comments most comical! Please keep 'em coming.

    Oh and I'm most sure you'd love people like me to actually go so that you and David can simply continue your ridiculous anti-telstra crusade, unfettered. But alas I'm not going anywehere. I will continue to disprove your unsubstantiated rhetoric, simply because it is fun and so easy to do so!

    Oh dear Lord, I only wish it was this easy to reel them in when I go fishing - lol!

    Cya next time!
  • I'm begining to realise that

    Pro Competition & Anti Telstra go hand in hand my friend. If typing rubish to get a response is what you call reeling them in then good for you. Keep up what you're good at ;)
  • Optus buildout

    Thanks for taking the time to comment Anonymous and Anonymous, but this is a simplistic claim that is easy to make and easier to refute.

    Optus, like Telstra, has already successfully managed an extensive fibre rollout that is delivering pay TV, telephony and high-speed broadband via an HFC network that passes several million households. Optus also owns UeComm, one of Australia's largest (previously) independent operators of fibre networks, and has extensive experience rolling out fibre-optic backhaul to support both its HFC network and its own data infrastructure. Optus has built a robust infrastructure to compete with Telstra's, and has access to the technical and financial resources of a multinational telco with operations in a large number of countries. So to say it can't handle an FttN rollout is probably a bit rich.

    Regarding Opel, these things don't happen overnight and I find it ironic that the same people who are happy to criticise Opel for not having brought WiMAX to their doorsteps within a few months -- in an election year in which the program had clearly been put in the firing line, no less -- are happy to wait five years or more for an eventual FttN network that will never service the areas WiMAX would have. I am not against FttN in any way but WiMAX would have been a big improvement for millions of Australians who have once again been shafted by political grandstanding. Dogmatic adherence to party platforms (whether Telstra's or Labor's) may be great for fueling debates but it's hardly the way to deliver actual working broadband.
  • 6 questions, 6 answers

    My goodness -- I went away for the weekend and come back to find out you have all been very busy commenting! Good on you all, keep it up.

    Mr Pistol, if I may respond one at a time:

    1) Labor's opposition to Opel is long-standing and I would argue that a government department headed by an avowed opponent of the rollout, with a vested interested in terminating the contract, is hardly the place for anything Opel-related to get a fair assessment. Optus is not a market newcomer and if it said the network would cover 90% of regions it must have had a reason to believe so. An independent assessment by an independent body would have been more appropriate but I don't think Conroy wanted to hear Opel was sufficient. Furthermore, if the government was actually considering honouring Opel it would have gone back to them and said 'we've found your coverage plan falls short, fix it and come back to us so we can talk about it'. But the proposal was doomed from the start.

    2) It is a bribe because it was a key platform of Labor's election yet it is a hopelessly useless endeavour. What is the point of giving disadvantaged schools computers but telling them they need to come up with technical staff and loads of money to install the systems, network them together, and keep them running. The schools aren't even getting funding to build the physical space to house all these computers or the money to pay for electricity to keep them running. And that's just to get the gear into the schools; why spend $1b on hardware but allocate nothing to helping teachers integrate that hardware into their curriculum? And why does it have to be 1 computer per student anyways -- are students somehow unable to share computers like they do at every university and other school in the country? Couldn't Labor have set a ratio of 1:2 thereby halving its costs and allocating the rest of the money to these many complementary areas? And what will the government do in 3 years when these mid-specced PCs reach the end of their useful life? None of these issues have been addressed and this is why the purchase was a bribe.

    3) I am not a legal expert but it doesn't take a legal expert to understand why they should be able to sue. The government signed a contract with them and they invested millions based on the certainty provided in that contract. The government then unilaterally terminated that contract without giving Optus and Futuris even a basic right of reply. Both companies would have incorporated the projected revenues from the contract into their forward-looking financial statements and projections, which all must now be revised to reflect the loss of capital investment and future revenues. In such a dispute, particularly one involving such a major investment, can't we expect that legal action is imminent? Heck, Telstra sued the government over sour grapes and the government didn't even have any contractual obligation to it.

    4) My reference to this common saying is an allusion to the points I made in #2 above; the government can score cheap political points by gifting $1b worth of computers to schools ("give a man a fish and you feed him for a day") but is doing nothing to support that gift in the long term ("but teach him to fish and you feed him for a lifetime")

    5) I'm presuming you meant to say "Who said Optus will be gifted $4bn..." This is the result of my connecting the dots. Telstra won't quality for the government funding if it sticks to its long-held line, which clearly says "if we build it we won't be forced to let anyone else use it". Telstra's repeated refusal to enter into equity partnerships with the government implies that it will continue to reject efforts by the government to control access to the network.

    That's Telstra's prerogative but it is contrary to the government's stated 'open access' policy and is hardly conducive to creating a competition-friendly fibre infrastructure. Unless Telstra publicly changes its strategy and embraces openness to w
  • continued

    That's Telstra's prerogative but it is contrary to the government's stated 'open access' policy and is hardly conducive to creating a competition-friendly fibre infrastructure. Unless Telstra publicly changes its strategy and embraces openness to win the FttN contract -- in which case, I say, fantastic! -- the only organisation that could conscionably be given the contract is Optus and the rest of the G9, which have both the resources and incentive to implement the FttN (this presumes no overseas company jumps into the fray, which at this point is sheer speculation but would be quite interesting). Or do you think Telstra should be given free rein to build the FttN *and* continue its long-standing efforts to keep competitors off the network at commercially viable terms? I hardly think even the most loaded industry panel could agree to such terms.

    6) FttN will work beautifully in metropolitan areas but fibre to the bush is a looming disaster that will fall far short of expectations because of the aging state of Telstra's dismal rural copper networks and the sheer distances involved in many areas. Telstra is promoting Next G over its fixed line infrastructure in rural areas because it's easier to roll out services to distant properties when you don't have to worry about fixed infrastructure getting in the way. So why is WiMAX, which is a wireless technology just like Next G and is being used successfully in many places around the world, such an inherently bad option? And, re the issue of coverage, I might remind everyone that even Next G's coverage has had to be tweaked repeatedly. Why is it OK for Telstra to have this luxury but to deny it to Opel?

    I hope this answers your questions. Great to see such interest in the blog and I hope everyone will keep their opinions flowing! Discussion is what this site is all about.
  • Tell me about confrontation

    During a Public Meeting in Roseworthy last year instead of answering my questions about the FTTN proposal he gave the answer to the question he wanted me to ask. When I didn't accept the answer he instead tried to shout and then stare me down to which I responded that I couldn't be bothered discussing with him. Another Labor minister then suggested that perhaps we move on as I think she realised it was going pear shaped for them
  • I will comment on the forst point otherwise my response will be even longer then

    The Labor government was against the peace meal approach by the former government and not against Opel, the solution they offered and won the tender with was based on information that was only made available to Opel and not all parties applying for the funds. It is funny how no one attacked the back room deals that occurred then but are happy to accuse Telstra of making back room deals now.

    There is a comment about lack of response form the government to Opel, sounds a bit like what happened to Telstra before it was offered by not advising them of the increased fiunding from $650M to $958M.

    Covering 90% of areas was not what the original funding was based on, it was more like 96% and since then even companies who have rolled out the proposed technology have indicated it would be lucky to even deliver 90%. Telstra gets slammed for using the word everywhere in an advertisement seen by a few hundred thousand people when they could "only" deliver 99%, delivering 90% when we are talking about close to a billion taxpayer dollars when even the old GSM mobile networks cover 96% can not be considered close enough.

    The delivery of the funds was based on a contract that required Opel to provide more then just a few cute pictures a 3 year old could have drawn, if they were serious they would have at least created a web site and placed some more detail on it to show what they were doing. They didn't even invest in their own offices, PR staff, marketing or sales force. All they did was piggy back 2 media releases onto the Optus web site.

    ZDNet is a news site and blogs should reflect both sides of the story. All they will publish on this site is blogs written by people that openly admit they hate Telstra and paid reporters that are not permitted to admit it but by reading enough of their stories it is clear that they are. Even Today Tonight and other tabloid publications will show both sides of most stories.

    You should change your blog to be called Half Duplex as you never look both ways and you never seriously consider comments that disagree with your spin and dribble.
  • IF

    If Telstra is so bad and so expensive why can't some other company walk in, invest their own money and deliver a better and cheaper service.

    Simple answer is that you are not profitable enough, why would these companies move out of their cash cow suburbs to subsidise and service the rural areas.

    Wake up to the fact that unless the government allows multiple tiers of pricing so the CBD has $1 services, metro has $1.20 service and the bush has $1.50 service then nobody will invest as there is no profit.

    Wasn't it Optus that won the Universal Service Obligation from Telstra a few years ago and was awarded something like $200M to service the bush but when they realised the true cost they walked away and handed it back to Telstra?

    The Telecommunications scene is not flowing fields full of daises, it is the real world and the real world is not a nice place.