Dear Telstra: pack up your toys, go home

Dear Telstra: pack up your toys, go home

Summary: Rejecting Telstra's proposal, after all, is the only conclusion Conroy can reach: as someone whose entire philosophy is built around transparency and process, he simply cannot keep Telstra as part of the NBN bidding process anymore.

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If you've ever played a board game with a young child, you've probably dealt with the internal struggles one faces in trying to establish a fair contest. Do you just let them win to boost their confidence; do you whip them outright to build their constitution; or, perhaps, do you agree to their requests for one-sided rule changes that favour their particular capabilities?

As Telstra's embarrassing half-response to the Federal government's NBN tender rockets through the media today, I couldn't help but think that the company's board has been spending a bit too much time playing Monopoly — the board game — with their grandchildren.

And not only have they been offering small perks like the pick-up-the-fines-when-you-land-on-Free-Parking or get-$500-when-you-land-on-Go rules, but they're likely relaxing hotel zoning laws and actively dipping into the bank to slip money into the lucky grandkids' hands. Is that a casino I see over on Ventnor Avenue?

Telstra has submitted not an NBN bid, but a proposal that basically flips Conroy the bird and promises Telstra will still come to the table

This sort of thing just doesn't fly in the real world — but the people behind Telstra's bid just don't seem to have gotten that particular memo.

After months spent unsuccessfully trying to wrangle special concessions from Senator Stephen Conroy, Telstra has submitted not an NBN bid, but a proposal that basically flips Conroy the bird and promises Telstra will still come to the table — later, and on its terms — if the government wants it to.

Incredibly, the terms of Telstra's proposal don't even vaguely resemble the requirements of the NBN RFP. Now, I know this issue will be dissected a hundred ways to Sunday before the week is over, but here are a few major points to contemplate:

Telstra is proposing to invest up to $5 billion in the new network. This gives a total network value of just $9.7 billion — about half the $20 billion at which Telstra executives priced the network at the company's annual general meeting last Friday.

This means either Telstra has decided to do its sums using the same number system as Terria and other analysts — who have repeatedly slammed Telstra's inflationary estimates — or that Telstra's proposal is more limited in scope than what it was previously suggesting.

Amazingly, the latter seems to be true. Telstra's proposal says that "up to 90 per cent of the population would be covered".

Even those with a casual interest in the bid know Conroy has explicitly required "high-speed, fibre-based broadband network, providing downlink speeds of at least 12 megabits per second to 98 per cent of Australian homes and businesses". It's right there on the NBN main page.

Which version have Telstra's executives been reading?

Telstra's underdone, useless proposal is ... an offer that, when Conroy gets tired of what Telstra feels are unequal rivals, he is welcome to crawl back to kiss McGauchie's proverbial

Telstra's proposal will deliver 25Mbps to 50Mbps to "65 percent to 75 percent of the footprint" and "between 12Mbps and 20 Mbps" to everyone else. The remaining 10 per cent of Australians get ... just what they have now.

For most, that will be the sad reality for some time, since Telstra seems to be cabling rural areas on an as-needs basis — witness its $5.5m investment in rural south-east Queensland, announced on the eve of the NBN deadline.

Telstra's proposal talks about "a $29.95 per month entry level 1Mbps retail broadband pricing plan" over its new network. Again, what proposal is Telstra reading? I thought it was pretty clear to everyone that 1Mbps services were to go the way of the dodo.

The NBN is about progress, not about spending billions of taxpayers money to get a service slower than what I can already get today from the likes of TPG, iiNet, and others.

Telstra wants the government's $4.7 billion provided as a concessional loan, not a straightforward contribution. Despite the clear desire of the government to have an equity stake in the NBN through its contribution — and, potentially, to get a return for taxpayers as the network takes off — Telstra wants it structured as a loan, of all things.

This, of course, is so Telstra can pay back the loan and eventually own 100% of Australia's next-generation broadband network. Does this sound like what you voted for?

Telstra's proposal is nonbinding — just a promise of what it might deliver if the government makes the concessions it has so far refused to. I don't recall this possibility ever being described in the tender documents. Telstra was supposed to submit its NBN bid, and it did not.

Telstra called a press meeting to announce its lodgement with 45 minutes' notice, and unfortunately I couldn't make it. But I was at Telstra's AGM last Friday, and I was somewhat amazed (albeit not too surprised) to see chairman Donald McGauchie continuing to rail against the government and call for regulatory guarantees that Conroy had explicitly ruled out just the day before.

Conroy may have his own shortcomings, but his refusal to cave in to Telstra's demands for preferential treatment are to be commended. By pushing its own party line right up to the deadline, Telstra has not only shown that its executives are simply not paying attention — but that they have managed to get themselves ruled out of the running for the NBN entirely.

Rejecting Telstra's proposal, after all, is the only conclusion Conroy can reach: as someone whose entire philosophy is built around transparency and process, he simply cannot keep Telstra as part of the NBN bidding process anymore.

they have managed to get themselves ruled out of the running for the NBN entirely

Its proposal falls short of the tender's requirements in so many areas that any other conclusion would be both a fatal lapse of prudence, and a slap in the face to the three (or more) other companies that duly submitted compliant bids in good faith.

I am reminded, suddenly, of the (quite funny, if you haven't seen it) movie Forgetting Sarah Marshall, in which the aforementioned Ms Marshall dumps our anti-hero protagonist, only to try to get back together with him — in a way that is far too risque` to describe in a PG-rated blog — when she comes to regret jettisoning him.

He is tempted for a second, but then realises that, even though it would have been inconceivable to him throughout most of the movie, he is better off without her.

When shareholders grill the management about its exclusion from the NBN at next year's AGM, Telstra will blame the government. But in truth, it has only its stubbornness (and, its bid suggests, inattention) to blame. Telstra's underdone, useless proposal is exactly the same as Ms Marshall's: an offer that, when Conroy gets tired of what Telstra feels are unequal rivals, he is welcome to crawl back to kiss McGauchie's proverbial.

After more than a decade of Telstra's utter contempt for Australia's broadband policies and technological future, and a proposal that reflects more of the same, one can only hope that Conroy is equally strong-willed.

Topics: Broadband, Government AU, Telcos, Telstra, NBN

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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Talkback

194 comments
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  • Telstra Non-Bid?

    So if Telstra has submitted a non-bid and someone else wins the contract and rolls out fibre to the nodes, will they have to pay Telstra for access to the last mile of copper? Can the government take away this asset from Telstra and pay them a nominal fee? Can Telstra bog down the whole rollout in the courts?
    anonymous
  • Telstra does not care for Australia one bit!

    Well written article. Exactly how are the Australian taxpayers expected to spend $5 billion for an entry broadband level plan that is available today. As an example I have a 24mbps service, with 25 gigabytes of downlaod for $60 a month at the moment. A 1mbps service is 12 times slower than requested in the proposal and 200mb of download is pathetic. This is Telstra at its spurious worst.

    Telstra shareholders should be replacing this management that has submitted a pathetic and incompetent bid designed in contempt of the tender and the Australian people.

    Shame on you telstra, shame. How do you sleep at night?
    anonymous
  • What about the shareholders

    The sad thing here is that Telstra value their shareholders above all else, but the bid they have submitted today is a waste of time and an insult to those shareholders.
    anonymous
  • Mission impossible.

    Calm down before you all demonstrate your irrational anti Telstra lunacy.

    Telstra presents facts and a plan that is realistic. Others presents dreams that will bring abject failure and disaster for the Australian taxpayer.

    To have any hope of success the Telstra opponents will need to confiscate Telstra equipment and customers. Please Senator Conroy be very careful.
    anonymous
  • Last mile copper

    Of course if anyone but Telstra wins the bid they will have to pay Telstra a lot of money to use Telstra copper. Especially if the competitors want to do a whole node cutover, it will be tied up in the courts for many years. Telstra is the only one with the money to build it
    anonymous
  • Telstra needs too..

    Just bog off their unrealistic pricing and download allowances is enough to be the brunt of all jokes.
    anonymous
  • look outside the square david

    david, as usual you show your lack of business acumen and typical blinkered IT outlook (pun intended).

    whilst most of us dislike the telstra approach, i must admit even only a few days ago i was wondering how they could get out of this. lo and behold, that's exactly what they have done and thrown down the gauntlet to the government.

    it may not be a palattable approach, but in business terms it is most forthright.

    here's what i wrote on another zd article.

    i must admit i haven't gone over the nbn bids with a fine toothed comb just yet, but on the surface, it appears as though telstra have out thought the government and their rivals.

    firstly, i have said for ages terria isn't serious and although it also seems to have largely been ignored or overlooked, terria per se don't appear to have bid. a bid went in by optus who put in two expressions of interest earlier. one expression alone and another with terria. seems the optus bid and not the terria bid has been submitted, with the rest of terria tagging along. in hindsight it would make sense as some wondered early on why the two expressions of interest from optus.

    but telstra, very shneaky, they are saying, ok you build the nbn in the remote outback and we will, if we wish, access as a wholesaler, your lovely new nbn in these areas.

    in the meantime we will *keep* rolling out our own networks in the more populated areas. and, by the way, it will be our network, which like adsl2, we will decide who, if when our competitors can access.

    perhaps the only possible counter is a fully government built network or the remaining bidders all teaming up?

    but legally, that may need a whole new bidding process.

    maybe in just doing a skim over, i have misread the sitation, so please correct me if im wrong.
    anonymous
  • @Mission impossible.

    "Telstra presents facts and a plan that is realistic. Others presents dreams that will bring abject failure and disaster for the Australian taxpayer."

    Realistic maybe, meeting the compliance of what the NBN required, no.

    The folly here is not whether Telstra is right or not with what can be delivered, it's their last minute 'this is the only way to do it listen to us' notion and their somewhat expectation that people will bow to their wishes and forget what the NBN was actually intended to do and deliver.

    This is the same thing that happened when OPEL won the bid, and like that time around Telstra won't win this bid. What they will do is fight tooth and nail to hinder whoever does win the bid.
    anonymous
  • Just a silly suggestion

    In my opinion, if Terria wins the bid, then Axia and Acacia should team up with Terria so that together they can gather up the money they need to provide broadband to 100 percent of the population (See Acacia's bid) using FTTH, FTTN, Wireless and Satellite.

    Meanwhile TransACT can provide up to 100Mbps to 98 percent of ACT and the Tasmania government can do the same for Tasmania. Sounds like a silly idea, but we could at least try.
    anonymous
  • Best for Consumers

    I hope to Dear God that tel$tra do not build the NBN

    I pray to the lord, that it is someone else, e.g. Optus and friends, and that they build a high quality NBN with a structurally, legally seperate entity operating a high speed Australia wide wholesale broadband network with access provided to all retailers on an equal basis.
    anonymous
  • Better Network

    To add to my previous comments,

    We should be aiming to build a network to rival the likes of South Korea

    Failing that, we should at a minimum, be aiming for a minimum speed of 100Mbps or more Fibre To The Home (FTTH) 100GB transfers per month, for less than $100 per month.

    1Mbps proposals are ridiculous, 1Gbps is more like it!

    It is actually quite feasible to provide 100Mbps services at affordable prices to households living in capital cities
    anonymous
  • Does not suprise me

    I have seen Telstra play this game many times before in other commercial RFP processors with enterprises. Show up with a half baked bid on the assumption that they are the best show in town and you can't tango without them.

    If nothing else, they just need to be treated like the petulant children they are and taught a lesson. I'd pay $5B for that. I really hope Conroy has the guts to see this through properly.
    anonymous
  • Real World, Not NWAT

    There is nothing irrational about it Sydney. Please spare us your NWAT rhetoric. Telstra did not present anything today, not a proposal for a world leading network, no idea's, but they did ask for a back room deal. The rest offered up the best possible solution for Australian Internet. Well done to TERRIA and Acacia, credit to you.
    anonymous
  • well said

    this article is pure tripe coming from zdnet that ignores all the core issues and turns a multibillion dollar project into a perceived schoolyard slinging of words.

    quality journalism
    quality

    zdnet drops further in rankings of decent IT reading
    anonymous
  • Hold on David

    "Telstra is proposing to invest up to $5 billion in the new network. This gives a total network value of just $9.7 billion — about half the $20 billion at which Telstra executives priced the network at the company's annual general meeting last Friday.

    This means either Telstra has decided to do its sums using the same number system as Terria and other analysts — who have repeatedly slammed Telstra's inflationary estimates — or that Telstra's proposal is more limited in scope than what it was previously suggesting."

    Hold on, I don't see the inconsistency in Telstra's position here. They said today that their proposal was more limited in scope. So David is it possible that "inflationary figures" as you call them ARE the figures for the full project as per the requirements of the tender i.e. the 98 per cent reach FTTN. Anyone could see that was going to blow-out. That estimate has been under-valued for years. Digging thousands of miles of fibre in the country???

    So what is wrong with what Telstra is saying today and how is it inconsistent?

    Anyway this tender has been so badly handled I find it astounding that Telstra has been criticised for an allegedly non-compliant bid.

    They're being asked to comply with an utterly flawed tender process. It's so woolly and its goals are obviously unreachable despite Opt-erria's claims.

    What the hell would any carrier do?

    Stupidly say that they can do it?

    You're commentary - and this is rare - is flawed.

    Sincerely,

    AJ
    anonymous
  • Conroy/Labor is ridiculous

    I find it a bit riduclous this whole tender process based on what the government is actually doing. Before the tender we debated on whether another entity can literally build on top of Telstra's property, this was a major obstacle. But with this 'tender' process we seem to have 'assumed' that the winner of the bid will have free reign to Telstra's property, based entirely on the fact that the government will throw in $4.7Bn. Now someone explain to me how throwing in half the cost will give winner of the tender the right to build on Telstra's infrastructure. This point and the issue of compensation has been mostly ignored, has Terria factored compensation costs into their $15Bn bill or are taxpayers going to have to fork up for that too down the road? They are going to offer so called 'competitive' pricing, but how competitive is it when it will costs taxpayers massive amounts to compensate Telstra.

    I dont consider any of the non-Telstra bids to be legitimate, hence I see Telstras rather smug letter as RFP to be an expression of this fact.
    Does a 900page proposal based on flimsy projections and business models make it any more credible? No. Telstra has implicitly stated that the government and all the other players should 'get real', if it wants a serious bid, it should go back to 2005 and see what Telstra has been proposing all along.

    You may not agree with Telstra's terms for the build, but at least it is based on fact, they are the only real player in this, and they have snub their noses as this government charade.
    anonymous
  • hellooooooo

    opel were a sham like terria, will you ever wake up?
    anonymous
  • David You're An Idiot.

    It shows you've not little expertise in Tier 1 carrier engineering.

    There is a simple point I would like to make. You cannot begin building a national network without a highly experienced workforce at hand, and a highly groomed and capable support organisational structure to make such a thing possible. Bidders such as Axia, Acaia, TranACT are building from literally nothing. The mind boggles how much time and money it would require jsut to even get to the design level let alone rollout. As with many geeks here, they are ignorant to the fact that just having money doesnt mean you can purchase the materials and start building, and that all you need are engineers and technicians.

    A large portion of the time and money would have already gone into establishing an organisation structure, workforce and procedure, and then some. Telstra on the other hand has its 60,000 or so employees, many of whom are experienced and an organisational structure and plan capable of carrying out an efficient build, with little upstart costs.

    I guess thats what David would consider 'Toys' in this game
    anonymous
  • internode

    here's what terria member internode strangely announced on the big bid day, today,

    "internode gets telstra ADSL2+ access".

    check it out

    http://apcmag.com/internode_inks_telstra_adsl2_wholesale_deal.htm

    http://www.zdnet.com.au/news/communications/soa/Internode-gets-Telstra-ADSL2-access/0,130061791,339293508,00.htm

    pretty much says it all about terria
    anonymous
  • Here'e the Solution:

    Introduce legislation to nationalise / takeover Telstra. Split it up, keep the main infrastructure in government hands, give the rest back to Telstra. Then run the show as per BT in the UK.
    anonymous