Election rant 3: coalition pride

How can we trust Labor with $43 billion to build the NBN, Liberal Leader Tony Abbott argues, when it's already proven beyond a doubt it can't do anything right? The Coalition can do broadband better, Abbott has said over and over in a bid to create and cash-in on voters' fears of big, nasty, inefficient government — and the lingering political damage caused by the insulation program and Building the Education Revolution.

Short memory: Abbott claims better credentials than Labor, but forgets the Coalition's last run at telecoms policy was dominated by a combative and unfettered Telstra under Sol Trujillo and others. (Credit: David Braue/ZDNet Australia)

Yet, assuming that Labor cannot do anything right is drawing a long bow; during its three years, Labor has successfully progressed dramatic transformations, of which Abbott does not speak, in areas such as education, healthcare and telecommunications. And for all his other faults, Stephen Conroy has held a firm hand on the tiller as he wrestled Telstra into submission and formulated a complex, expensive but forward-looking communications policy to fill the vacuum his subjugation of Telstra would create.

Yet behind the scaremongering and accusations lies a much different truth that Abbott is conveniently forgetting: the Coalition already had 11 years to formulate and execute better communications policy — and failed, time and time again.

It was, after all, Coalition policy that set up the current deregulated market, with all its shortcomings; the Coalition that floated Telstra at an unsustainably high price, then washed its hands when market forces savaged its value; the Coalition that failed to give the Australian Competition and Consumer Commission enough power to deliver real pro-consumer outcomes; the Coalition that allowed Telstra to leverage its market power, without fear of real retribution, for years. And it is now, under Abbott and Smith, the Coalition that will not subject Telstra to the one thing needed to level the playing field, once and for all: full separation.

That's a worrying premise for a party that needs to guide our telecommunications industry into the 21st century. The Coalition oversaw a decade of frustration and lost opportunities as internet service providers (ISPs) fought over and over again to stop Telstra from abusing its control of the local loop. Consumers saw quality compromised, prices high, and the availability of ADSL and ADSL2+ delayed for years at Telstra's whim. Seemingly arbitrary roll-out decisions left even inner-city residents unable to access decent broadband, or any broadband at all. And the bush? We have discussed this issue ad nauseum, but suffice it to say that the digital divide only grew larger during 11 years of the Howard Government.

It was Coalition policy that set up the current deregulated market, with all its shortcomings ... floated Telstra at an unsustainably high price ... failed to give the ACCC enough power ... and will not subject Telstra to full separation...

These problems have been long recognised and lamented across the telecommunications industry. Yet even today, the Coalition's prideful, revisionist dogma denies that it was ever an issue. Consider Andrew Robb's reaction when a journalist suggested that past Coalition policies meant that the private sector had failed to deliver what it could have: "the private sector has NOT failed", Robb interjected angrily. And then he changed the subject.

What few successes there have been, have been despite Coalition policy and not because of it. The industry had little help from a Coalition government that was fundamentally conflicted between its obligations to the industry and its obligations to the shareholders that bought its Telstra smokescreen all those years ago. This conflict left regulators powerless to resolve an ongoing, frustrating, very obvious ineffectiveness that left them as useful as gnats circling around an elephant.

Even when it was clear government intervention was the only way, the Coalition simply pulled its head into its shell and reiterated its faith in the private sector. It is only under David Thodey's Telstra that the company has had the decency to admit it was not playing fair all along; shareholders have savaged the company as its financial figures rapidly right themselves. However, if the Coalition had been more upfront and proactive about its regulatory controls from the start, this massive betrayal of the Australian public would never have been necessary.

Expect more of the same if Abbott is elected. Smith and Robb feel we'll all be fine without a separated Telstra, but the private sector isn't buying it. Telecom NZ director Rod McGeoch, for one, has slammed the Coalition's 12Mbps policy as "troubling" for future growth and blamed the current situation on past Coalition policy; the CBA and other banks have expressed a preference for a high-speed NBN; industry observers are unimpressed by Coalition policy; the Australian Information Industry Association (AIIA) has come out strongly in favour of Labor's model and called for bipartisan support; and the Competitive Carriers' Coalition (CCC), whose constituency includes the very carriers the Coalition expects to build the networks that it won't, has been a long-time supporter of both the NBN and the separation of Telstra.

Not even Telstra is anticipating a future without separation. By its own admission, Telstra has been in maintenance mode on its copper network for some time, shifting expansion dollars to other parts of its business and preparing to wind down the copper in anticipation of seemingly-inevitable separation. Thodey played his last copper-loop cards in negotiating a quite favourable arrangement with the Labor Government, and not even he sees it as a viable concern in the long term.

Ripping up Telstra's deal with the government may sound like a good idea to Abbott, but it will actually hurt Telstra's long-term prospects by forcing it to spend untold millions patching up its copper network while deferring other priority investments.

Indeed, the Coalition's determination to build our broadband future on that network is a mixed blessing for Telstra: slowing revenues and flagging investor fortunes are already squeezing Telstra's resources, which need to be focused on growth areas like wireless mobile and content. Ripping up Telstra's deal with the government may sound like a good idea to Abbott, but it will actually hurt Telstra's long-term prospects by forcing it to spend untold millions patching up its copper network while deferring other priority investments. The Coalition may have promised some funding to help in the worst areas, but who's willing to bet that it will be enough to single-handedly salvage the copper loop?

Long-term prospects

Vitriol, however, makes for far more interesting sound bites than reality. And that reality is that the Coalition still believes that the private sector can overcome an unchecked Telstra. Give them backhaul, Tony Smith argues, and the rest will fall into place, even though competing carriers will still be forced to go through Telstra to get access to customer premises over its struggling network. It's like 1997 all over again, only with more backhaul.

"We'll provide the backbone that will go to every corner of Australia, and if there is demand, the private operators will say there is demand, and we can meet that demand," Smith said while launching the policy last week.

Andrew Robb even took a moment from his unsavoury personal attack on NBN Co's architects to add further detail. "There will be billions spent on this, and the billions will be largely at risk to the telecommunications companies," he said. "If one or two of those telecommunications companies make the wrong punt and go for the wrong technology, they'll pay for it. It will be their risk."

That's an interesting way to inspire private-sector confidence: float a policy platform based on not resolving the one major issue the industry has flagged as necessary to resolve for the sector to work properly, then tell carriers it's their necks on the line if they can't make their investments work.

The Howard Government took a similar stance, and during his time innumerable established companies and telecoms start-ups that tried, but failed, to launch innovative services despite the technological and market constraints they faced. It's like giving your niece a checkers set that's missing half the black pieces: it's a nice gesture, but the game's not going to last very long before she realises something's very, very wrong.

That's an interesting way to inspire private-sector confidence: float a policy platform based on not resolving the one major issue the industry has flagged as necessary to resolve for the sector to work properly, then tell carriers it's their necks on the line if they can't make their investments work.

Defending his policy, Smith made the point that Telstra and Optus already have hybrid-fibre coaxial (HFC) networks passing 2.5 million homes; his push for private-sector investment seems based on the idea that these networks can be extended to bring high-speed data to more premises over time. There's just one problem: neither company has any intention of doing this; Telstra has not expressed interest in it and Optus recently flat out said that the Coalition's proposed plan wouldn't convince it to expand its HFC network. For Optus and so many other companies, inertia is just as good a policy as assuming the Coalition's risk.

Questioned about his reliance on Telstra and Optus, Smith was clear about where he thinks salvation lies. "There are lots of telecommunications companies," he said. "We're leaving [the decision about where 100Mbps goes] up to the market."

Well, the market has had that decision available to it for years, and 100Mbps is almost nowhere. Left in its current situation, the "lots of" telcos Smith refers to will find no better reason to roll out better services universally than they did during 11 years of Coalition-driven deregulation. The result will be a patchwork of services and occasional investment that neglects sparsely-populated areas and over-services densely-populated areas, all with the same underlying currents of frustration and impossibility that the last Coalition Government fostered.

A proud Tony Abbott says the Coalition can manage the NBN better than Labor, but what credentials does he have to back his claim? His broadband policy is little more than a return to the past, and the likely outcome from this policy is not greater private-sector investment. Rather, it will be three years of more of the same, in which ISPs defer difficult investments, focus on areas where they can actually turn a profit, and spend their spare time crossing off the days on their calendars until the next election.

This is part of a series of seven election rants, one for each deadly sin, aired each business day until the big day. Renai LeMay is writing a reply to each of the rants, playing devil's advocate.