Telstra fibre talks break down

The network was initially proposed in November last year, however its construction was put on hold in December due to Telstra's concerns about unfavourable regulatory conditions that it said would not allow costs to be recouped.

Since that time Telstra has been discussing with the Australian Competition and Consumer Commission (ACCC) the terms under which the network would be built, and access provided to rivals like Optus.

But Telstra group managing director, Public Policy & Communications, Phil Burgess, told a media teleconference today that those talks were now over, following several recent phone calls between himself and ACCC chairman Graham Samuel.

"When we were talking together this morning, the chairman and I agreed that we have reached an impasse in our FTTN (fibre to the node) deliberations," Burgess said.

Burgess said agreement had been reached on a number of fronts, but ultimately the two parties disagreed on the cost of providing services to some difficult rural and suburban areas.

Telstra believes wholesale pricing chains would stop it from subsidising rural areas with city profits, meaning the cost of the network investment would not be recouped.

"The bottom line is that the ACCC can't keep cutting wholesale prices in cities, where the surplus comes from to pay for the bush, and expect Telstra to continue to fund the bush," Burgess said.

As a result Telstra will not submit an application (known as an undertaking) to the ACCC to build the network.

Ultimately Burgess blamed the government for what he saw as "clashing world views on the issue of cost".

"So when all's said and done, the problem you see is really not between Telstra and the ACCC. It's a conflict within the government, between the policy making arms (the ministries and parliament) and the regulatory arms, (the ACCC).

"The government needs to get its own policy house in order before there will be progress for all Australia on the FTTN talks," said Burgess.

While Telstra will not accede to the ACCC's public request to publish a draft of its FTTN proposal for discussion and comment, Burgess said "a detailed technical overview" of the telco's now-defunct plans would be available on its Now we are talking Web site this afternoon.

Burgess declined to comment on any backup plan that Telstra may have to expand broadband services to more Australians, although it has been reported that such a plan would include an expansion of its existing hybrid fibre cable (HFC) network.

With respect to the talks themselves, Burgess said they were congenial.

"The discussions we had with them were affable, professional, involved a lot of hard work, and I think both sides gave it a shot," he said.

G9 are welcome to it
Burgess also commented on a rival fibre proposal recently put forward by a group of its rivals led by Optus and known as the G9.

Last month the G9 said they would build their own FTTN network if Telstra abandoned its plans.

"I think if the G9 can do this at a lower cost, they ought to do it," said Burgess. "And you know, if they succeed in doing it, we'll be first in line to be access seekers."

But he said Telstra would not participate in funding or building the network.

"Sol Trujillo has made clear, and I agree with him, if you look around the world it's hard to find examples of successful consortiums of this kind.

"I think it's better if one company takes the risk, makes the investment, builds it out, manages it, tries to serve their customers as best they can," added Burgess.