Telstra's last-mile strategy: Broadband limbo

Telstra's last-mile strategy: Broadband limbo

Summary: Should Telstra be investing in a pre-emptive defence against the NBN? Or should it go slow and wait like everybody else?

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Let's say a competitor of yours was planning a major new initiative, and you had a few years to get ready before the battle began. You'd probably start bolstering your defences, strengthening your products and working hard to secure customers so you'd have the best defence against whatever new product they were bringing to market.

Anti-tank Russian cannon(ISU-122 image by Andrzej Skwarczynski, royalty free)

As the announcement of the Tasmanian start date pushes the NBN on its slow, ponderous way towards reality, however, Telstra is investing not in bolstering its existing solutions — but, rather, is easing into an extended waiting period.

At least, that's how it sounded when I sat down with several Telstra executives this week amidst proclamations that the company's robust Next IP backbone is 90 per cent complete and that they're planning big things for their hybrid fibre-coaxial (HFC) network later this year.

Telstra's push to revive its HFC network has been seen as a natural outcome of the NBN's announcement: the company needs a comparable network, everybody says, and existing copper and HFC services won't cut it.

Just don't tell Telstra that; as Michael Lawrey, managing director of Telstra Network Services, pointed out in his PowerPoint presentation: "80 per cent of the Australian population are able to get broadband access at up to 20Mbps using either HFC or ADSL2+".

In other words, you're all set for broadband for now, right? Yeah, right. Asked about this seemingly optimistic statement, Telstra chief technology officer Hugh Bradlow offered a cryptic answer: "Blame our competitors," he said. "We aren't the ones out in the market saying 20Mbps. [Slower speeds] are a simple law of physics."

Hold on: this was said just after Lawrey put up a slide claiming that it was providing speeds of up to 20Mbps to 80 per cent of the Australian population. But Telstra isn't "saying 20Mbps"? Huh?

I don't think I'd be going out on a limb to say that most Australians are getting far less than 20Mbps from their ADSL2+ services, and many still have no broadband access at all. HFC provides more headroom — witness Telstra's plans to upgrade it to 100Mbps in Melbourne before year's end — but that doesn't mean either solution will be relevant to you in the near future.

Given the gap between theory and reality, Lawrey's comments sound ominously like George W Bush's infamous "mission accomplished" back in 2003. Here, the words "up to" are Telstra's hedge against the reality of Australian broadband: even my 2.5Mbps ADSL2+ service would be classified as "up to" 20Mbps, in its parlance.

Telstra's go-slow strategy
Given that the NBN will eventually enable a range of alternative, cost-competitive broadband 100Mbps services, you'd think Telstra would be working hard to capitalise on its HFC network to reach places where ADSL2+ is still slow and substandard.

Short HFC spurs would be an ideal pre-emptive strike against the NBN's promised 100Mbps services — especially for customers stranded in broadband blackspots, potentially winning long-time customers who will be less eager to jump to NBN-driven services down the road since they'd already have their 100Mbps services. Just imagine the marketing: "The NBN promises you 100Mbps in one to eight years, but we can deliver it to you tomorrow."

Asked whether this was actually going to happen, however, Lawrey got cagey. "We're really waiting to see how the [NBN] environment unfolds before we make those sorts of decisions," he explained.

"So we're all in limbo for now?" I asked. His response: "Yeah."

Unless Telstra's HFC already passes your house, and you live in Melbourne, Telstra won't be upgrading the connection to your home any time soon.

Just to recap, Telstra claims its 80 per cent of its customers are getting robust broadband, but they're not. Telstra has no plans to improve its copper or HFC networks to reach the other 20 per cent, nor will it invest in its networks to ensure customers actually get the speeds they're paying for. Faced with the immense challenge and change the NBN represents, Telstra's new last-mile strategy is simply to sit on its hands.

You can look at this in two ways: one, the NBN threat is still far off and Telstra wants to see how it shapes up before investing capital in its end-user network. Or — and this seems more likely all the time — Telstra is leaving its network investment in limbo simply because it plans to be a major buyer of the NBN's wholesale services as they are released.

This makes cold, hard business sense: why invest to expand the HFC network when there's a ready-made infrastructure you can access at the same prices as your competitors? Well, there isn't one yet, but there will be. In the meantime, Telstra will let its copper network rot in the ground, maximise the value of its existing fibre, and wait to buy NBN services heavily as they become available.

For customers, this suffer-in-your-jocks strategy means just one thing: unless Telstra's HFC already passes your house, and you live in Melbourne, Telstra won't be upgrading the connection to your home any time soon. If you have no broadband coverage at all, expect that to continue for years; there won't be any improvement until the NBN comes your way.

For the industry, the situation presents scary reality: the NBN has been seen as a competitor to Telstra's network, but seems ill-prepared to consider the effect if Telstra buys heavily into the same economies of scale on which they are depending.

In an open wholesale market, volume speaks volumes — and Telstra will be able to bring its heavy hand into purchasing negotiations that could spell major problems for competitors. Until then, Telstra's abandonment of the copper loop, and its decision not to expand its HFC network, will indeed leave customers in limbo.

Should Telstra be investing in a pre-emptive defence against the NBN? Or should it go slow and wait like everybody else?

Topics: Broadband, 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

34 comments
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  • hmm

    Hi David,

    You note that you quoted the Telstra guy as correctly stating "Upto 20mbps". Thats the technically correct statement for ADSL 2, no matter how unlikely it is to get the full 20mbps.

    David your first one or two anti T articles might have had some legs. This ones just pointless.
    anonymous
  • So only Telstra can spend Money on Infrastructure?

    Good to see your article discusses the other providers and what they are not doing in terms of spending money on BB infrastructure.
    I didn't realise that the other providers had their hands tied?
    Nice Telstra bashing article, nothing more.
    anonymous
  • Telstra wont move until pushed.... again!

    I am baffled how people can continue to defend Telstras lack of progress in broadband. The only time they have ever moved is when competitve investment and innovation have forced their hand. 8 years of artificially crippled ADSL is a prime example. This is the case again here.Telstra sits on its hands and Australia slips further backwards in the world rankings. The dont mind gouging their customers for the "premium services" though. What a joke! People should be thanking competitors for where broadband is today. If it werent for their efforts against the 100 pound gorilla, we wold all still be sitting around on dial up or artificially crippled ADSL services, and getting ripped off to the eyeballs.
    anonymous
  • ADSL problems

    The problem with most of the 20% is they live in pockets between areas that can get ADSL. Where I live in Safety Beach about 100 homes cannot get it but each side can
    anonymous
  • Telstra's HFC already passes your house

    Has anyone got a brand new connection to either Telstra or Optus in the last month or so. Are these guys connecting new customers on HFC networks?
    anonymous
  • 80% my ARSL

    I may be mistaken but my guess that 80% figure is based on the number of households connected to ADSL2 enabled exchanges rather than those that can actually get ADSL2 (e.g. pair gain).

    You have to laugh when execs start basing their decisions on their own marketing b.s. Looks like nothings changed.
    anonymous
  • Take the high ground.

    David, as usual you aim at presenting discussion that will be controversial.

    Unfortunately, your mish mash of twisted financial theory has no logic and is something no reasonably intelligent person could consider.

    Why would Telstra, or anybody else, invest billions of dollars in equipment that may possibly only deliver a short time return on the investment.

    Telstra must try to be involved in the NBN Co but if this investment is considered unsatisfactory then Telstra must move to compete.
    anonymous
  • don't forget maintenance

    David,

    bit of anecdotal evidence for you to counter Telstra's "laws of physics" answer. I live 500 metres as the crow flies from the local phone exchange. My ADSL2+ never gets above 6Mbps and usually hovers around 1 or 2 Mbps. The ADSL drops out at least once a week and when the phone line dropped out as well last year the second Telstra tech (the first one couldn't find a problem) discovered our connection at the exchange was corroded.

    I asked the tech what the maintenance schedule was like at the Northcote exchange (6km from Melbourne GPO) and he just shrugged his shoulders and shook his head. Letting it "rot in the ground" is about right.

    As to Sydney Lawrence's "why would they invest" question, it's a good point. But here's the thing, if Telstra doesn't invest in bridging infrastructure to cover us until Conroy's Fibre rolls out then who will? That's why infrastructure shouldn't be run by the private sector: it's not financially viable but it is necessary for the community so government should pay for it.
    anonymous
  • Why it will fail for Telstra

    NBN Co can demand Telstra pay the same amount to access the NBN as any other wholesale customer, by then, with no significant investment in infrastructure to build a competing network, and having left their copper rotting in the ground, Telstra will have no alternative whatsoever but to accept the going rate.
    anonymous
  • ADSL2+ Speeds

    Within 100 metres of the local exchange my ADSL2+ Modem indicates my connection is at the full 24Mbps. A friend at 3-4 km from the same exchange runs at 11Mbps. Works great. I am very happy with this "obsolete copper" and expect it will work just as well for the next 100 years. Howard's $1 billion Opel plan to provide wireless broadband services (where there is still no broadband) should have been implemented instead of being canned by those useless ALP dills, Rudd & Conroy, who instead of just filling in the blackspots now, are going to waste $43 billion, and take 5-8 years to do it. Bring on the Double Dissolution.
    anonymous
  • ADSL Problems

    Re the Safety Beach area. Like a lot of people in this area I am also not able to receive ADSL. We made a representation to Telstra three years ago and we were promised then that supply was in the pipe line and we should connect to wireless as stop gap option.The wireless reception is as good as the ADSL in this area but the cost is way to high. If The cost of wireless could be compeditive with ADSL then I would be quite happy to stay with it
    anonymous
  • Why it will fail for Telstra ?

    Existing customers happy with ADSL will find that copper does not rot. Looks like the best option for Telstra is let the taxpayer dills pay for the NBN build, then access the NBN at the same price as as everyone else. ie, Let someone else take the risks, and do the work. KRudd's ALP has no clue.
    anonymous
  • 80% - ADSL2 ?

    I live in one of the fastest growing suburbs in Melbourne - Casey. When i arrived 5 years ago the best Telstra could provide was ISDN, eventually I obtained access to ADSL1. I moved a few kilometeres to another new estate, same story - despite being advised by Telstra ADSL was available before I signed contracts!

    4 years later I can still only get ADSL1 (long live RIM). Compare this to many Asian or European countries and our Internet offerings are abysmal.

    Melbourne is the second largest city on the continent, the area I live in was developed less than 6 years ago by which time residential Interent services were well establisehd, how can anyone imply we have an Interent service even remotely comparable to other countries.
    anonymous
  • europe telcom

    the broadband speed in london is around 20x faster and less than half price for monthly unlimited broadband. i'm all for democratisation of telecom services. telstra is so yesterday.
    anonymous
  • Why not?

    I connected to Telstra 6 months ago after moving house. ADSL was too unstable even after line checked with new filters, finally all they (other ADSL provider) did was lower connection speed and the outcome was still not satisfactory. So I switched to Telstra HFC on their bundled offer (a cost effective one only avail. through sales ppl knocking door-to-door) and I could not be happier: It's not blazing fast (am on the 1.5M, there are faster plans) but most importantly to me it's reliable. So yes HFC is definitely a valid alternative to ADSL/Wireless available today if the cable is in your street.
    anonymous
  • NBN needs to bypass Telstra technology blockers

    I live in Woodcroft (NSW) and most people here have had it with Telstra. Our modern suburb is serviced by Telstra RIM's with AM35 ADSL cards. Each evening and weekends our internet crawls at barely above dialup speeds due to severe backhaul congestion caused by lack of capacity from the RIM to the exchange. It is very poor for a suburb that services 18,000 residents. Older suburbs either side of us have cable or direct copper and have no such issues.

    We've complained to Telstra about this for 3 years now and it has fallen on deaf ears. We wait eagerly for NBN 100 Mbps fibre to be installed in our suburb so we can give Telstra the boot permanently.
    anonymous
  • @NBN needs to bypass Telstra

    So why just complain to Telstra. There are other telco's that you could have called.
    anonymous
  • Yawn

    Refer to the second sentence, Steve.
    anonymous
  • Telstra definately are

    Hi Mate

    I know for a fact that Telstra cable is available and indeed a preferred option for connecting internet for their customers.

    So yes, the big T are definately still doing cable new connects. As long as your in an already cabled area there shouldnt be problems
    anonymous
  • @ NBN needs to bypass Telstra

    He can't read or doesn't understand the technology.
    Why would Telstra want to lift a finger for ALL those on RIMS. They have a captive market with NO competition.
    That's how monopolies operate!
    Telstra Exec's are a bunch of arrogant d*ickheads. They don't give a rodents rear end for either the Australian users or our economy. They will continue to gouge as much from the public, who are tied to their copper, as is possible, until they are forced to deal with competition from the NBN Co.
    ADSL2+ is a poor excuse for a fast network. I'm 800m (line length) from my exchange and the best I can achieve is ~14mbps. If I try for faster (& I could.My ISP provides the function via the user's account) sync loss renders it unusable. I just love the way YouTube, Flixxy & other video services are so stable (not). Streaming video is out of the question.

    A POX on Tesltra.
    Huntsman.ks