The resection we had to have

The resection we had to have

Summary: Pigs are flying in flocks as Telstra has a change of heart on separation. Given the vitriol of the past few years, Rudd and Conroy deserve credit for bypassing the copper loop and, in so doing, bringing Australia's most big-mouthed telco in line at last.


Looking through the window a few moments ago, I would swear I saw a big pink piggy with wings hurtling through the air.

Little wonder: this week, after years of not-over-my-dead-superannuation-fund posturing, Telstra chair Donald McGauchie is now talking openly about the possibility of separating the company and working closely with the government on the NBN.

Donald McGauchie

Donald McGauchie (Credit: David Braue/

Has McGauchie had a brain transplant? Because it was only a few months ago, at Telstra's AGM, that he was restating his near-constant offensive against the very thought. "Separation has meant that [BT and Telecom NZ] are so badly damaged that they are no longer capable of a major investment," he told the audience in what was quite a frustrated tone of voice. "Certainly not the sort of investment required to build next-generation networks."

He said it, and more. I was there. Thousands of people heard it. Yet this week, as the initial enthusiasm over the NBN announcement gives way to the inevitable devil's-in-the-detail recriminations, we now hear that Telstra is not only looking forward to working with the government, but is setting up an NBN office to handle the relationship.

As a major holder of capital, Telstra will most certainly try to buy a significant share of the new NBN company so it can exert control over its operations

Most strikingly, Telstra is apparently now open to discussions about voluntary separation. Despite rumours over the past few weeks, I was as surprised as you to read that. Just to make sure I was understanding correctly, I looked up "voluntary" at "Done, made, brought about, undertaken, etc of one's own accord or by free choice."

Porcine aviation is only the beginning; Telstra apparently realises it has a lot of sucking up to do. Can it be long until McGauchie is pressing the flesh and kissing babies on the street?

It's hardly the kind of charm offensive anybody would have expected just a few weeks ago, when Telstra was still smarting from its NBN dismissal and firing on all barrels as it announced take-that-you-so-and-so's upgrades to both its Next G wireless and hybrid fibre-coax (HFC) cable network.

With the announcement of NBN Mark 2, these investments will become redundant, to some extent: Telstra now finds itself jockeying for position in a public-private venture with its long-avowed enemy — to build a network that will compete with its own fixed infrastructure.

Last week I lambasted the political waffling that led to the new NBN, but with regards to Telstra it was a brilliant move. By sidestepping the copper loop entirely, Rudd's new NBN has finally delivered a workable (if it can be financed), albeit politically difficult, solution to the lingering issues raised by the previous government's shockingly-executed privatisation of Telstra.

Remember that the possibility of Telstra separation was until recently so ridiculous that it was floated as an April Fool's joke — sending Telstra's shares vacillating in a $1.9 billion roller-coaster ride by those who failed to notice the idea was, at the time, patently absurd.

The thing is: separation of Telstra really isn't the leverage it used to be. Nobody cares about its copper anymore. In fact, if the new NBN can be delivered as envisioned — and that's a big "if" — it will render Telstra's copper and HFC networks irrelevant to the broader picture at hand. Telstra will not only be welcome to separate itself, but may need to do so to capitalise upon natural market opportunities.

One could even conceive of Telstra not only separating, but spinning off its infrastructure division in a move that would spare it having to keep funding the maintenance of what will be a second-rate copper network providing low-cost, relatively low-speed services. Such an investment would expose the copper loop to natural competition; divert those investments away from the government's NBN with promises of better returns from a nationwide infrastructure that is already largely amortised; and provide billions in the war chest to help Telstra reinvent itself as a value-added provider of content and services.

These are interesting times. The exact repercussions of the new broadband order will only be felt as details emerge over time, but it is already delivering rewards by forcing Telstra to awake from years of monopoly mentality and compete on its own merits.

Sure, Telstra saves face with a role in this NBN project — but that involvement will be on the same terms as every other player, with none of the legacy advantage Telstra has so far enjoyed.

Separation of Telstra really isn't the leverage it used to be

Indeed, Telstra's participation in the previous tendering process had one very problematic result: the government now has a detailed map of Telstra's entire infrastructure, and can plan its new network with the confidence of someone who has peeked at the answer cards inside the envelope during a game of Cluedo. Heck, for all we know, this new contract is just a ruse to get Telstra to separate and push through more-competitive copper loop legislation before Rudd throws up his hands when the funding falls through.

We'll assume for now that the NBN is a going concern. As a major holder of capital, Telstra will most certainly try to buy a significant share of the new NBN company so it can exert control over its operations. The government will of course need to anticipate this, with caps on individual company investments to ensure that Telstra cannot organise filibuster-capable representation on the NBN company's board.

One suspects McGauchie and his crew may even start tucking away profits in a corner somewhere, earning comfortable dividends until the completed NBN goes up for full privatisation and they can try to buy a controlling interest in it. Harry Potter's Lord Voldemort waited over 10 years to begin his quest to regain his human body, so by those standards a 13-year wait isn't that much worse for Telstra.

Or perhaps it is. Because, despite all the questions and complexities the NBN raises (as I explored last week and will continue to do) those 13 years will be spent in the painful knowledge that Kev and Steve finally beat Telstra at its own game. It may be a Pyrrhic victory for a massively debt-ridden government, but it is a victory nonetheless.

Topics: NBN, Broadband, Telcos, Telstra


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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  • Rudd and Conroy cannot deliver on IT.

    I agree with you about the need to bring Telstra into line and, in fairness to Rudd and Conroy, they're doing a good job of that. However, as for the NBN, that is quite another issue. This Government have proven time and again that they are incapable of properly conceiving and developing IT projects. Does anyone remember GroceryWatch and PetrolWatch? Both have been outstanding failures. I love the idea of a NBN and in my area we desperately need competition to Telstra for fast broadband. I also love the idea of Santa Claus and the Easter Bunny. Unfortunately, the NBN, like the other two, will be little more than a fairy story.
  • NBN funding

    Nice article, Telstra's about face surprised me too! Can't believe the change from vitriol to charm in two weeks. Especially floored by the separation talk after 15 years of blunt refusal and derision of any proponents of separation.

    I don’t see an issue with funding. Ruddnet will mostly need infrastructure people on board and this will be Leightons and the likes, not Telstra. Ruddnet will already have a swag of project managers so can’t see much value add for telcos. The builders are in a good position to put skin in the game with a similar exit strategy to the govt.
  • Read your own quoted material

    You really should read the documents you link before you write your blog. In the one linked under "voluntary separation" is the following:-

    "The radically different and more conciliatory approach is part of an attempt to ward off the threat of much greater government intervention in Telstra's business."

    So it seems it is voluntary only in the sense that Telstra is trying to avoid something worse. It is as voluntary as a robbery victim complying with the bandit in an attempt not to get shot.

    Next time you are on, look up the following

    "hack journalist"
    (sorry, the last one is not in, but I think we all know what it means)
  • O Rly?

    Well, I for one enjoyed reading the article, and thought the content, expression, bias, and tone all appropriate to the material.

    Hack journalist? Hardly.

    Perhaps might include the phrase 'Hiding my vitriol behind anonymity', just for you, eh? Wouldn't happen to work for a certain telco, would we?
  • Comprehension problem perhaps...

    How could you possibly fail to notice the sarcasm? David clearly doesn't believe that it's voluntary and I thought he communicated that belief very clearly.

    By the way, haven't I seen your thoughts somewhere before? Like, perhaps, every article about Telstra and in response to every comment anybody makes about that Telco...
  • So is it time to sheet home the blame ...?

    That is, to the senior public service idiots and various Howard government ministers (including the Howard himself) who so comprehensively stuffed up the Telstra privatisation and who had a complete failure of vision over our need for a world-standard internet service, and those who hired Trujillo and his idiot-in-chief, the pugnaciously purple Phil Burgess.
  • FTTP NBN is a statesmanlike decision

    After twenty years of fuckwit comms policy in Australia, it is bloody magnificent to now see a real concept that will provide a vital backbone network for our needs for the foreseeable future.
  • reComprehension problem perhaps...

    "By the way, haven't I seen your thoughts somewhere before? Like, perhaps, every article about Telstra and in response to every comment anybody makes about that Telco..."

    You certainly have seen them all before ! The guy is a recalcitrant looney, who constantly posts under different aliases, but we all know who the clown is.