Would the Coalition really buy Telstra's copper?

Would the Coalition really buy Telstra's copper?

Summary: One hopes that Malcolm Turnbull was deadpanning when he recently referred to the possibility of buying Telstra's copper access network, because if that's what his alternative NBN policy is based on, then the industry can kiss 15 years of hard-fought progress under deregulation goodbye.

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The NBN debate has taken on quite a different (read: relatively sedate) tenor in the past few weeks, shifting from limbo to all-forward largely in the absence of the usual attacks by the likes of Malcolm Turnbull and Paul Fletcher.

That lull may be because they're busy hurling barbs in parliament; because the ACCC's recent approval of Telstra's separation has helped the NBN over its last major obstacle; or because Turnbull is desperately hoping that by keeping quiet, he can outlast the memory of those who might otherwise call him to task about one of his most absurd pronouncements ever.

I refer, of course, to his suggestion to the Australian Financial Review that it might be in Telstra's interest — and Australia's — for the government to buy the company's entire copper access network (CAN) back from the company.


Could the Coalition's long-simmering alternative NBN policy really involve the long-dismissed nuclear option — buying Telstra's copper network? (Castle Bravo blast image by US Department of Energy, CC BY SA 3.0)

Yes, seriously.

Correct me if you read it differently, but Turnbull's statement — made in the context of a conversation suggesting that it would be no problem to wind back the NBN as part of the Coalition's secret-squirrel alternative policy — was followed by a non-sequitur that would, from anyone else, be laughed off with a slap on the back and the serving of a subsequent beer or six.

"The copper network belongs to Telstra, so you would have to reach an agreement to either buy it or have access to it, but I think that it would be in Telstra's interests to do that," he is quoted as saying.

Buying Telstra's copper network back has always been the nuclear option — the one thing that the government was trying to avoid. It is the telco equivalent — if there is such a thing — of Barack Obama's recent refusal to rule out military options when asked how he would deal with the Iranian nuclear program.

Buying Telstra's copper network back has always been the nuclear option — the one thing that the government was trying to avoid.

The Telstra debate, of course, has far less significant geopolitical implications, but it's still a central and ongoing issue as the NBN starts to stretch its legs and run for — and, it hopes, past — the line marked by next year's election.

Not only would Turnbull's nuclear option be extraordinarily expensive, but it would also nullify the value of the entire Telstra privatisation, and, in real terms, be a concession that Australia's entire telco privatisation exercise has been nothing more than 15 years of sad, unrecoverable farce. That said, privatisation was originally engineered by Turnbull's own party, which adds an extra dose of irony.

You could even go so far as to say that the entire point of the NBN was to avoid such a purchase, which would bury anywhere up to $20 billion of taxpayer capital in an ageing, decaying infrastructure that would, if it were purchased by the government, become a disaster in asset management.

Surely, even the biggest critic of the NBN and its fibre infrastructure would not support the payment of double-digit billions to Telstra to acquire an overburdened copper network — especially one that even Telstra admits will be worth nothing a decade from now.

Surely, even Malcolm Turnbull would realise that this would be an even worse way to spend taxpayer money than the fibre NBN against which he has so vehemently fought. At least if you spend billions on fibre, you end up with a new and future-proof network, rather than inheriting the problems and idiosyncrasies of 15 years of Telstra's architectural ambivalence.

Telstra truly would be laughing all the way to the bank if its contract with NBN Co were cancelled and Turnbull tried to drag it back to the negotiating table. Turnbull has made much of his apparent plan to encourage Telstra to play nice by ironically accelerating payments to the telco, but Telstra would not be viewing such negotiations in terms of the net present value of that deal, compared with that under its current NBN Co payment structure.

Telstra would not be viewing such negotiations in terms of the net present value of that deal, compared with that under its current NBN Co payment structure. It would be viewing such negotiations in terms of its ability to stall any substantial change...

No, Telstra would be viewing such negotiations in terms of its ability to stall any substantial change in the local-access network (LAN) for the indefinite future. Turnbull might think that he has a tasty carrot to offer to our ex-monopolist telco, but Telstra has never really, truly been interested in change unless it's dragged to it; as soon as he sits down to talk with Telstra and puts his carrot on the table, I suspect that Telstra will decide that it wants oats instead.

And with a few ill-conceived pen strokes, we would be back in 2000, with the remains of a fledgling national fibre-to-the-premise infrastructure in the ground, a totally confused private sector that has only recently had the certainty to even know whether ADSL is a viable long-term investment and a new government whose only real promise regarding the NBN is that it will change what's already underway.

It's always easy to watch from the sidelines and say, "I could do that better", but statements like this do nothing to support the suggestion that the Liberals' evolving alternative NBN policy is nothing more than a wayward fantasy.

Heck, it took the current government several years and heavy-handed threats before it was able to negotiate access to Telstra's copper network, but if Turnbull thinks that he can do better by buying Telstra's CAN, or even by trying to negotiate a better deal for facilities access, I submit that he will be sorely disappointed. And so will the rest of the industry.

What do you think? Is the purchase of Telstra's CAN a viable element to the opposition's alternative NBN strategy?

Topics: Broadband, Government, 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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63 comments
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  • "Surely, even the biggest critic of the NBN and its fibre infrastructure would not support the payment of double-digit billions to Telstra to acquire an overburdened copper network — especially one that even Telstra admits will be worth nothing a decade from now".

    Just wait David ;-)
    Beta-9f71a
  • Let's see we have two options:

    1. "Waste" money on fibre because it'll be redundant due to that magical wireless technology we've been hearing so much about.
    2. Waste money on copper because it'll be redundant due to that magical wireless technology we've been hearing so much about.

    Is it possible the coalition clowns will chose option 2 if they win the next election? Well it certainly wouldn’t surprise me they are renowned for their blatant hypocrisy after all and remember this the same group of twits that sold Telstra to begin with... they also gave us the biggest clown of them all Richard Alston.
    Hubert Cumberdale
    • Did you know the volume of wireless devices being sold has now exceeded desktop computers. It's seems people are deciding the technology they want to use, rather than be told by the experts.
      Knowledge Expert
      • "Did you know the volume of wireless devices being sold has now exceeded desktop computers."

        Did you know the numbers are meaningless now and will be even more so in the future but more to the point you probably haven’t even bothered to try and understand them...


        "It's seems people are deciding the technology they want to use, rather than be told by the experts."

        That's right. People are deciding they want fast fixed line FTTH rather than be told by coalition "experts" that they should take up wireless internet. I wonder why... Imagine having a wireless internet connection for every wireless device in your house. Sounds expensive and extravagant. So tell us what these wireless devices are connecting to in the home. Is it fixed line or a wireless internet connection?
        Hubert Cumberdale
        • And how did my comment end up being anti NBN?
          Knowledge Expert
          • Your comment was anti-NBN? I thought it was just bog standard ill-informed drivel and my post reflects that. Notice there was no mention of the NBN in there.
            Hubert Cumberdale
          • My comment was anti NBN because you say so? You do not know my thoughts. I was making an interesting comment about the growth of Sales of wireless devices worldwide.
            Knowledge Expert
          • Interesting, you ...LOL!
            Beta-9f71a
          • "My comment was anti NBN because you say so?"

            No. I'm asking you if you thought your comment was anti-NBN. I certainly did not think so, like I said I thought it was just "bog standard ill-informed drivel" and treated it as such. I did not mention the NBN in my comment so: You do not know my thoughts. I was making an interesting comment about your ill-informed drivel.
            Hubert Cumberdale
          • I merely thought your comment irrelevant to the article and troll-like.

            Back to the topic at hand, I agree with the author. Macolm Turnbull's sound bites about relying on private industry and existing access infrastructure ignore the experiences and sound reasoning that led to building a new network.
            agreenfield17
  • "Surely, even Malcolm Turnbull would realise that this would be an even worse way to spend taxpayer money"

    Clearly he doesn't realise otherwise he wouldn't want to renegotiate with Telstra, which is something Telstra probably isn't going to do.

    It's beyond me how Turnbull doesn't realise that it's going to cost more and take even longer to undo the NBN than it would to just admit defeat and carry on with the NBN roll out.

    And big ears Abbot is an even bigger idiot for not recognising that what Turnbull wants to do is going to waste even more money which is exactly what Mr Abbot is dead set against.

    The Coalition is a joke without a punchline.
    Jingles-8366c
  • Where is the usual band of pro-liberal idiots for this one?
    David has raised some very good points in this article, it'd be interesting to see them actually address them for once instead of creating a bunch of strawmen, or trying to take the debate off topic as they usually seem to do when faced with logic.
    RealismBias
  • The Coalition did not learn from the mistake that one cannot unscramble an omelette. They should have gone along with Telstra's proposal to deploy FTTN at a cost of $5.6 billion many years ago at no cost to taxpayers. We could have been enjoying a modern terrestrial fiber network today, if sanity had prevailed then. Too late to cry over spilt milk.

    Be it as it may, even to the detriment to us long term shareholders and in our national interest I think that the Government is spending way too much on a Rolls Royce network which will take a decade to deploy at huge debts to taxpayers.

    It's a huge and unpleasant quandary.
    Vasso Massonic
    • The wait is over... *rolls eyes*

      1. "The Coalition did not learn from the mistake that one cannot unscramble an omelette"...

      Agree. So the government are now doing the correct thing, by throwing out the old mouldy omelette and cooking a fresh new one "but this time, for everyone"!

      2. "They should have gone along with Telstra's proposal to deploy FTTN at a cost of $5.6 billion many years ago at no cost to taxpayers... We could have been enjoying a modern terrestrial fiber network today, if sanity had prevailed then. Too late to cry over spilt milk...."

      FFS, for the umpteenth time stop the BS. "Telstra were the one's who withdrew from the negotiations" with the ACCC, to build FTTN. I don't like the "current" Coalition but this wasn't the previous Coalition Government's fault. Got it - TELSTRA WITHDREW (refer URL #1 below and then #2 for an overview).

      Also for the umpteenth time, the NBN is NOT being funded from general taxation revenue (refer URL #3).

      http://www.accc.gov.au/content/index.phtml/itemId/757949/fromItemId/720536

      http://www.smh.com.au/business/acccs-samuel-brands-telstra-plan-an-illusion-20110615-1g3dm.html

      http://www.smh.com.au/business/government-goes-global-to-raise-3b-needed-for-national-network-20110710-1h91o.html

      3. Be it as it may, even to the detriment to us long term shareholders and in our national interest I think that the Government is spending way too much on a Rolls Royce network which will take a decade to deploy at huge debts to taxpayers.

      Way too much? $3.59b per year for 10 years (compare that to the budgetary areas and Telstra's annual profit) with funding for the build being derived from investors, which is projected to be fully repaid by 2034, whilst providing modern services currently sadly lacking "to all Aussies". What the hell is wrong with that? Re: taxpayers, A G A I N, refer to URL #3 above.

      4. "It's a huge and unpleasant quandary".

      No it isn't. But the Coalituion are hellbent on making it exactly that.

      Vasso you have been spreading the same BS for years, since being NWAT's #1 poster. Isn't it time you let the disproved lies go and just get on with it... like your precious Telstra are?
      Beta-9f71a
    • Vasso, Telstras previous FTTN proposal would not have been at no cost to the taxpayer. Telstra was only going to fund the build in certain capital cities (i.e. cherry pick the cream) and it had it hand firmly out for the govt(taxpayer) to pay for all the rest. Taxpayers would have paid more for access too, under a Telstra controlled FTTN. History is a guide as to how Telstra gouges customers at wholeslae and retail levels. Turnbull is kidding himself if he thinks he can pull off what has hinted at, and especially if he thinks its the best outcome for the public.
      CommonSense-e9dea
    • Vasso,

      The Telstra idea would almost be worse than the current FTTN idea, in fact it would be.

      A long with the fact that Telstra would still require tax funds to spread the network further than the main cities it would strand competitors because of the way FTTN is going to make DSLAM deployment obsolete.

      * For reference Telstra would only reach 4 million homes, less than 50%.

      It would make it impossible for the competition to create their own services on they FTTN lines because Telstra demanded unobstructed access for 'upgrade reasons'. They stated that they would not be able to upgrade past a minimum of 12 Mbps and still have other competitors install their own tech to maintain competitive pricing.

      FTTN is an ideal technology for an incumbent with anti-competitive ambitions.
      Firstly, unlike the existing copper network, it cannot be unbundled. This means that
      if Telstra is able to build the FTTN network on the terms it proposes, it will be
      protected against competitive entry. Telstra will be the monopoly supplier —
      allowing it to keep prices high and capture monopoly rents.
      Secondly, this means that the only competition will be from resellers — but with
      the speed, grade of service and other features all determined by Telstra, it will be
      impossible for resellers to differentiate or to offer truly effective competition

      http://www.optus.com.au/dafiles/OCA/AboutOptus/MediaCentre/SharedStaticFiles/SharedDocuments/06.06.28%20FTTNWorking%20Paper%20Final.pdf
      TimHT
      • Sadly TimHT your common sense rationality will fall on deaf ears with your correspondent, who is a TLS shareholder, who believe's Australia's comms "MUST" revolve around his portfolio.
        Beta-9f71a
  • Its easy - our parents and their parents have already paid for the copper. As an adult before the selll off of Telstra is was strongly suggested that the copper system still remains public property. 99% of the infrastructure is already paid for out of public monies. The Coalition need only remind Telstra of the fact and with a swipe of the pen remove it from Telstra control.
    Hideous62
    • You are forgetting that Telstra has been maintaining the copper network by replacing copper wiring and infrastructure which degrades over time and replacing the trunk cables to the switched network buildings with fibre. The current copper network was upgraded to handle ADSL2 in many places and even more so recently with Telstra's Top Hat local area initiative to extend the value of their refurbished copper network.
      stomfi
    • Yes, you are correct that generations past paid for the copper network, rolled out by the government-owned PMG (my granddad was one of those who worked on it). But the government doesn't own it anymore, because it was all sold off lock, stock and barrel as part of a privatised Telstra. A lousy decision, but it can't be undone now.

      You suggest that the Coalition "with a swipe of the pen remove it from Telstra control". Ahh... very interesting in theory, but since we live in a society that lives according to the rule of law, you just can't do that. And a little thing called the Constitution has something to say about that, too. Does the phrase "on just terms" ring any bells? Tell Turnbull he's dreamin'.
      Gwyntaglaw