Conroy: architect of the accidental telco

As expected, Senator Stephen Conroy -- who made a career out of picking holes in the actions of his predecessor Helen Coonan -- was named to Kevin Rudd's front bench, bearing the interesting new title of Minister for Broadband, Communications and the Digital Economy (BCDE).

As expected, Senator Stephen Conroy -- who made a career out of picking holes in the actions of his predecessor Helen Coonan -- was named to Kevin Rudd's front bench, bearing the interesting new title of Minister for Broadband, Communications and the Digital Economy (BCDE).

It may have that cutesy quality that suggests an education portfolio, but at least it's the kind of title that a person charged with delivering high-speed information services should get; it was never really clear why IT was lumped in with the Arts portfolio. However, I might suggest a better title would be Minister for Bear Handling, since the first week of Conroy's reign, so to speak, showed that he still has a fight on his hands when it comes to the biggest bear of all.

To escape political evisceration, that bear could well push Conroy in a completely unexpected direction. Here's why.

In the week before the election, Conroy was quoted as optimistically saying a Labor win would mean starting "on a fresh foot" in the government's relationship with Telstra and other telcos. Post election, however, Phil Burgess made it clear that Telstra has no intention of changing its relationship with the government -- slamming Conroy's suggestion of a financial partnership with Telstra and telling Conroy to keep his paws off the company.

"We're not going to do consortiums, or equity or things like that," Burgess was quoted as saying at an industry conference this week. "It's not the way we do things."

That's something of a slap in the face, and probably not the way Conroy was expecting to be received by Telstra, which has clearly had enough of talking with the government. Burgess' message is clear: give us the AU$4.7 billion and scram, or we'll just do it our way.

This all leaves Conroy in something of a quandary: he no doubt thought the availability of massive amounts of money would lure Telstra into a public/private partnership that would allow Labor to fulfil its broadband promises. Burgess not only canned that idea in no uncertain terms, but at the same event promised that Telstra would duplicate any broadband that's rolled out anywhere in the country.

Much of that broadband will come courtesy of OPEL, whose fibre-and-WiMAX solution Conroy spent much of his tenure in Opposition slamming vigorously. Just before the election, presumably believing Telstra would be on his side if he were elected, Conroy told ZDNet Australia that it would be "up to OPEL what they're going to do about the fibre network that will run by their door."

Having made it clear Labor's fibre network will compete with OPEL's, and now having been rebuffed by Telstra, Conroy faces a significant problem: he has the cash, but nowhere to spend it. Telstra doesn't want it, and has promised to duplicate any fibre Labor funds. Pouring the cash into OPEL, which seems a logical way to counteract Telstra's stated ambitions, would run contrary to Labor policy and stand as a backflip of immense proportions.

The way I see it, in braving the bear's claws -- and being pushed into a corner -- Conroy is being pushed in a completely unexpected direction: funding a third fibre-optic network, to be built in partnership with a yet-to-be-determined provider that could, if it's more willing to partner with the government, become the next Optus.

Fifteen years ago the government helped create Optus and pull it out from the weight of Telstra's shadow. Since it would be totally irresponsible for Conroy to hand over AU$4.7 billion of public money without retaining some measure of control over how it's spent -- as Telstra seems to expect -- he may just find himself repeating the past.

I'm guessing there are more than a few telcos in Australia that would be happy to get in bed with the government, given that kind of funding. Of course, Conroy's previous policy pronouncements would limit the field: surely, the promise of funding and favourable government conditions would convince many overseas telcos to partner with the Australian government, but after years spent criticising Optus's Singaporean ownership it would seem Conroy has closed that door.

This means that some time, probably not too far away, a domestic telco is going to get a very nice (late) Christmas present. And so should Australia: a three-way infrastructure competition -- between Telstra, OPEL and the yet-to-be-named carrier -- would have to push down prices and, more importantly, improve the quality of Australia's broadband.

Telstra will languish in self-imposed isolation while pouring capital into duplicating its competitors' infrastructure; OPEL will ignore Labor's indifference and get on with its rollout, and the new telco will have access to buckets of public money, and the support of its new partner the government, to build a new network Labor's way. Resellers of OPEL and the new telco's services will bask in healthy margins again, and the government will once again be in the telco business.

The only question that remains: what to call the new firm? BearTel? Conroy's Legacy? Oops?


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