'Metro-comparable' a concession to Telstra?

For a government that's theoretically meant to be technology-agnostic, it was a big step to explicitly declare Telstra's Next G wireless network good enough that no further funding would flow to the company's potential competitors. Does this concession on the government's part signify it may be reaching a compromise in its long-running negotiations with Telstra?

Anybody who has actually relied on wireless broadband would probably have found some humour in the government's recent declaration that Telstra's Next G network provides metro-comparable broadband services. But when I read that news a more pressing question came to my mind: is this the first of many compromises paving the way for a long-elusive agreement in the government's ongoing negotiations with Telstra?

The possible outcomes of those negotiations are, still, anybody's guess: we get nothing more than the occasional proclamation that the two sides continue to engage in meaningful discussions, supposedly surprising tidbits such as Stephen Conroy's revelation that Telstra is driving a hard bargain.

You would expect Telstra to drive a hard bargain; after all, it long ago mastered the art of holding up fruitful negotiations and developments with lawsuits, government applications, ponderous negotiations, and the good old-fashioned art of pretty much ignoring anything outside of its own business plan. It is a large company with deep-seated interests in inertia, and a flotilla of lawyers whose job description basically says "drive a hard bargain".


(Yevgeny Onegin's duel image by Ilya Repin, public domain)

Yet with the NBN implementation report more or less paving the way for the contentious network roll-out to gain critical mass, Telstra has become less and less relevant: witness an emboldened Conroy now threatening to walk away from the table if an agreement isn't reached by the end of June. Given the timbre of the report, one suspects he's not just bluffing.

That deadline is just six short weeks away, after all, which makes one wonder what can be accomplished in six weeks that hasn't been able to be accomplished in the five years since the government came to blows with a combative Sol Trujillo. Of course, Telstra probably long ago made up its mind on its final bargaining position, and is holding out on making any kind of real commitment until it absolutely, positively has to. Remember Telstra's eleventh-hour bid for the original NBN project?

One wonder[s] what can be accomplished in six weeks that hasn't been able to be accomplished in the five years since the government came to blows with a combative Sol Trujillo. Of course, Telstra probably long ago made up its mind on its final bargaining position, and is holding out on making any kind of real commitment until it absolutely, positively has to.

Quizzed by reporters on his one-year anniversary at Telstra, Thodey remained defiant, the Australian Financial Review reported, "warning the government he would compete aggressively" with the NBN if NBN Co doesn't pay enough for Telstra's local-line infrastructure. Thodey has a Plan A, B and C for the company, and reiterated his belief that a no-deal outcome is more problematic than beneficial. And he is, he said, in very deep discussions with NBN Co.

By deep we assume he means intense rather than philosophical. So, if both sides are so still so deeply engaged, what will it take to get Telstra to sign on the dotted line? One suspects that the metro-comparable determination might help Stephen Conroy drag Thodey towards the signing table: the company has long been telling competitors to put up or shut up when it comes to claims on its infrastructure, and the withdrawal of government subsidies returns the market to that old situation where wireless broadband service providers will simply be unable to justify the kind of expenditure they need to provide a viable alternative to Next G.

When push comes to shove, I'd say most service providers will realistically shut up rather than put up.

So has the government just handed Telstra a new monopoly to replace its old fixed-line monopoly? Since Telstra is not in control of wireless spectrum in the way that it has controlled the copper local loop for years, there are technically no impediments to alternative service providers who want to compete. This situation lets the government wash its hands clean of its competition mandate, and consolidate Telstra's position as default wireless provider across much of the country./p>

This is not a small victory: David Thodey came out swinging for wireless in his recent address to a trans-Tasman business lunch. The amount of data on our wireless network doubles every nine months, he said. Any of you out there would die to have a business like that. Mobile internet is going to be far bigger than we originally thought./p>

This situation lets the government wash its hands clean of its competition mandate, and consolidate Telstra's position as default wireless provider across much of the country... The government is spending billions on the NBN to deliver Australians an alternative to Telstra's network, but is now cutting back mere millions for the ABG in a move that can only hasten the flow of Telstra capital away from copper to wireless networks.

Thodey was almost dismissive of Telstra's ailing copper network: at some point we need to look at what we are going to do with the copper network, he said. Um, ya think?

The real question is whether Telstra may already have started making concessions of its own. After all, how could the normally technology-agnostic government suddenly decide that Telstra's Next G network is good enough to justify withdrawal of funding for competitive solutions? Competition has been fundamental to Commonwealth telecoms policy since 1997, so it's strange to see Conroy letting that point slide. The net result is that the government is spending billions on the NBN to deliver Australians an alternative to Telstra's network, but is now cutting back mere millions for the ABG in a move that can only hasten the flow of Telstra capital away from copper to wireless networks.

One suspects this sort of thing didn't come without its price for Telstra; the real question, of course, is what that price is. Has Conroy finally wrung out a binding plan to transfer Telstra's local-loop customers to the NBN? Has Thodey promised easier access to Telstra's ducts so NBN Co can avoid billions in digging and a legal nightmare in local-council red tape? Will NBN Co chief Mike Quigley be ordered to personally provision an NBN Co fibre connection to Thodey's home-theatre room?

The possibilities are endless, and unlikely to become much clearer until the June deadline passes and Conroy, prisoner to his own bluster, has no choice but to call "time" on Telstra. He faces added incentive: with the looming election, Conroy will take great pride in donning the mantle as the Man Who Tamed Telstra At Last, and Thodey will make him pay handsomely for it. Recognising that his options are steadily running out, Thodey may well have no choice but to capitulate. But if the metro-comparable proclamation is indeed government bait for Telstra, it's hard not to wonder what other concessions the company has extracted in return.

Back-room deal or just a coincidence? Is the government helping Telstra realise its wireless ambitions?

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