Telstra's broadband discomfort

commentary Telstra spent this week in a familiar position over broadband.On the defensive.

commentary Telstra spent this week in a familiar position over broadband.

On the defensive.

The telecommunications heavyweight was distinctly unimpressed by a proposal from Optus that would see carriers who commit to building their own copper-based broadband networks secure concessional capped prices for local call resale and wholesale line rental for a set period.

Optus' chief executive, Paul O'Sullivan, claimed he would commit the SingTel-owned unit to deploy its own broadband equipment in "several hundred Telstra exchanges" by December next year -- if the government came to the party on the plan.

"For three years, the local call resale price should be should be set at 10 cents; and the wholesale line rental price should be capped at AU$25 per month," O'Sullivan said this week."In return for this, the government should extract a commitment from the recipients of those margins to roll out competitive broadband networks using unconditioned local loop copper.

"If the government introduces concessional resale pricing as we have proposed, Optus stands ready to sign up to a legally enforceable deed with the government, committing to roll out our own broadband equipment in several hundred Telstra exchanges across the country by December 2006".

Telstra responded to O'Sullivan's highly self-serving (but politically quite astute) remarks by arguing SingTel was trying to secure a "discount" on investing in telecommunications in Australia. Spokesperson Rod Bruem accused the carrier of trying to bypass the existing access pricing regime in an effort to catch up to the network-build plans of its rivals.

Despite the partisan nature of the to-ing and fro-ing, Optus' proposal does yet again highlight the urgency of the need to introduce genuine competition in the broadband market in Australia.

Household penetration of broadband in Australia now sits at a mere 20 percent -- well behind nations such as Canada with 42 percent, Hong Kong at 64 percent and South Korea at 76 percent.

In addition, the fact Telstra only elected to detail its plans to deliver to Australians high-speed ADSL2 and ADSL2+ services after rival Internode went public with its own moves a few weeks ago hardly indicates its desire to demonstrate leadership in broadband delivery. In addition, according to some rival carriers, the telecommunications heavyweight is currently delivering speeds to customers slower than its infrastructure can support.

It will be interesting to see how Telstra responds over the next year or so to the widespread deployment of rival networks. Along with Optus and Internode, Primus has flagged plans to offer broadband services via its own DSL network infrastructure within the next year. One might suggest Telstra quickly adopts a more competitive, customer-friendly stance before the threat of significant customer losses becomes more real.

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