Vertigan signs Turnbull's NBN love letter to Telstra

Look beyond the call for an NBN Co split detailed in the latest instalment of the Vertigan review into the NBN, and you see a blueprint for a weaker telco regulator appear.
Written by David Braue, Contributor

Given the government's manufactured sense of urgency around its renegotiations with Telstra — crucial for it to acquire the copper access network on which it will build its vision of the broadband future — it is hardly surprising to see that the final part of Michael Vertigan's review of the National Broadband Network (NBN) would lean so heavily in favour of broad industry restructuring and deregulation.

Communications Minister Malcolm Turnbull, of course, has been going to great pains to deliver on something resembling the vision he spruiked to the Australian public at the election, albeit more slowly and with fewer guarantees than one might have expected, given the election-time rhetoric just a year ago.

One of the biggest disconnects has been between Turnbull's insistence that the Telstra Definitive Agreement could be twisted to his purposes with a few "slight adjustments" to the contract, and Telstra's natural inclination as a private-sector behemoth to drag the whole process out for as long as possible.

Turnbull, for example, noted the attainment of a non-binding agreement about the terms of the negotiations, implying that those negotiations were making great progress as part of the government's NBN repair job.

Telstra CEO David Thodey was more circumspect, recently pouring cold water on Turnbull's ambitions more recently by saying that there is still a long way to go before the renegotiations could be concluded.

A year after the Abbott government was elected — and a year since Thodey himself publicly said that he would like any renegotiations to be completed quickly — we are still nowhere near having a complete draft version of the new arrangement, much less a final version on which NBN Co can hang its hat and its new architecture.

Vertigan's recommendations about splitting up NBN Co and rolling back regulation — directed in the short term at the ACCC, which seems to have gone a bridge too far and will now be replaced by a more focused, presumably more malleable telecoms industry regulator — are less a win for Turnbull, however, as they are for Telstra.

It is Telstra, after all, that has persisted with its call for protection of any infrastructure investment by the assurance of an untouchable monopoly over service provision. Telstra, which dragged its feet on architectural reform and indeed stalled the NBN effort for two years during negotiations of the original Telstra DA, only to concede a sort of defeat in the face of threats from the government about interference in its HFC and mobile business.

Telstra's complicity with the challenges that have faced the NBN effort is well documented. But while the names may have changed over the years, the message has remained eerily similar.

Recall a statement made by the company's head of public affairs on the originally mooted plan in which Telstra was going to roll out fibre to the node (FttN) to 40 percent of its most profitable customers:

The FttN project has been on hold since last year, last December, pending regulatory reforms that could safeguard the investment of our shareholders...

All aspects of Telstra's transformation strategy are proceeding on or ahead of schedule and on budget, except for regulatory reform to achieve the FttN deployment safeguard that will protect our shareholder investment...

The FttN investment will be made if we are permitted by the ACCC to price the service at commercial rates, rates that reflect all our costs and under regulatory conditions that protect our shareholders' AU$4 billion investment from being pillaged by competitors. So the only thing that makes a difference in the short term is what the ACCC thinks. The ACCC holds 100 percent of the decision-making power over the short term and can, with the stroke of a pen, set prices and make commitments that will advance the FttN investment by Telstra.

That statement (PDF) was made by Phil Burgess in August 2006, approximately 10 years before the Coalition will find itself stumping up to the public to be judged on the merits of a multi-technology mix (MTM) NBN that, depending on the outcome and time frame of the Telstra renegotiation, may or may not have cemented the network's future direction.

Thodey made it clear that he can wait — and, in fact, that eight years after Burgess' comments, the ball is still in the government's court: "It's making good progress," he is quoted as saying.

"But we're really in the government's hands [and] we're quite happy with where we are today... If the government wants to change to a multi-technology model, we're happy to be as helpful as possible, as long as it's not a dollar less or a dollar more than we negotiated."

Sound familiar?

This, then, is the reality in which Vertigan's report lands: While it is putatively an effort to shake up the telecommunications regulation in the sector to encourage competition, this review is going to play out more as way to finally give Telstra everything it's been holding out for, for years: Lighter-touch regulation; the muzzling of the Australian Competition and Consumer Commission (ACCC) by shifting telecoms responsibility away from a consumer-minded body to one that can focus more directly on telecoms outcomes; and the guarantee that a compliant government will do almost anything to finalise the revised Definitive Agreement.

If effected, these changes will not only give Telstra everything it has been demanding for years. The inevitable delays to the NBN rollout will also buy the company years more in which it can cement its lead, both through further expansion of its landline-rival 4G broadband network and through preparations to mount a competitive response to NBN Co's competitive response to TPG's competitive response to NBN Co's fibre-to-the-basement policy blunder.

For all this, the taxpayer gets a warmed-over fixer-upper that will be progressively triaged, remediated, patched up, and — in theory — sold to a private sector that will most likely have moved well past copper networks by the time the sell-off commences.

Expect procedural chaos as a nest of legislation is revisited and adjusted; a readjustment of carriers' competitive positioning, including the chance key acquisitions; a persistence in the digital divide that Turnbull will later blame on the private sector's failure to invest; and, through it all, David Thodey chuckling quietly to himself all the way to the bank.

What do you think? Has the government sold out to Telstra? Will Vertigan's recommendations improve the market or hinder it? And what are we to make of the deja vu around Telstra's messaging?

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