Trying to get one’s head around the detail of the deal between Telstra and the National Broadband Network company – the vehicle set up by the government to build the NBN – has been a mind-bending exercise. Certainly, it’s virtually impossible to assess at this stage whether the financial aspects of the deal are about right (even if I had the skills to do so, which I certainly don’t); in any case, much of the detail remains to be hammered out. However, in a broad sense, it has to be a win for both the government and Telstra, given that the government was committed to building a fibre-to-the-premises network across most of Australia. For the government-owned NBN co, the alternative was to spend billions digging ditches up and down the length of Australia and/or annoying every resident in every leafy suburb in Australia lopping branches to run overhead cables. Telstra would have spent the next decade steadily losing customers to a competitor with a better product that it could sell (or, more precisely, retailers could sell on its behalf) on non-commercial terms. Given the massive opportunity for a win-win deal, it would be hard to imagine that either party could be worse off.
The ministerial press release points out the key features: Telstra will allow the NBN to use its infrastructure, and will gradually switch its customers from the existing copper fixed-line network to the NBN, most likely becoming the NBN’s biggest customer. Rather than directly selling the infrastructure, Telstra will lease it to the NBN; Telstra will also receive a cash payment for every customer it transfers from its copper network to the NBN.
An interesting, though relatively small part of the deal is the creation of a new, government owned company, “USO Co”, which will take over Telstra’s universal service obligations (for universal basic phone access, emergency numbers and so on). In terms of financial aspects, the foot has been taken off Telstra’s neck in mobiles, where the government has given up its threat to refuse Telstra the chance to bid for next generation mobile broadband spectrum.
So, after years of delay, cash gouging by Telstra, and argy-bargy, it seems that Australia’s fixed-line telecommunications industry will be something akin to what many (including me) have thought would be best – a monopoly, government-owned supplier of the natural monopoly bit – the cables to everyone’s house, and a free-for-all in the other bits, including retailing and the high-capacity cables linking exchanges and whatnot. Joshua Gans is disappointed that Telstra’s existing networks aren’t going to be competing against the NBN. I’m not; duplicating telecommunications infrastructure to the home makes about as much sense as running multiple competitors’ power or water networks to individual homes and businesses. As noted here (let’s not rehash that debate), I’m not sure that that connection to the premises actually must be fibre, but if we’re going down that road the only sensible thing to do is to shut everything else down.
And, yes, this does amount to buying (or leasing) back large parts of the infrastructure that the government sold not so long ago, as John Durie points out in the Oz. Thank you, John and Peter. Whatever other idiocies Stephen Conroy is determined to inflict on us in the name of the fundie vote, he, and the government more broadly, deserve the credit for finally unscrambling the egg.
That’s assuming that the deal can actually survive the next federal election, the ACCC, and Telstra’s shareholders…
Elsewhere: Paul Budde’s initial reaction and follow-up. He likes it too.