Government Must Unshackle Us
The Age
Tuesday August 8, 2006
We will be stuck with slow internet speeds until regulators and legislators can agree.
AUSTRALIA'S vast open spaces, small population and the long distances that separate us from our trading partners mean this country has the most to gain from the roll-out of super-fast broadband services - and also the most to lose if Australia continues to be a broadband laggard. Fixing this problem is one reason Telstra advanced a plan for a new national broadband network offering speeds up to 24 megabits per second - nearly 100 times faster than today's entry level plans.If we could have won assurance from the Australian Competition and Consumer Commission that Telstra shareholders could earn a commercial return on their investment, then Telstra was prepared to invest up to $4 billion of shareholder funds to build such a network - an investment larger than the Alice Springs to Darwin railway, bigger than the Pacific Highway upgrade, and bigger even than the PNG-Australia gas pipeline. The economic benefits - estimated at up to $30 billion by the Government's own taskforce - would have been equal to or greater than these other nation-building projects.There are many opinions about why Telstra's talks with the ACCC failed. Some say the talks were scuppered by Telstra's desire to monopolise the new network, but we proposed a High-speed Access Service (HAS) to give third parties access at commercial rates. The talks were also not scuttled by disagreements over management issues or service descriptions. The talks were not halted by disagreements over transition issues. Telstra was prepared to offer competitors access to our plans and project timetables to help them manage their own transition planning.So why did the talks fail? There are two reasons one dealing with policy; the other dealing with costs.At the policy level, two world views are clashing. First, the policy world view of the Government (which is also the world view of Telstra) that favours national uniform pricing (or price averaging) for retail consumers. This means consumers in the high-cost bush pay the same as consumers in the low-cost cities and surpluses generated from the cities are used to subsidise the bush.Second, the world view of ACCC, which favours price de-averaging for Optus and other wholesale providers that, with increasing competition and lower unconditioned local loop (ULL) prices, is undermining one of the financial pillars supporting the Government's policy of urban-rural price parity - the cross-subsidy model.So, when all is said and done, the conflict is really not between Telstra and the ACCC or Telstra and the Government. What we are seeing is a conflict within the Government between the policymaking arms (ministries and parliament) and the regulatory arm (ACCC). The Government needs to get its own policy house in order before there will be progress in getting advanced telecom services, including broadband, to all Australians. So, one reason the talks failed is because national telecommunications policies are confusing, inconsistent, and counterproductive and we decided to get out of the line of fire until the Government decides how it wants to fund services to the bush.The talks also failed because of costs, in the sense that Telstra and the ACCC could not agree on our assessment of the cost of new services or maintaining old services. During the period of the FTTN talks, the ACCC repeatedly rejected our view of costs both inside the negotiations and outside. The ACCC rejected the findings of our new cost studies by declaration, not with facts and data; rejected our cost elements of our FTTN proposal because it contained key numbers based on the same cost studies; and rejected our offer to engage in a joint review of costing methodologies and that would allow us to build a new cost model in which the ACCC could have confidence.There is a simple truth. If you can't agree on costs, there is no way to agree on prices. We have our view of costs and are willing to have it challenged with facts and data, but not by unsubstantiated opinions.There is another simple truth. When 1.6 million mums and dads invested in Telstra, they expected management to take care of their assets, not give them away. Regulations require Telstra shareholders to sell their assets to Optus and other competitors at below-cost rates. That isn't right, and should be resisted. That is why we would not agree to abandon our view of costs just to have an agreement on FTTN. If you are selling something below cost, you don't make it up on volume. You just become more impoverished. That is a practice that needs to end, and that is why the FTTN talks ended.Philip M. Burgess, Ph.D, is Telstra's group managing director, public policy, communications and corporate affairs
© 2006 The Age