Template Tools
| NBN: Telstra's Double/Triple Costs |
| Tuesday, 25 November 2008 22:09 |
 Telstra is proposing spending $9.7B to cover 90% of Australia from DSL/fiber nodes. Based on what AT&T is spending on the nearly identical U-Verse, the cost should be closer to $3-4B. (All figures Australian dollars, worth 65 U.S. cents as I write.) U-Verse is being built without subsidy, while Telstra wants "concessional loans."
They also demand regulatory changes designed to knock out much of the already weakened competition. Commsday calls this "a major bombshell" and "non-compliant," pointing out it doesn't even match last year's proposal. "Telstra's offer is effectively identical to what it offered the Howard government in the last parliamentary term - a fully funded metro network with a government subsidy to cover rural regions, albeit to a reduced 90% population target." I doubt he has the courage, but Stephan Conroy's obvious response is to say no and direct any subsidies to areas otherwise unlikely to be covered. That should be backed up with non-concessional loans to build a true fiber to the home network comparable to France, Japan, Korea, Greece, and one/third of the U.S. Telstra's proposed "fiber to the node" leaves Australia's Internet 50-95% slower many of the nations with which it needs to compete. Telstra has world-class engineers, so there's no technical reason they can't build a network like NTT or Verizon. By limiting this to 90%, they've excluded those long reach and expensive to serve. There may be small issues that create a cost differential, such as unionized construction crews, more underground building, fewer existing field terminals, etc. (I don't know.) I have no direct evidence, but the pricing doesn't seem to have any explanation other than Telstra deception or highly unusual cost accounting. The fact they have no cable competition gives them enormous incentive to inflate costs. That gives them more money now, and a higher cost basis for future rates. ---------------- A remarkably clear article from Murdoch's Herald Sun explains why Telstra thought they could do whatever they please. Telstra held all the aces before the game began by Terry McCrann began, "TELSTRA will tender a bid today for the government's National Broadband Network. It will win the tender. And it will build the network. This is the biggest poker game in town and the government has seeded the pot with $5 billion. You don't walk away from all that 'free' money. And you certainly don't walk away from the table when you hold all the aces. When you are playing against other bidders in a 'rigged' game where they can only draw cards up to kings. It was all part of the extended poker game. It was always going to try to use that negotiating power to win an even bigger pot than merely the $5 billion. To lock in total domination of telecommunications in the 21st century." However, I doubt McCrann is on target saying " A year ago it was pretty clear that only Telstra could build this network. Twelve months deeper into the financial crisis, it's beyond any sensible discussion. Telstra has the cash flows and it has the all-important ducts." The government is putting up half the cash. Mandatory sharing of ducts is part of the German, French and probably soon British policy. Nor is their any lack of expertise available. Ericsson, NokiaSiemens, and several others would be delighted to do a turnkey build. Telstra massively redundant staff would provide the local skills. I also don't agree "The government should use the $5 billion to ensure some real scraps are there for the losers, and especially Optus." I'd use any available government funds to directly ensure a great Internet for 98% of Australia. Competition is great, but it's a means not an end. Conroy's first responsibility is to the public, not the shareholders of any corporation. |