Telstra is being successful… quick, let’s put a stop to it!

Telstra has demonstrated over the last 5 years that it can be a leader in the world telecommunications marketplace. It went from a follower just riding on the coat-tails of a copper network, to creating the biggest and fastest mobile network in the world.

Yet this morning, the Australian government has decided that it doesn’t like an Australian company being too successful. After all the the time, money and effort that Telstra has invested into becoming the leaders, the Government has decided that it’s time to slow it down.

They announced a series of reforms to telecommunications legislation that will essentially force the break-up of Telstra. Stephen Conroy tried to make it look nice by saying that Telstra can voluntarily choose to break up the way it wants, but then swiftly added that if they didn’t, the goverment will break them up anyway. And added a boot in by saying it’ll block any new mobile spectrum acquisitions until “it structurally separates, divests its … cable network and divests its interests in Foxtel.” Talk about bullying.

For me, this just seems like it’s going to make it very, very difficult for Australia to continue to be a world leader in the mobile broadband marketplace. Telstra’s advancements have forced Optus, Voda and 3 to play along or get left behind, and has meant that we have four 3G mobile networks in Australia. That’s massive for a country of our size compared with the US and China. And so by slowing down Telstra and forcing it to separate, are Optus, Voda and 3 going to bother making anymore advancements? They won’t have anyone to try and keep up with.

It just feels like the government has caved in to the whinging and whining of other telecommunications companies in Australia, who aren’t as far ahead as Telstra, and has just chopped it right down to slow its growth.

Somehow, the government thinks that a 100Mbps nationwide fibre network is the answer to Australia’s broadband problems… but in 8 years when its built, it will already be redundant. And in that time, Telstra would’ve been beyond that point in wireless broadband. Wonder if that will still happen, or if this will signify the beginning’s of the government’s monopoly on Australia-wide telecommunications?

And lastly, I loved the nomination that Stephen Conroy put forward for himself for the Ignorant and Stupid Comments of the Year awards:

Senator Conroy said Telstra copper network was literally “collapsing in the ground”.

“Every time there is a flood, every time there is heavy rain in northern NSW, Queensland, there is a further degradation of some part of Telstra’s copper network,” he said. “There is an enormous maintenance requirement every year to continue to just try and keep it where it’s at.”

The infrastructure in the ground was actually blocking the capacity to deliver decent broadband.

Bring on the comments telling me that Telstra is a big bully and that it’s the right thing for “competition” and for Australia – I’d love to hear them and I’m ready for a fight. Cos you try and tell me that the government isn’t being the biggest bully of them all right now.

[smh link]

  1. MellyMel’s avatar

    You’ll like this one: http://www.smh.com.au/business/now-for-something-different-telstra-ripped-off-20090915-fote.html Think it raised some very valid and to the point issues.

    Like I said on Facebook, the service levels we get here from Telstra are crap on every level EXCEPT on NextG which is brilliant, hardly any black spots well out into the boonies, but still so prohibitive cost-wise that even I just ported out last weekend to a more affordable service (to the same carrier you went to yourself). I agree, it’s far ahead of it’s time, but what about other services? What about regional Australia? If the focus is going to be on rolling out this network in place of fibre when is it going to become available to everyone at a rate that the majority of the population can afford? That’s not to suggest that I think breaking Telstra up is the answer to that, I think it’s bloody stupid and shouldn’t be legal, but I don’t think they’re the perfect Telco either.

  2. James’s avatar

    Yeah, I definitely understand your point re lack of services for regional Australia. But two points in reply:

    1. Who else is making an effort to get more service out to regional Australia? At least Telstra has made the best effort by creating a mobile network that gives those people at least some connectivity.

    2. How the hell is separating Telstra going to solve the issue of lack of services in regional Australia?!

  3. b’s avatar

    I read 40 of the 204 pages of the explanatory note supplied by the relevant dept.

    I wondered why Labor was going this way when it was the Liberals who copped it most from Telstra. But of course, it isn’t Labor, it’s the ACCC who is driving this change- and from what is in the explanatory note it sounds like the ACCC is sick of being bullied by Telstra and wants some teeth.

    The goal *is* a wholesale Monopoly [in fixed line] owned by the govt and they are not shy about it:
    “This approach will ultimately lead to a national outcome where there is a wholesale-only network not controlled by any retail company—in other words, full structural separation in time. Such a negotiated outcome would be consistent with the wholesale-only, open access market structure to be delivered through the National Broadband Network. However, if Telstra does not voluntarily implement structural separation, this Bill will require the functional separation of Telstra. Functional separation is a regulatory tool that has been used successfully in other countries such as the UK and New Zealand and is being considered by the European Commission, to address the underlying incentives that fixed-line incumbents have to favour their own retail businesses.” pp 3f

    Funny how no one has mentioned that it has been used in the UK and NZ.
    Maybe the govt is not reporting the whole story either but it is noteworthy.

    I didn’t read anything in the first 40 pages about the provision of Mobile services – and I think that is cos Mobile services are quite competitive and it is due to that Competition that Telstra has moved so far ahead of the others in that area.

    Plus that move was quite wise because I am sure that they saw the day coming when the fixed network was going to a) cost them a fortune and/or b) be forced to be opened up to real competition. And maybe there has been more R&D in wireless so they could see that speeds would increase in that area quicker than in wired. And of course wireless is the way to go in many cases and all the more as technology converges. But, again, I think if Telstra had the same control over wholesale access to wireless connections as it has over fixed line then why would they bother competing? Without the competition in the wireless space Telstra would not have gone for Next G.

    However, as I said – this is nothing to do with Mobile – to bring that up seems to blur the issue.

    And now onto the ACCC…
    “…the current operational separation regime aimed at promoting equivalence is ineffective and does not address Telstra’s incentive and ability to discriminate against its competitors’, and ‘[s]ince coming into effect in June 2006 the operational separation arrangements that apply to Telstra have been shown to be ineffective in a number of essential areas.” p17

    The explanatory note says, “Enforcement mechanisms for the existing operational separation regime are weak and indirect. There is no legal obligation on Telstra to comply with its operational separation plan.” p21 and “The ACCC has recently reported that competition in the Australian telecommunications market is not emerging as anticipated.” p22

    And here is what Optus had to say “‘Optus complained to the ACCC that Telstra was providing higher performance standards to its retail customers than wholesale customers—for example, by routinely offering better connection times to its retail customers than to wholesale customers…Whilst Telstra Retail is able to provide connection remotely at the flick of a switch—Telstra applied a cumbersome process for wholesale customers requiring two separate technicians to visit the customer’s premises and taking several days to complete (and requiring customers to be present for both visits). ’—Optus consultant Dr Chris Doyle, University of Warwick” p19

    If what the explanatory note says is true, then it sounds like the Govt wants to create a government owned monopoly supplying fixed line access – maybe, as I tweeted, that should have been the way it was when Telstra was first privatised.

    As for no one else stepping in to build their own network – any new entrant has to build from scratch – Telstra started with the network in the ground and went from there. What incentive is that for someone to try and compete? Plus the, in your view, substandard, 100MB NBN is expected to cost $43 billion. That’s a lot of money for someone to find from scratch – with a decent return being a long way into the future – it doesn’t surprise me no one has done it before.

    Is Telstra being bullied? Probably – but it sounds like they have had it coming to them – sadly I am not so sure the Govt could have started this any other way – secret meetings with Telstra would not go down well in the parliament or with the electorate – as far as I know, the Govt have to notify the Parliament to bring about these changes – plus with the ongoing investigations and complaints how could Telstra be caught out by this idea coming forward – from what is in the Explanatory note Telstra has resisted competition on it’s fixed line services for as long as it can and now something has to be done. The explanatory note is, no doubt, only half the story, but it does look like the ACCC has cried BULLY!! to Dad and Dad has responded with an ultimatum. Change yourself or we’ll change you.

    I wonder what Rollo thinks…

  4. Rollo’s avatar

    The Government’s big policy here is trying to establish a national broadband network. Telstra already showed their contempt for the government by submitting a totally inadequate proposal in the tender process, and then cried foul when the Federal Government announced that it was going to go it alone.

    The Government’s prime concern is about providing broadband services to the people of Australia, something which Telstra haven’t seriously proposed. Besides which, if Telstra as an organisation hated both the Liberal and the Labor Parties then this is not a political issue.

    Exactly the same issues arose with the breakup of British Telecom into BT Group, Yell and 02.

    -

    The US has five major 3G Networks (Sprint Nextel, US Cellular, Verizon, AT&T, T-Mobile) and although China has seven national mobile telephony companies, all of the base infrastructure is owned by the Government.

  5. Rollo’s avatar

    Actually in all honesty I hope that the Government does eventually have a monopoly on Australia-wide telecommunications. I objected to Telstra’s privatisation in the first place. I still see it as theft.

  6. MellyMel’s avatar

    Late reply soz James, like I said in my original post yes there are issues with regional services but like I said there I don’t see how splitting up BigT is going to help that. However one wonders after reading these subsequent posts, if that is what the gov is aiming for, to have control over the wholesale network maybe it would make a difference to regional Australia. It’s like I said originally, Telstra should never have been privatised in the first place, government at least has some obligation to try to look after all Australians but private enterprise does not – private enterprise cherry picks coz that’s where they make money, what company in their right mind would sink dollars into low return investment. I question however the government’s ability to manage it if they do get to their targeted monopoly…

  7. MellyMel’s avatar

    Oh and that said I still don’t see how it’s particularly fair to sell a business off and then start meddling with it and wanting their marbles back.

  8. Rollo’s avatar

    MellyMel Said: “I question however the government’s ability to manage it if they do get to their targeted monopoly”

    I do not.

    In theory the only reason Telstra got to be where it was in the first place is precisely because they were a government organisation; not bounded by the profit motive. It was managed perfectly well by the Federal Government for 96 years before it was privatised.

    The difference between it then and now is that used to be accountable to we the people as voters; as a private organisation it is accountable to no-one including it’s shareholders.

  9. James’s avatar

    Thanks for all the comments everyone.

    Over the last few days, I guess I’ve calmed down a bit. I can see the logic in having the govt own the copper network given the amount of competition in today’s telecommunication market.

    However, I think it’s wrong that Telstra wouldn’t be compensated for losing one of its assets. Especially considering the govt made a tidy few billion dollars from when it sold its ownership in Telstra.

    Thanks b too for your indepth comment about the whole explanatory “note” and how it all slotted into place. Interestingly, I don’t disagree with anything you said. I guess I’m still learning and understanding it all.

    I’m looking forward to hearing more about it all as it progresses through parliament, and I’m also thankful that our internal comms team are doing a good job of explaining it to us as employees and how that affects our day-to-day job (which is nil at the moment).

  10. MellyMel’s avatar

    This was a really interesting conversation Jam-ez, thanks for starting it! :)

  11. Rob’s avatar

    Most of the countries in the Caribbean have govnm. owned networks and the service is really really bad. Here in Trinidad it’s taken me 3 weeks just to get all 5 lines working, and the DSL is forever dropping out…. TSTT (Trinidad telecommunications) used to be owned by the government but is now privatized in an attempt to bring in competition and get them to raise their service levels.

    I just hope that in whatever happens here, we don’t go backwards with service due to lack of competition. Telstra has come a long way since they have had competition and I would hate for that edge to be lost.

    My only other comment is to ask why we arn’t using the existing cable networks and just bumping them up to DOCSIS 2.0 or higher which will give almost the same speeds as this new fiber network. That’s what the USA is doing. I don’t understand how anyone can propose that fiber to the home is cost effective at those speeds.

    Then there is the question of the backbone from Australia to the rest of the world. It’s already seriously under spec’d and if we all get faster broadband it’s only going to be slower again.

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