Tuesday, December 16, 2008

Telstra's war on everything - the comentariat

Michael Sainsbury says the government has called Telstra's bluff:

"Telstra is the natural builder of what is, after all, an extension of its own network. But no, it's not the only company that can build and finance the network."

Ian Verrender forsees an end game:

Telstra's board and management have a duty to maximise shareholder returns. But a company that believes it has the right to impose its will over an elected government is a dangerous phenomenon, one that could lead to dire consequences for Telstra shareholders.

Alan Kohler reckons if the new network goes pear-shaped, great!

"We can keep getting relatively fast, competitive ADSL broadband from a full range of providers as well as wireless broadband from Telstra and Optus. And the government can’t get blamed for not delivering on its silly promise, because it won’t be its fault. It’s all good."

Here's my take:

TELSTRA has declared war on its former owner and has most of the artillery it needs to win.


Revealing yesterday that a government panel had ditched its bid to build the $5 billion new national fibre-to-node broadband network it said that whoever did win the contract would face a competitive assault that could run them out of business.

"We have choices. And we think that they are very viable choices. And we can build faster," said Telstra chief executive Sol Trujillo.

If the government tried to stop the company it once owned overbuilding and out-competing the successful bidder "that would put Australia probably in a unique category with maybe North Korea and Cuba as the only places in the world that restrict competitive builds etcetera"...

"It would be in violation of World Trade Organisation requirements."

Communications Minister Stephen Conroy said the panel had acted on legal advice.

Telstra's bid, delivered just minutes before last month's deadline, ran to only 13-pages and declared that Tcompany wasn't prepared to abide by all of the government's conditions. By contrast the bid from the Optus-led consortium ran to more than 1,000 pages and met the requirements.

Other bids were received from Canada's Axia Netmedia and a Melbourne-based consortium headed by retailer Solomon Lew. The ACT firm Transact and the Tasmanian government submitted local bids.

The expert panel includes the Treasury head Ken Henry and the head of Senator Conroy's department Patricia Scott. It will report in March.

If Senator Conroy accepts its recommendation that a bidder other than Telstra build the network, the winner will apparently have the right to disconnect the wires that go from most Australian homes and business to pillar boxes on the street and then reconnect them there to a optic fibre that bypasses Telstra's network.

Unjust confiscation of Telstra's property? That's what Telstra believes, but it has already argued that case all the way to the High Court and lost. In March all seven judges rejected its argument in part because they believed that when the government sold Telstra it only gave it the right to use the wires and pillar boxes rather than giving them to it outright.

Telstra's form suggests it will fight all the way to the High Court again, and suggests much more. In the mid-1980s it dealt with a threat to its television signal distribution business from the government-owned Aussat by massively expanding and competitively pricing its optic fibre links between cities. The satellite corporation went broke.

In the mid-1990s it dealt with a threat from Optus to wire Australian cities with coaxial cables by putting in its own coaxial cables in the same streets, creating Foxtel to give it something to put on them. Optus Vision bled money then folded.

Telstra told the stock exchange yesterday that from next year it will boost the speed of its Next G mobile broadband network to the point where its faster than than the government's proposed fibre-to-node network. It will boost the speed on its Foxtel cables to make them faster still.

It is used to winning. Even without pillar boxes, it has the resources to do it.