Freedom of information - Vodafone style

Vodafone faces compensation payouts to as many as 4 million of its customers after confirming it is investigating a security breach that has put billing and call records on a publicly accessible website protected only by passwords that change monthly.

It also faces the prospect of privacy concerns being added to a lawsuit being prepared by on behalf of 12,500 customers over quality of service issues.

Justice Minister Brendan O’Connor yesterday raised the matter with the office of the Privacy Commissioner which will seek answers from Vodafone today.

Commissioner Timothy Pilgrim has power to launch a so-called "own motion" investigation on behalf of affected customers and direct that compensation be paid to each.

At issue will be whether Vodafone has logged attempts to access its data and knows which of its customers have been affected.

"It appears what has happened is that somebody shared a password"... Vodafone chief executive Nigel Dews told the Herald.

"It appears to be a one-off breach and we have got out internal investigators looking into it right now. We reset our passwords last night and we are resetting them every 24 hours until that investigation is complete."

Vodfaone merged with mobile provider '3' two years ago, but only Vodafone customers were affected by the breach.

The firm would lay criminal charges against anyone who had passed on passwords.

Mr Dews declined to say whether Vodafone kept logs of every access, saying he did not want to hand out information that could help hackers.

Telstra too said it would not disclose the nature of its security measures. It is believed to use the same customer management system as Vodafone although it may be configured differently.

A reporter for the Sun Herald had someone with a laptop and login code demonstrate how easy it was to call to call up her address, drivers licence number, date of birth and details of the time, location and destination of all of her phone calls and messages.

'I was surprised how easily the database could be opened'

Natalie O'Brien

SITTING in a western Sydney business with a laptop and someone who knew a login for Vodafone's customer database, I handed over my mobile number to be punched in - in seconds we could see all my personal details.

For some time I have been told information about telco customers could easily be accessed.

I have heard many stories of how undesirable elements could get the passwords to tap into anyone's phone account and gather confidential details as well as watch all their transactions including who they contact.

But I was surprised at how quickly and easily the customer database could be opened from anywhere by someone unconnected to Vodafone. I could see my full name, address, driver's licence number, date of birth, the pin number to access and change details on my Vodafone account.

My entire call list - everyone I had rung or texted and the time I spent on the phone - was visible.

University of NSW law professor Graham Greenleaf told the Herald if Vodafone did not keep such logs there would be no obvious limit on the number of its customers to whom it could be liable if its conduct was found to breach the Privacy Act.

"Where more than one person is affected they can declare it a representative complaint," he said.

"The Privacy Commissioner can order the payment of compensation. If the firm does not pay, he can take it to court."

Until now no Privacy Commissioner has used that power in the decade they have had jurisdiction over private companies.

"It sends a bad message - that compliance with the Act is optional," he said.

The Privacy Act requires private companies to take reasonable precautions to protect personal data.

"What is reasonable depends on the risks and the nature of the information, but common sense would tell you there is a real question if you are potentially exposing this sort of information to people who can access it not just from Vodafone offices but from remote sites."

Any Vodafone customer is entitled to ask when and to whom the firm has disclosed their information.

"That's just accessing your own record under Privacy Act," he said. The Act also allowed the equivalent of a private class action.

Piper Alderman lawyer Sasha Ivantsoff will this week mail 12,500 Vodafone customers a questionnaire and says he may extend a planned law suit if their responses detail privacy breaches.

"The main issues to date have been dropped calls, no service, voice mail not functioning and data not functioning. We haven't filed anything yet, so we can adjust our claim," he said.

Published in today's SMH and Age


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Let's celebrate. Telstra will be split!

Okay, so we apparently had to get an enormously expensive NBN to do it, but it is long overdue!


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What passes as cost-benefit analysis of the NBN

As I have outlined before this kind of stuff is, well, weak.

Here's the latest. It'll give you an idea of the quality of the analysis they are bringing to the task at the moment.

It came from Conroy in what was supposed to be 10 days into the caretaker period:


NEW REPORT HIGHLIGHTS TELEWORKING BENEFITS OF NBN

Australia could save between $1.4 billion and $1.9 billion a year if 10 per cent of the workforce teleworked half the time, according to a new report by Access Economics.

Telework is work conducted outside designated places of business, and the focus of the report was on working from home.

Communications Minister Senator Stephen Conroy said the report, The Impact of Teleworking Under the NBN, highlighted the advantages of delivering affordable, high-speed broadband to all Australians.

Innovation Minister Senator Kim Carr said: “Teleworking offers many advantages. It can deliver more flexibility in the workplace, more freedom to balance work and family, and more job opportunities for people living in regional and rural Australia....


Now read the report they are trumpeting. Ask whether it has even begun to consider the costs as well as the benefits of a switch to telework, or whether an NBN would make much difference to Telework.


Then read Joshua Gans, below the fold.

Oh, and read this, from The Onion: Waste Tax Dollars Only On Stuff That's Awesome


Telework - Access Economics Final Report



Now Gans:



That cost-benefit analysis - Joshua Gans

I thought it was time to pick up a theme on the National Broadband Network that has been going around for sometime; the lack of a clear cost-benefit analysis.

First, it is never going to happen. Put simply, the political rationale for the NBN is a combination of two things. First, that a big push on broadband was not going to happen without a big push from Government given the virtual monopoly held by Telstra and the ineffectiveness of regulation to manage that.

Second, there is the Yes Prime Minister Trident/Hollowmen/GFC Big Ticket/Shiny things rationale that is wonderfully captured by this piece in The Onion. You only want a comprehensive cost-benefit analysis if it is going to change your decision. The political rationale is so strong that that is not going to happen and so there is no point to attempts at quantification.

Second, even without a choice motive, there is a downside to the lack of clear analysis: that we can’t optimise the NBN and will inevitably end up causing some waste and inefficiency. I have already mentioned many times that by placing the policy sales pitch on broadband, and worse than that, on broadband speed, we leave that as the sole metric for performance. However, the NBN can potentially yield benefits of lower prices (virtually nothing in fact) for telecommunications and also a revolution in government services if basic broadband is freely available. The problem is that the Government is not being held to account for realising those benefits and this is very troublesome. That said, once the stuff is in the ground …

Third, and this is more worrying than the lack of a cost-benefit analysis, there has been no consideration whatsoever given to issues of market design. If we were serious about this, the NBN would be regarded as a platform that would allow telecommunications markets to evolve. Instead, it is regarded as a thing rather than an institution that sets the rules of the game. That is why we end up with fibre all over the place. That is why we end up with engineering criterion.

On that latter point, and with due respect to my colleague Rod Tucker, it may well be true that only fibre can deliver the fastest broadband speeds. But time and time again we find that people are willing to sacrifice engineering metrics for other things. The evidence is compelling that consumers will sacrifice speed for wires just as they sacrificed CPU power for portability (something IT people thought would never happen). For this reason, we need to be cautious in how we let technological choices be made and to provide rules to allow it to evolve flexibly. The problem is that that does not square with the one-eyed sales pitch on the NBN.

Finally, one thing we can’t quantify well in cost-benefit analyses is ‘future proofness.’ That provides a reason to push forward with the NBN but at the same time is the reason to ensure it is built in a flexible manner. You can’t simultaneously be claiming you are insuring Australia for the future without actually taking out insurance on the details.

Oh and by the way, there is no cost-benefit analysis for the Coalition’s plan. To do that would require a consideration of opportunity cost. So if the choice is between ‘do nothing’ and ‘do the NBN,’ as any first year economics student will tell you, you can’t justify ‘do nothing’ without first doing a cost-benefit analysis on the NBN.


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There's only one really important concept in economics [Warning: Broadband post]

It's opportunity cost.

You would be amazed at how many people don't get it.

Christopher Joye is someone who does.

Here are his twitter posts today:

I wonder whether Australia would be much better served by spending $43 billion on public transport systems
about 5 hours ago via Twitter for BlackBerry®

Okay let's spend $43 bn on public transport + throw in free wi-fi. I'm guessing efficiency gains wld be greater (while mkt supplies b-band).
about 5 hours ago via Twitter for BlackBerry®

$43bn wld buy ~230km of new metro rail track across Australia (using Parra-Epping price); equivalent to 68 times size Kings X to Bondi line
about 4 hours ago via web

Tonight ~105k people are homeless. $43 billion could completely eradicate homelessness. We could build 107,500 new homes worth $400k each.
about 3 hours ago via web

Perspective: give homes to 105k homeless or build 230km of new city rail + get 10mb/s. Who needs 2 d/load 100mb/s anyway? Youtube is fine
about 2 hours ago via Twitter for BlackBerry®

Rather than NBN we could solve health crisis with 43x new 340 bed hospitals-- bringing 14,620 beds online--based on ~$1bn cost of Melb's RCH
about 2 hours ago via web

Do we really need a taxpayer funded $43bn upgrade to Skype, iTunes, Facebook + YouTube? Kids will still go to school, people travel to work.
about 1 hour ago via Twitter for BlackBerry®

NBN's doing my head in. Simply GFC-induced grandiloquence. Too-smart-by-half kids in Rudd/Swan's office thinking let’s build $43bn lolly pop
about 1 hour ago via web

Where's the Treasury analysis or PC report showing us that this is the best use of $43 billion? There isn't one. We're all gullible fools
4 minutes ago via Twitter for BlackBerry®

@joshgans sure, compare it to the revenue/benefits you get from public transport, hospitals etc. The PROBLEM is NOBODY has done the analysis
6 minutes ago via Twitter for BlackBerry® in reply to joshgans

We don't even know if $43bn is the right number. Why not $10-20bn. Who made these decisions? What independent analysis was carried out?
2 minutes ago via Twitter for BlackBerry®

I agree completely.

What you think about the NBN says an awful lot about the way you think.


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Whoops, sorry. Fibre-to-the-Home should be a top national priority

Last night, on Yes We Canberra:





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Gans is right - the NBN won't solve much

Until today the NBN was offering speeds of 100Mbps.

As of today it is offering ten times as much - 1000Mbps.

The Coalition's "plan" will offer a theoretical maximum of 12Mbps.

But will it matter?

Economist Joshua Gans writes in an excellent piece today:

"I'm sitting here in the US at the moment on a 100Mbps maximum speed . But if I look at a website in Melbourne, my speed drops to 2Mbps. That is pretty much the maximum you will get from Australia to much of the internet, regardless of the theoretical maximum of your provider. This is because a key bottleneck is our submarine fibre link rather than our backbone network, or even the last mile."

Could he be right?

He is.

Here's the test I just ran from Canberra to Melbourne:

5.4 Mbps is pretty good.

But look at what happens when I try to get something from the US, which is where most of the websites actually live:

The speed drops to 1.2 Mbps -- way below both Labor's and the Coalition's promised speeds.

It won't get any faster under either Labor of the Coalition's plan.

(BTW, that doesn't bother me.)


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Bright idea: Don't privatise the NBN - Kohler

"Communications Minister Stephen Conroy should do more than just remove from the NBN legislation the option for it to be a retailer – he should put in a clause that it will never raise equity or be privatised.

The NBN can, and should, be fully funded by government-guaranteed debt.

Its prices should be regulated to provide a margin over the cost of that funding to pay for management and maintenance, and then that’s it.

And those misty-eyed nostalgics within the government who want to create another PMG or Telecom Australia should be taken aside, arm on their shoulders, and counselled: get over it, the world has moved on, and it wasn’t really better then anyway.

This is an opportunity to build a great public asset that will turn Australia into a hotbed of innovation, but for that to happen the leash on the NBN needs to be very tight – forever.

NBN Co chief Mike Quigley has done the right thing by declaring that he will only provide a very basic bitstream transport service – called Layer 2. The legislation’s main purpose should be to make sure his successors in the future do the same thing.

Raising equity and/or privatising the NBN will set up a demand for growth – equity investors require capital gain as well as dividends..."


The full thing is at at Business Spectator



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What if Telstra could gouge us less?

The inquiry is really all about the line rental charge.  Right now Telstra is allowed to increase it every year by the rate of inflation, whether or not its costs have actually increased.  There are bugger-all costs by the way.  Telstra does this because it faces no competition in line rental and uses the extra revenue to cut prices where it does face competition. 

The capped 22 cent local phone call and the 50 cent payphone fee are up for grabs.

Communications Minister Stephen Conroy has ordered a snap inquiry into all of the price caps that apply to Telstra, including the critical fixed line rental charge.

While it is understood that his interest is in tightening rather than loosening the controls, Telstra says it will argue that it should be freed from price caps in areas where it now faces effective competition.

The current controls in place since 2005 stipulate that Telstra can not charge more than 22 cents for a local call from a fixed phone unless it does so as part of a "discount plan"... Local calls from public phones are limited to 50 cents.

The basic line rental charge has to be uniform throughout Australia and can grow no faster than the consumer price index . In addition the price of a "basket" that includes line rental, long-distance charges and calls to mobiles has to stay fixed in absolute terms, meaning that as line rental charges rise other charges have to fall.

Mobile calls are exempted form the caps on the ground that the industry is competitive.

The price controls were due to expire in mid-2009 and were extended a year while the government developed plans for its national broadband network.

The Minister's statement says "given that the NBN is in an early stage of development" he will extend the controls for a further two years after first asking the Competition and Consumer Commission to conduct a "limited" inquiry into the form they should take.

The ACCC has just two months to report and wants submissions by February 12.

Telstra said in a statement it was "keen to ensure that any controls take into account the increased level of competition in the marketplace".

Published in today's Age

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The case against Conroy

Gittins and I love what Conroy's done. As Gittins says: "For Telstra to have been given immunity - an eternal licence to rip off Australian phone users - would have been intolerable"

But Ken Davidson argues today that part of Conroy's vision appears to be to force us to pay more by cutting off what we have now.

An extract:

"It is a blackmail attempt by the Government designed to force Telstra (owned by 1.4 million voters) to divest itself of a copper network, which generates cash flow of around $6 billion a year, and make it worthless within eight years. It is doing this in order to replace it with a system that nobody wants or needs at a cost to households and businesses for access to the telecommunications network 30 to 40 per cent higher than now."

The full thing is below.

Be careful what you wish for. Telstra's competitors - such as Optus, AAPT and Primus, who have led the charge for breaking up Telstra into two companies in order to protect their own arbitrage businesses - may have shot themselves in the foot.

Forget about competition, level playing fields, cheaper, faster telephone and internet services. What is unfolding in the policy announced by Communications Minister Stephen Conroy is a $43 billion protection racket designed to keep Telstra's competitors in business.

The competitors are basically marketing and billing organisations. With the assistance of the Australian Competition and Consumer Commission, they are allowed to tap into the telecommunications network at the telephone exchanges at a price that doesn't reflect the cost of building the network, and then resell the capacity at a price that allows them to undercut Telstra in the profitable major city markets. Telstra, of course, is expected to build and maintain a network that covers the whole country.

This cosy arrangement in the name of competition was threatened by Telstra's announcement in 2005 that it would begin upgrading the network by rolling out fibre to the node at the end of the street as part of the evolutionary upgrading of the network - as has occurred over the past 100 years.

The point was that it would bypass the exchanges and put the arbitragers out of business.

So what? The introduction of automatic exchanges and the change from analog to digital network destroyed more than 40,000 Telstra jobs during the '80s and '90s, which was managed by the former public monopoly without major union disruption.

By comparison, the job destruction as a result of technological change bypassing exchanges and putting the arbitragers out of business would be a flea bite by comparison.

Most of the jobs are in call centres, which are being moved offshore to India and the Philippines in any case.

Fibre to the node is a sensible intermediate step to eventual fibre to the home if it is ever needed.

Big institutions such as hospitals, universities, utilities, big corporations, government departments and even schools already have access to direct fibre connections.

Copper wires, properly maintained, can give speeds up to 50 megabits, which is more than adequate for any need a household might conceivably imagine.

In Devonport and Hobart, where the Tasmanian Government has been experimenting with building fibre to the home at Commonwealth expense, shows nobody wants it while the cheaper copper alternative is available.

The mind boggles. What could a sensible government do with $43 billion to invest over eight years? Think global warming. Think of the infrastructure such as electrification of rail lines, urban public transport, base load renewable energy, conservation and recycling water, which will be needed to reduce our carbon footprint in order to ensure that the world will be a fit place to live for our children and grandchildren.

Meanwhile, Telstra could use its internal cash flows to upgrade the network, supplemented by a multibillion- dollar sell-off of more than a thousand large exchanges, most occupying valuable real estate in the major cities.

Now that would be a win-win situation leading to lower real prices.

What Telstra's competitors hoped was that, by splitting Telstra in two, they would keep their privileged access to the copper network. Not so. As the experience in Tasmania makes blindingly obvious, the only way customers can be induced to take up the fibre-to-the-home option is if the copper network is closed down.

Under the plan, the copper network will become progressively redundant as the NBN network is rolled out. Even with the febrile imaginings of the ACCC as to what constitutes competition, it cannot set a wholesale price for access to the new network that is lower for Telstra's competitors than for Telstra retail.

Without scope for arbitrage, the competitive advantage to Telstra's competitors disappears. Even with the arbitrage handicap, Telstra still holds 70 per cent of the fixed-line market and would be able to drive its competitors out of business, based on a level playing field.

It is bad public policy. Even worse, it is politically disastrous.

It is a blackmail attempt by the Government designed to force Telstra (owned by 1.4 million voters) to divest itself of a copper network, which generates cash flow of around $6 billion a year, and make it worthless within eight years. It is doing this in order to replace it with a system that nobody wants or needs at a cost to households and businesses for access to the telecommunications network 30 to 40 per cent higher than now.

The way this policy was arrived at cannot bear the most superficial examination. When the Opposition stops staring at its navel, it will realise this is Rudd Labor's equivalent of WorkChoices with the same capacity to destroy the Government.

Published in today's SMH and Age

Graphic: From here

Read more >>

Alston, Beazley and the telecommunications union should hang their heads in shame.

Whatever the Coalition says about this week's long-overdue decision to split Telstra, don't expect it to call for an inquiry.

Here's why.

The Coalition's then Communications Minister Richard Alston (now High Commissioner to London) ordered such an inquiry in December 2002.

Academics and interested parties spent all that year's Christmas season preparing submissions and produced 68 of them by the deadline of January 31. Hearings were to begin on February 7.

Then on February 5, Alston got the committee to cancel the inquiry.

He said the prospect of an inquiry had "achieved its objective by flushing out [Labor's spokesman] Tanner into admitting that his structural separation proposal was a foolish and unworkable concept".

As a result there was "no valid reason for progressing this inquiry".

Rarely has a politician misused the parliament's processes so cynically...

John Quiggin spent Christmas working on one of the 68 submissions. It's here.

He wrote at the time:

Like 60-odd other suckers, I put a submission into the House of Representatives committee inquiring into the structural separation of Telstra. I knew it was an Alston stunt, designed to embarrass Labor, but I thought it might provide a useful forum for public debate. Apparently Alston has now realised this and panicked. Even though he had the numbers on the committee, the evidence showed that his policy was incoherent and unsustainable. So he's ordered the troops to put up the barricades.

Here's the email the committee sent him:

Dear Professor Quiggin

The committee has decided NOT to hold the public hearing scheduled for
tomorrow, 7th February, 2003. It has also decided NOT to hold any of the
scheduled public hearings.

I apologise for any inconvenience.

Just about the only public figure who comes out of this well is Keating. He opposed the creation of the Telstra megalith at the time.

Beazley, and his mates in the telecommunications union insisted that somehow a megalith would be good for us.

The Coalition bought the line.

It is a measure of how far we have travelled that these days the merits of genuine competition are not in dispute.

Alston, Beazley and the telecommunications union that foisted Telstra on us should hang their heads in shame.

Read more >>

So how are they going to lay down all this fibre?

Won't they have to dig up everywhere?

And won't the cost be GINORMOUS?

I reckon it won't.

Here are 3 reasons why: (you might find the third unsavory if you are uncomfortable around toilets)

1. Virtually every time Telstra has dug up a street in recent years it has laid down fibre alongside copper wires. It costs next-to-nothing, and it is there just in case. The streets of Mount Gambier and Orange are apparently full of it.

It is known as "dark fibre" because it isn't yet lit. It is waiting for a purpose.

If Telstra does take part in the government-led Fibre-To-Premises consortium, it will tip in this valuable but otherwise useless pre-existing fibre in return for equity. It will get money for nothing (equity actually).

2. Getting fibre to houses and businesses in actually pretty easy, where there are power poles...

In the ACT the electricity authority part-owns Transact which hangs fibre cables off the electricity poles and then slings wires into houses. It doesn't use the Telstra wires. As I wrote once, the Telstra sockets remain intact, unloved and unused on skirting boards througout Canberra.


What goes in to each house is actually new copper wire, from junction boxes such as this one I photographed this morning, but the cost would be the same for stringin in a fibre - not that much. The total cost of the Transact service is reasonable Indeed, phone calls from Transact  to Transact customers (that bypass Telstra) are free.

3. But in places such as Gungahlin in the ACT and Elizabeth, north of Adealaide the electrical wiring is underground - because those new cities  were "modern" and underground wiring was thought then to be modern.  There are no poles from which to sling wires. Getting any new service into the houses is difficult. So what to do?

Use the sewerage pipes. I mean it. Have the fibre coming into each toilet bowl.  Japan and the US are already doing it. There is plenty of room within each sewage pipe, and every home already has the sewer connected. The fibre swims in the sewage and a tiny robot clears the pipes to give it lots of room - an added bonus.  It is much cheaper than digging new trenches.

Speed-of-light communication to most Australian businesses and houses could be easier and cheaper than many people believe.

Read more >>

Telstra - the witch is dead

Ian Verrender in today's Herald and Age:

"As a gesture in nation building, they don't come much grander than yesterday's announcement of a $43 billion investment in a national broadband network by the Prime Minister. But it also was a transforming moment for Telstra. No longer will the company control the fixed-line telecommunications network - its monopoly has been smashed, its market power shredded.

Putting aside technical and economic considerations for a moment, the new network will help rectify a glaring error made when John Howard and Nick Minchin sold Telstra to the public a decade ago.

Back then, Telstra should have been split, with one company selling telecommunications services and another owning the hardware. Instead, the Coalition government, eager to maximise returns, chose to sell the company intact with an overarching legal framework that would force Telstra to make its network available to competitors. The potential conflict was obvious from the outset and became a reality almost immediately."

Read more >>

My intitial broadband thoughts

It was to be $4.7 billion of government money, now it's at least half of $43 billion.

Wow!

And 90 per cent of it will be fibre-to-house, not the merely-incremental fibre-to-node it was to be.

Best of all, it bypasses Telstra's existing copper wire network, removing all sorts of problems.

And because it will totally wholesale, it it'll also bypass Telstra's attempts to stop other companies using the public backbone. There will be a new public backbone, and everyone will be abvle to get access qucikly and on good terms.

Of course, the whole idea is still silly, but it you are doing to do it, it is an effective, gutsy, game-changing and incredibly-expensive way to do it.

UPDATE: Joshua Gans: "Wow!"

UPDATE: Paul Budde writes: Australia starts leading the world...

"The Government’s plan sees us skipping the halfway house of so called ‘fibre to the node’ which would have seen street cabinets being installed around the country. The government will now bring the fibre network straight to people’s homes.

This is the most ambitious infrastructure ever undertaken in Australia and will be the most ambitious FttH network anywhere undertaken in the world.

The Australian Government is one of the few governments who, in a holistic way, understand the importance of broadband across the various sectors. This network is not just for high-speed Internet and enterainment but, more importantly, for healthcare, education, smart grids, etc.

The $43 billion also clearly indicates that the investment will go well beyond Internet and broadband and that it understands the need to use it for the digital economy. This will set Australia up as potentially one of the international leaders here. This Government understands the trans-sector approach that is needed to stimulate the digital economy. The nature of the investment further highlights this it is an open network and the infrastructure will be made available on a wholesale level. This makes it possible to deliver that infrastructure on a utilities’ basis which, of course, is going to make access to the network very affordable to the end users.

While the concepts are right – high quality broadband and an open access infrastructure – at the same time, such a massive project requires planning and design that is going to take time. The Government had foreshadowed two quick wins:

. The first project will start in Tasmania perhaps as early as within the next few weeks.

. The government has indicated it will also immediately start work on the backbone network. This has been discussed for many years and indeed work can start on this rather quickly.

But the big work will require replacing the copper cables that are going into people’s homes by fibre. Examples from around the world have indicated that it is very difficult to build a business plan around this, just based on Internet access – you simply will not be able to generate enough revenue from such services that warrant such an investment.

The government is taking the sting out of this by basically guaranteeing the investment money for the project and also indicating the use of the infrastructure for other sectors (healthcare, etc). What this means is that, for example, healthcare can independently provide e-health services to all Australians over the network, without these people needing to have a paid subscription. Media companies could do the same if for example they want to finance their applications through advertising. So what is happening is that there won’t be a gatekeeper involved who clips the ticket of everything what is happening over the network.

The accompanying regulatory documentation doesn’t give Telstra any room to manoeuvre. The company can of course participate but based on the rules of the government and not based on the monopolistic structure of its current vertical integrated service offerings. Most current players in the industry have already indicated that they have no problems with this concept, so there is a good chance that some, if not all of the players, involved in the tender become partners in the National Broadband Corporation.

Open network = innovation and affordability

The open network approach makes it possible to offer the basic infrastructure on a utility basis to content and service providers, and this paves the way for the development of the digital economy. In this way the FttH investment will deliver an economic multiplier effect that will benefit the healthcare, education, energy and environment sectors as well as the digital media and Internet providers.

These content and service organisations can now independently develop their own products and services without being controlled by a gateway-keeping and ticket-clipping, vertically-integrated telco.

The structurally separated model of the FttH plan also allows the National Broadband Corporation to work very efficiently. Using infrastructure construction companies in the most effective way of building a network. This allows Telstra, Optus and the other telcos to concentrate on developing the intelligent structure on top of that, and this will deliver innovative new applications and services in the most cost-effective way, securing an affordable service for everyone.

As we see with the Tasmanian State Government the project allows regional organisations to add their own local and regional touch to it and it supports local competition and local development, while at the same time fitting into the overall national picture.

What’s next for Telstra?

Telstra now has another choice to make. It can continue its obstructive behaviour and launch new court cases or (let us hope!) it can look at the business opportunities that are now available to it. It can work with the new Corporation and establish working relationships, based on the new rules set by the government.

What the new plans are doing is providing a bigger cake – not just another telephone or Internet network, but an infrastructure that will attract a large number of new services.

BuddeComm estimates that once the network is deployed healthcare alone could account for 25% of its capacity. Equally, given the right business circumstances, services related to education and energy/environment could take up another 25%. Over time the traditional telecoms and Internet services will only account for perhaps 25% of the NBN.

Not that these latter services have shrunk in volume or revenue – this simply demonstrates the volume of additional growth that will be unleashed on this open network infrastructure.

While Telstra’s NEXT G network is certainly impressive and its cable network upgrade will also help it to move forward, it will be no match for this new state-of-the-art FttH.

FttH and wireless

There may be many steps along the way but the FttH is the final destination. Once fully deployed the FttH infrastructure will deliver 100Mb/s and who knows what else? We can only guess what might be possible in five or ten years’ time.

And wireless broadband will be weaved into all of this, partly to make sure that people don’t have to wait five or ten years before a fully-deployed FttH network is available to them, and partly because this technology is also evolving rapidly and in less densely populated areas it will be able to deliver a service equal to FttH.

Paul Budde"

Joint media release

PRIME MINISTER
TREASURER
MINISTER FOR FINANCE
MINISTER FOR BROADBAND

New National Broadband Network

The Rudd Government today announced the establishment of a new company to build and operate a new super fast National Broadband Network.

This new super fast National Broadband Network, built in partnership with private sector, will be the single largest nation building infrastructure project in Australian history.

This new National Broadband Network will:

Connect 90 percent of all Australian homes, schools and workplaces with broadband services with speeds up to 100 megabits per second100 times faster than those currently used by many households and businesses

Connect all other premises in Australia with next generation wireless and satellite technologies that will deliver broadband speeds of 12 megabits per second

Directly support up to 25,000 local jobs every year, on average, over the 8 year life of the project.

Under the Rudd Government's new national broadband network every house, school and business in Australia will get access to affordable fast broadband.

OWNERSHIP AND FINANCING

The Rudd Government's National Broadband Network will be built and operated by a new company specifically established by the Australian Government to carry out this project.

The Government will be the majority shareholder of this company, but significant private sector investment in the company is anticipated.

The Government will make an initial investment in this company but intends to sell down its interest in the company within 5 years after the network is built and fully operational, consistent with market conditions, and national and identity security considerations.

This company jointly owned by the Government and the private sector will invest up to $43 billion over 8 years to build the national broadband network.

The Government's investment in the company will be funded through the Building Australia Fund and the issuance of Aussie Infrastructure Bonds (AIBs), which will provide an opportunity for households and institutions to invest in the national broadband network.

The new investment is also the biggest reform in telecommunications in two decades because it delivers separation between the infrastructure provider and retail service providers. This means better and fairer infrastructure access for service providers, greater retail competition, and better services for families and businesses.

This announcement follows the Government's decision to terminate the NBN Request for Proposals (RFP) process on the basis of advice from the independent Panel of Experts that none of the national proposals offered value for money. The Panel noted the rapid deterioration of the global economy had a significant impact on the process.

This historic nation-building investment will help transform the Australian economy and create the jobs and businesses of the 21st century.

SPECIFICATIONS

The new superfast network will:

. connect homes, schools and workplaces with optical fibre (fibre to the premises or 'FTTP'), providing broadband services to Australians in urban and regional towns with speeds of 100 megabits per second - 100 times faster than those currently used by most peopleextending to towns with a population of around 1,000 or more people

. use next generation wireless and satellite technologies that will be able to deliver 12 megabits per second or more to people living in more remote parts of rural Australia

. provide fibre optic transmission links connecting cities, major regional centres and rural towns

. be Australia's first national wholesale-only, open access broadband network

. be built and operated on a commercial basis by a company established at arm's length from Government and involve private sector investment

. be expected to be rolled-out, simultaneously, in metropolitan, regional, and rural areas.

Every person and business in Australia, no-matter where they are located, will have access to affordable, fast broadband at their fingertips.

High speed broadband is increasingly essential to the way Australians communicate, and do business. It will help drive Australia's productivity, improve education and health service delivery and connect our big cities and regional centres.

The Government will invest in this major nation-building infrastructure to stimulate jobs in the short-term and pay a dividend to the Australian people through enhanced productivity and innovation in the long-term.

This is a major nation-building project that will support 25,000 jobs every year, on average, over the life of the project. At its peak, it will support 37,000 jobs. Given the productivity gains associated with this investment, the full benefits will continue to flow for decades beyond the completion of the project.

The Government's announcement today has been informed by expert advice. The Panel of Experts has encouraged the Government to invest in optical fibre technology, supplemented by next-generation wireless and satellite technologies. The Australian Competition and Consumer Commission has also endorsed the use of FTTP as a superior technology to Fibre to the Node.

The preliminary estimate is that the enhanced NBN network will cost up to $43 billion, which has been developed taking into account advice from specialist technical advisers.

The Government's objective is to achieve 90 per cent coverage of the FTTP network, and remaining coverage to be delivered through wireless and satellite technologies, within this funding envelope. Initial advice to the Government is that this objective is achievable, but this estimate will be subject to an implementation study.

The Government will seek private investment in the company to draw on private sector capacity and expertise. However, ownership restrictions will be established to protect the Government's objective of a wholesale open-access network.

PLAN OF ACTION

To turn its vision into action the Government will immediately:

Commence an implementation study to determine the operating arrangements, detailed network design, ways to attract private sector investmentfor roll-out early 2010, and ways to provide procurement opportunities for local businesses

Fast-track negotiations with the Tasmanian Government, as recommended by the Panel of Experts, to build upon its NBN proposal to begin the rollout of a FTTP network and next generation wireless services in Tasmania as early as Julyan immediate start on a nation-wide investment.
Implement measures to address 'black spots' through the timely rollout of fibre optic transmission links connecting cities, major regional centres and rural towns - delivering improvements to telecommunication services in the short term.

Progress legislative changes that will govern the national broadband network company and facilitate the rollout of fibre networks, including requiring greenfields developments to use FTTP technology from 1 July 2010.

Make an initial investment in the network of $4.7 billion.
Commence a consultative process on necessary changes to the existing telecommunications regulatory regime.

The initiative announced today is a historic nation-building investment focused on Australia's long-term national interest. It will fundamentally transform the competitive dynamics of the telecommunications sector, underpin future productivity growth and our international competitiveness.

CANBERRA
7 APRIL 2009
PRESS OFFICE (02) 6277 7744

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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.

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That $1 billion contract? Terminated.

It'll no longer be possible to claim that the new government is all talk.

Why Steven Conroy pulled the plug:

In opposition the Communications Minister Senator Conroy called the $1 billion Optus-Elders rural broadband network a “dog of a product”.

In government, he had to put it down.

Steven Conroy has his own much bigger broadband vision.

He wants 98 per cent of us to have access to very fast broadband (12 megabits per second or more) delivered by an optic fibre cable stopping just metres from our door.

He has been given access to $4.7 billion from the Future Fund to do it. As he said last week it was Labor's biggest spending commitment: “bigger than health, bigger than education”.

It would, he said, “rival the Snowy Mountains Scheme in its scale and significance to Australia”.

But there are two big problems...

One is that most of us in cities already have access to broadband. Perhaps not as fast as the Minister would like, and for various technical reasons not extending to parts of Gungahlin in Canberra, but access nonetheless.

The other is that most of the rest of Australia outside of the capital cities was stitched up by John Howard when he signed a deal with Optus and Elders just before he called the November election.

If the “OPEL” consortium had gone ahead and spent the $958 million John Howard had promised to fling its way the business case for tossing $4.7 billion into Senator Conroy's new national network would have begun to look shaky.

The Minister said yesterday that the technical people in his department had analysed the mapping and testing undertaken by OPEL and concluded that it would be unable to provide the coverage it had promised.

This meant that it had failed to meet the terms of its contract.

But there have long been such doubts.

It would be interesting to know what the technical people in the department concluded about OPEL's ability to do what it had been promised at the beginning.

Did they think that the technology OPEL was to use would be incapable of doing the job back then? Did such advice reach their Minister, Senator Coonan?

Or did the Department of Communications bide its time and wait for a new minister who would be receptive to its doubts?

The Minister's decision means that a monopoly will provide broadband in much of the bush, and a partly government-owned one at that.

Whether you think that's a good or a bad thing depends on your point of view.

It will mean that Australians in the bush will wait longer. Senator Conroy's “Snowy Mountains scheme” sized project is likely to take five years.

For the rest of us, it won't mean much. We are generally happy enough with the broadband we have got. We are not hanging out for the Conroy scheme and whether or not we use it when it comes will depend on price and the alternatives available at the time.


THE NEWS ITSELF:

In a dramatic exercise of ministerial power the Communications Minister Senator Conroy yesterday canceled the Coalition's $958 million “final failed broadband plan” delaying the delivery of improved internet services to 900,000 rural Australians.

Declaring that the OPEL consortium made up of Optus and Elders had failed to meet the terms of a contract it had made with the previous government, Senator Conroy canceled the deal, freeing up almost $1 billion to add to the budget surplus.

Elders and Optus were to lay around 15,000 kilometres of fibre-optic cables throughout the bush, taking high-speed broadband to places that are at present only served by satellite.

Gaps in coverage were to be filled in with largely-untested WiMAX wireless transmitters in order to reach 90 per cent of the under-served premises in rural Australia.

The Minister said yesterday that his department had analysed OPEL's maps and technical data and concluded that its network would reach only 72 per cent of the under-served premises.

“On the basis of the department's assessment, the government determined that OPEL’s implementation plan did not satisfy the condition precedent of the funding agreement,' Senator Conroy said.

Optus told the stock exchange it had already spent $16 million on the project, and Elders said it had already spent $15 million.

Neither indicated whether it would be suing the government, or seeking recompense for the money it had spent.

The Optus chief executive, Paul O’Sullivan said the department's analysis was flawed.

“There were serious errors in its database of underserved premises which led it to underestimate the number which would benefit,” he said.

“Optus has made an offer to the government which I repeat publicly today: we are quite happy to have a respected independent expert audit OPEL’s coverage database and the department’s coverage database.”

“The implications of this decision for confidence in future competitive selection processes conducted by this Government will need careful consideration.”

A spokesman for Elders, Les Wozniczka said the project had been a “live” one.

“It was there to be done and be operational within two years. The tried and tested way of introducing new technology into Australia is to bring in competition, and that's not going to happen,” he said.

The decision leaves leaves the way clear for the minister to proceed with his promised national fibre-to-the-node broadband network which would service both remote and city customers providing broadband faster than 12 megabits per second to 98 per cent of the population.

The scheme would be funded by $4.7 billion from the government's Future Fund and so would not affect the budget surplus.

A private partner would contribute a similar sum to the consortium.

Telstra yesterday denied that it expected to be that partner.

“It would be not be right for me to propose that we are in the box seat at all, because it's an open tender and we will work with the Government to meet their requirements,”said its spokesman Geoff Booth.

Senator Conroy has given his broadband advisory panel until September to recommend which company will win the $4.7 billion contract.

The network is expected to take five years to build.

Optus is heading the so-called G9 consortium of telecommunications providers which is competing against Telstra for the contract.

The Opposition Leader Brendan Nelson said the decision left regional broadband services in the lurch.

“The average hardworking Australian taxpayer would have have to ask why they have to spend billions of dollars more, when we already had a solution in place,” he said.

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Jam-jar economics.

Imagine for a moment that the Government still owned Telstra. Imagine that it announced that a certain proportion of each year’s dividend would go to public service pension payouts, a certain proportion would go to funding much needed capital expenditure on universities, and a certain proportion would go to go to buying medical equipment.

You would probably think that the government was crazy: “Why is it bothering to tell us this stuff? – this is what we expect it to do.

And your would probably think that it was a good idea for the government to keep owning Telstra.

Stop imagining, and think about what’s actually happening.

The government’s Future Fund (and associated Higher Education and Health Infrastructure funds) still does own $17.6 billion of Telstra shares and heaven knows what of other shares...

The Treasurer has announced that a certain proportion of each year’s dividends will go to public service pension payouts, a certain proportion will go to funding capital expenditure on universities, and a certain proportion will to buying medical equipment.

As he put it yesterday: "we are now beginning to see the results of long, hard work to strengthen the Australian economy.'"

But it could have been done years ago. It could have been done in any year that Telstra shares and the like paid dividends.

Steven Bartos, a former deputy secretary of the department of Finance describes it as “jam jar economics”.

You put away a little bit of your expected earnings for this, a little bit for that and so on – for the kind of thing you would have any way.

Peter Costello is asking to be given credit for the kind of things we employ him to do any way.

He wants us to re-elect him for it.

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Talking to Telstra.

Nicholas Gruen has been trying to talk to Telstra.

An extract from its series of emailed responses:

"I can assure you that all of our plans are fixed and are non-negotiable.

I will most certainly forward your concern on to our products and services team to ensure that they are aware of your concern. We most definitely value your custom....

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Saturday Forum: Telstra's worst nightmare just got worse.

Telstra’s worst nightmare just got worse. Until this week it had been understood that if ever there was big money to be spent building phone and broadband networks in the bush, Telstra would do it.

And if ever Australia was to get a rolled-gold replacement for its copper-wire based network in the cities Telstra would build it. It owns the network we already have, and more importantly it owns the wires going into each home that would have to connect to the new network.

On Monday John Howard and his Communications Minister Helen Coonan rendered the first assumption obsolete. A new consortium made of Optus and Elders was given almost $1 billion to help it provide broadband and associated phone services in the bush.

For the first time where big government money was at stake Telstra lost out. It says the government “ignored Telstra’s bid altogether, refusing approaches to meet on the matter and not once asking for any further information or clarification”...

Optus and Elders will be able to make Telstra irrelevant in the bush if they want to, using their own equipment and radio transmitters to bypass Telstra’s ownership of the wires that go into houses and farms.

Work on the network will start in eight weeks. When it is finished in two years time Telstra’s old slogan “Advancing Australia” will be quaint and wrong.

In the cities Telstra believed it had the government in a headlock. It said only it could build a fibre-to-node broadband network that would connect that would reach every house in every street. Again, its trump card was that only it owned the wires going into the homes.

It said unless it was freed form the oversight of the Competition and Consumer Commission it wouldn’t build it, and it imposed a deadline. It gave the government until July 31.

On Monday Howard and Coonan ignored it on that as well. They up an expert committee to more broadly examine ideas on broadband with no fixed deadline.

They called Telstra’s bluff. Telstra had threatened to walk away in the belief that no-one else would be able to build a network that would supersede its own.

On Wednesday Telstra’s nightmare turned toxic.

Europe's largest telecommunications company Deutsche Telekom was named as one of several international corporations keen to build a new broadband network in Telstra’s place.

In the ACT we know that despite the conventional wisdom it is possible to build a broadband network and take it into homes without Telstra.

TransACT puts it into ACT homes by putting in its own wires. Telstra sockets sit unloved on ACT skirting boards, presumably still connected to the network but irrelevant.

It is a very expensive exercise for TransACT and it is able to do it only because one of its parents ACTEW already owns the electricity poles from which it strings the cables. (It can’t do it where it doesn’t have the poles, which is why it can’t service parts of the Canberra suburb of Gungahlin. The electricity wires put underground.)

With enough money behind it a corporation such as Deutsche Telekom could render Telstra’s entire network irrelevant.

Operating as a new Australian company with new equipment it could secure greenfields industrial agreements and employ only the minimum of highly skilled staff it needed to make its network work. Unburdened by thousands of telephone exchanges, call centres, retail shops and creaking IT systems, it would be a cheaper network than Telstra’s to run.

If a company such as Deutsche put a fibre wire into every home instead of a wire (a very expensive undertaking), it would have a network that ultimately would cost very little to maintain.

As the aging Telstra network became more expensive to run and as the new corporation paid down its debt and gained more users its network would keep getting relatively cheaper.

And far from trying to keep other companies off its network, as Telstra has done, it would welcome them. The new network owner wouldn’t be in the complicated and expensive business of retailing. It could make more money by selling access to the network wholesale, at reasonable prices. With practically unlimited capacity on the network it would make more financial sense for it to charge a low price and get a lot of customers than to charge a high price and get few.

All Deutsche Telekom would need would be the money. The worst part of the scenario for Telstra is that it would be find it in spades.

Australia’s Macquarie Bank and Babcock and Brown have made fortunes finding the money for these sort of deals. Macquarie does it for radio and TV transmission towers and for toll roads. Babcock and Brown is part of 3 groups bidding for the right to build Singapore’s high speed broadband network.

Right now the world is awash with superannuation and pension fund money looking for safe, reliable and ultra-long-term returns. Investment banks such as Macquarie and Babcock use this money to build or buy infrastructure designed to last a very long time. A fibre broadband network covering every city in the country would last longer than most of the assets Macquarie packages into trusts, and the income from it would never stop.

For putting such deals together (contracting the builders, working with a company such as Deutsche and spruiking the trusts to funds) organisations such as Macquarie and Babcock and Brown charge healthy fees. But the investors in the trusts don’t mind. Boring, stable income earning-earners are exactly what they need.

(Those investors would however be very alarmed if the trusts started behaving like Telstra and sprayed around billions in ill-conceived ego-boosting expansion plans.)

The plain but unlikely-sounding truth is that an infrastructure company that only provides infrastructure is worth more to a certain type of investor than one combined with an aggressive and market-leading retailer.

Telstra had and still has the opportunity to structure itself as such a company. It could either split itself into two shareholder-owned companies, one operating the wires and other using them or split itself internally. One of its business units would chase business from the likes of Optus, iiNet, and Telstra Retail while the other one would compete agressively against them.

To date Telstra has resisted structural separation at every turn. It persuaded the former Communications Minister Senator Richard Alston to do the same. Late in 2002 he set up a parliamentary inquiry into the idea in an attempt to discredit it and then shut the inquiry down when it looked as if it was not going his way.

The government and Telstra’s shareholders may now be wishing that Richard Alston had been less successful. In private hands and conflicted as both Australia’s dominant wholesaler and retailer Telstra has behaved like a bully. It won’t turn on the high-speed equipment it already installed in many of Australia’s exchanges for fear that competitors will try to buy access to it. It charges so much for its impressive Next-G wireless broadband service (through excess download fees) that neither its competitors nor most of its retail customers can afford to use it for true broadband. And it lobbies and delivers ultimatums in order to keep its competitors away from its wires.

The group that Senator Coonan has set up to examine ideas for broadband is likely to be extremely receptive to proposals from stand-alone operators such as Deutsche with Macquarie. They would be proposing a network that stood alongside, rather than replaced the existing one. Telstra wanted to disconnect each of us from its existing network, reconnect us to its new higher-priced one and turn the old network off.

With the new network and Telstra’s old one operating side by side Australians would have a choice - old technology or new, Telstra’s prices or those of the companies using the new network. The competition would hold prices down, at least until Telstra’s network died of old age.

12 consortia are bidding for the right to build the Singapore network. It is highly likely that they would be interested in doing so here as well.

Telstra’s 1.7 million shareholders stand to lose a lot from the decisions announced by Howard and Coonan this week, especially Telstra’s management makes good its threat to walk away from its offer to build a fibre-to-node network after July 31.

Those shareholders might take the view that Telstra’s management has served them incredibly badly, that Telstra’s lobbying and its threats have unleashed processes that Telstra can no longer control.

The Labor Party might be feeling bruised as well. Its “nation-building” plan to kick $4.7 billion into a consortium to build a national fibre-to-node network looks redundant. Now that Elders and Optus have been given money to fix up the bush, a fibre-to-node network in the cities looks commercial without government money.

As far as I can tell Labor’s Communications spokesman Senator Steven Conroy put out only one press release after the Minister’s announcement this week, complaining that it defined Hobart and Launceston as regional centres rather than as cities.

Like Telstra, Labor appears to have been blindsided.

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Tuesday column: Calling Telstra's bluff, with malice.

Telstra says it is “unbelievable” and I am inclined to agree. The government has called Telstra’s bluff. With malice. In an election year. It was about time somebody did.

Imagine if you can a really big company, absolutely dominant, with access to the very best lobbyists money can buy.

Used to getting its own way, it decides to take advantage of the political tension in the lead up to an election to extract a really big prize from the government – one bigger than it has ever reached for before.

Perhaps because it is so audacious it asks the government to keep the details secret.

It says it will invest billions of dollars in a new cables and equipment that will give its city customers access to pretty much the same sort of service that they had before, but at a much higher price.

In order to do it will disconnect each of its customers from its existing cables and exchanges, ensuring that they have no option but to pay the higher price...

Competitors who have attached their own equipment to those cables and exchanges in order to sell a competing product will have their investment made worthless.

Its new cables and exchanges will be all but impossible for its competitors to use, and in order to make it hard for them to even to even buy its service wholesale and compete as retailers it demands the right to set its wholesale price prohibitively high and demands a guarantee that the competition regulator won’t order it to cut it.

Naturally, the government has doubts.

So the company ramps up a PR campaign so crude and so expensive that it makes the government’s own workplace blitz look modest.

(And with economic arguments so dodgy it makes you hope the company doesn’t believe them. As recently as this month the company’s Chief Financial Officer was quoting an estimate of a $30 billion economic benefit from national broadband exposed as a furphy by this newspaper back in April.)

The company delivers brochures to each of its millions of shareholders and customers asking them to lobby members of parliament on its behalf. It creates a fake “grassroots movement” and takes out full-page ads, all aimed at publicly pressuring the government to adopt a proposal it has demanded that the government keep secret.

And it imposes a deadline.

A self-respecting government would tell the company where to get off.

I am proud to say that ours just has. With malice.

It has told Telstra that in future it should take its ideas to an expert panel, not to the Minister. And it has loaded that panel with experts likely to be appalled by those ideas.

The government put carbon emitters on its emissions trading taskforce. It has put no-one friendly to Telstra on its telecommunications taskforce.

Instead it has appointed Dr Ken Henry, the head of the Treasury and an economic rationalist whose belief in the virtues of competition and views about corporate welfare are well known.

He will be joined by the head of the Department of Communications and a Deputy Secretary in the Prime Minister’s Department. Yesterday Telstra complained that the government had stopped talking to it, something that might provide a clue as the stance of those departments.

Also on the panel will be three experts on competition, all of whom have either worked or still work at the Australian Competition and Consumer Commission, the organisation from who’s oversight Telstra wanted to be freed. It is a fair bet that they don’t believe in special deals.

Rounding out the expert group will be business figure Len Bleasel, a former head of AGL whose partly-owned subsidiary TransACT took on Telstra in the ACT, and company director Dick Warburton who has run businesses including David Jones, Southcorp and Tabcorp; firms for whom communications costs mater.

Even worse for Telstra (and for the Opposition which had wanted to make the differences between the parties an election issue) the expert taskforce has been given no set deadline. It will almost certainly keep considering the proposals put to it until well after the election when the time for political pressure has passed.

There is no reason why the taskforce should have a deadline. Almost anyone in an Australian city who wants access to broadband already has it. There are some black spots, parts of Gungahlin amongst them. But they can be fixed locally. They don’t need a new multi-billion dollar national network. It may be that such a network is never needed, and it may be that the longer the expert group waits the more likely it that time, technology and the market solve whatever problems there are.

That’s how it has been to date. Reading back over the documents written at broadband at the turn of the century a few months ago I was astonished at the extent to which self-interested parties urged the government to “do something” to boost its take-up. As it happened the government did nothing, and the take-up of broadband in Australia’s cities far exceeded the most optimistic of the urgers’ forecasts.

If urban Australians genuinely want faster broadband they are likely to get it, with or without Telstra’s grand plan. Telstra itself could help by turning on the high speed equipment that it has already installed in its exchanges and is holding back for tactical reasons.

In the bush it is different. It costs real money to get broadband to some of those places, and the government has put it up. It is handing over almost $1 billion to a consortium created by Optus and Elders (named Opel) with the express purpose of providing broadband outside of Australia’s cities.

Telstra didn’t get the gig. It is livid and says that the government ignored its own lower-priced bid “refusing approaches to meet on the matter and not once asking for any further information or clarification on what Telstra could have achieved”.

If so, the government has done us all a favour. Telstra’s present behaviour can arguably be traced back to a Cabinet win by Kim Beazley, Communications Minister in the Hawke government in 1990 who pushed for the creation of a “megacom” made up of Telecom Australia and the previously separate Overseas Telecommunications Corporation. The Treasury and the Treasurer Paul Keating condemned the move and wanted the OTC to form the nucleus of a competitor that would stand up to Telstra.

Beazley won and the megacom has thrown around its weight ever since.

Opel will encourage it to behave.

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