Government & Telstra's NBN negotiations are the real game

Stuart Corner
Monday, 19 October 2009 12:03

IT Industry - Strategy

The Senate enquiry into the telecoms reform legislation is getting lots of air-time but what really matters is the horse trading going on between Telstra and the Government over Telstra's contribution to and role in the NBN.

There's a certain well worn predictability in the arguments mounted by Telstra in its submission to the Senate Enquiry looking at the telecommunications bill, and an equal predictability in the responses from 'the usual suspects' - Telstra's main competitors.

I've lost count of the number of times I've seen Telstra trot out the argument about the number of licensed carriers (172) and ISPs in Australia (670) as justification for its claim that the market is competitive - totally ignoring the statistic that has been trotted out just as often to argue that competition has failed - that Telstra makes about 90 percent of the profits in the industry. (The Competitive Carriers Coalition went one step further to claim that Telstra is "the most profitable telecommunications company in the developed world.")

What surprises me is that Telstra even bothers to use this argument any more - no one bothers to argue against the might of Coles-Myer and Woolworths in retailing by pointing out that there are zillion corner shops in Australia.

But the rules this time are rather different. In previous enquiries/discussions on proposed regulatory change the outcome and the process were clear. This time around there is another process underway in parallel with discussions on the proposed legislation: namely the discussions between Telstra and the Government over just what role Telstra will play in the NBN and what Telstra will or will not do to make its network assets available to the NBN.

While the subject of the enquiry is a bill that will end up in legislation some of its provisions are, in all likelihood, not intended to be exercised. Telstra has some very valid arguments as to why it should not be denied spectrum for wireless broadband services. And this power in the draft legislation seems like the regulatory equivalent of a thermonuclear device: the ultimate deterrent never intended to be used. Undoubtedly the Government expects Telstra to come to the party on separation so this power won't have to be invoked.

Ovum's research director, David Kennedy, for one, thinks that the submission cannot be viewed in isolation from the negotiations underway between Telstra and the Government on the NBN, saying "We never expected Telstra to concede anything in advance of a deal with the Government on the NBN. In our view, this submission should be read as an ambit claim."

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