Government & Telstra's NBN negotiations are the real game

Stuart Corner
Monday, 19 October 2009 13:03

IT Industry - Strategy

So, is the Senate enquiry into the legislation being used by the Government and/or Telstra has the public face of private negotiations? Kennedy suspects so, although he stresses that he has no inside information in this regard. "It would not surprise me if the reason Telstra needed an extension of time to put in its submission was because the Government was looking at the submission before Telstra put it in. That would explain why their criticism of it was so muted."

Telstra's public position is that it must put the interests of its shareholders first, and of course it is the duty of its directors to do so, but, as Kennedy points out, it is within the Government's power to ensure that what is in the best interests of Telstra shareholders is the Government's desired outcome also: simply by a mixture of carrots and sticks.

"It is quite easy for the Government to make its preferred outcome the optimum one for Telstra simply by compensating Telstra through some arcane asset transfer," he told iTWire. He acknowledges that this could be costly for the Government and he points out that Telstra too has a few carrots and sticks of its own.

"It seems to me the easiest way for the Government to make the NBN viable is to take copper and the HFC out of the market, and they will have to pay to make that happen [but] Telstra can make this very difficult and expensive to the Government. The more cooperative Telstra is the less the Government will have to do financially to prop up the NBN in the intervening years...And the more it has available to compensate Telstra, if that is what the Government wants to do."

One of the sticks Telstra has to beat the Government with is a pain in the electorate: a tactic employed blatantly by Phil Burgess and one which the new management seems to be already employing, though in a rather less extreme manner than the previous management.

In summary, how Telstra and Telstra's networks and ducts transition into the NBN is far more important that what Telstra or anybody else has to say about the proposed legislation: the Senate enquiry and its multitude of submissions are just a lot of noise. The real debate, if you can call it that, is going on between Telstra and the Government behind closed doors. However, getting the legislation through while those negotiations are underway would considerably increase the Government's bargaining power.