Telstra must build, so must compromise: Ovum

Stuart Corner
Friday, 02 December 2005 08:52

IT Policy - Regulation

According to market research and consultancy company, Ovum, Telstra is using a stock standard argument used by incumbents around the world: next-generation networks are a high-risk, capital-intensive investment which require a commercial return.

However, Ovum says this argument is overly simplistic and "there is nevertheless a recognised risk of re-monopolisation...We would argue that wireless broadband or powerline cannot be regarded as direct substitutes for fibre."

According to Ovum "As markets mature, network operation becomes a game of scale. And few alternative operators have the size or capital to upgrade or deploy their own next-generation network on the scale of incumbents. Without regulated access, they risk being unable to compete on speed or price, and being unable to capitalise on assets already deployed in exchanges."

Ovum noted that for all its hardline posturing "Telstra management gave themselves room for negotiation. And indeed it must negotiate: we question whether Telstra can afford not to continue its NGN strategy, regardless of regulatory uncertainty. It is too critical for Telstra's long term future."