NBN: recreating Telstra by stealth

Stan Beer
Friday, 26 November 2010 10:41

Opinion and Analysis

Worldwide it has always been fashionable to hate your government-owned telephone company and Telstra has been no exception. Privatisation and regulation has seen the Telstra haters dwindle in number and intensity amidst strong competition. Why then is the Government spending massive taxpayer dollars to buy back the previous government-owned telecoms monopoly in order to create another one?

Putting aside questions of the merits of FTTH just for a moment (we'll come back to that) let's follow the money trail and look closely at what is happening here.

NBN proponents, including the Government, claim that the NBN will no longer cost $43 billion but about $36 billion plus $13.8 billion to buy Telstra's network giving a total of just under $50 billion. Of this, the Government reckons it will need to spend about $27 billion of taxpayer dollars.

Considering most large IT projects, let alone massive infrastructure projects of days gone by, should be enough for most sober minded persons to understand that there is no way to estimate to any level of accuracy how much a project of the scale of running fibre to every home in Australia over the next 10 years would ultimately cost. However, you could confidently bet money that it would be some multiple of the stated figure above.

For arguments sake, though, let's assume the Government for the first time in the history of all governments has hit the mark with its cost estimate of rolling out the NBN. Where is the largest chunk of taxpayer dollars initially going to be spent - in a word, Telstra.

The Government plans to spend $13.8 billion of taxpayers' money to buy back the assets of a company that a previous government sold to taxpayers some years back. What's more, by many experts reckoning it is buying these assets at a considerable discount to their true value.

If you happen to be one of the million plus mum-and-dad Telstra shareholders, the Government plans to use your tax dollars to buy your company from you for less than it's worth

Getting Telstra's assets at a bargain basement price has been made possible because the Government has arguably played a hand in destroying the value of this previously strong company. How has it done this?

Some will argue overly harsh regulation has been the culprit but Telstra was subject to strong regulation through successive governments from the moment it was privatised. In the case of this Government, the main value-destroying agent has been the threats to the sovereignty of Telstra as a corporate entity through punitive legislation.