For backhaul don't compete, co-operate, says Telstra

Stuart Corner
Wednesday, 27 May 2009 14:27

Opinion and Analysis

In its submission to the backhaul blackspot consultation Telstra is, ostensibly, extending the offer of co-operation to the government as an alternative to government-subsidised competition.

In its submission, Telstra has very cleverly suggested that, rather than spend $250m subsidising competition on its rural monopoly backhaul routes the Government should co-operate with Telstra and spend the money, with Telstra, to put in fibre backhaul to communities presently served by inferior technologies.

"Telstra estimates $250 million in funding, if allocated solely to extension rather than duplication, could connect 140 communities in Australia to the high-capacity, national transmission networks, removing barriers to deployment of high speed fixed and mobile communications," Telstra said.

It added: "Some of these communities are the most remote and isolated in Australia. It could lead to improvements in service delivery by local government, health, education and emergency services, and open up new opportunities for regional business, industry and tourism. Schools and health services in remote areas that are today cut off from broadband-based programmes could have access to metropolitan standard Government services."

Sounds tempting doesn't it? It would win the government lots of brownie points with voters. And Telstra has, very helpfully, provided "a list of potential communities that could benefit from fibre transmission extension." In fact it is more than a list. A great deal of the submission is devoted to detailing the plight of many of these broadband-starved communities and the specific gains each would enjoy.

So what about those routes on which Telstra presently has a monopoly and on which the Government, and other submitters, believe artificially high prices are stifling competition in access services? "There is potential for the Government to provide lower transmission prices by either purchasing capacity from Telstra's existing network and reselling it at a subsidised cost to access seekers, or by acting as a demand aggregator and negotiating on behalf of interested access seekers," Telstra says.

And if the Government is not tempted by the Telstra carrot of being able to take the credit for delivering fibre backhaul to places it presently does not reach, then Telstra is prepared to wield the stick. The introduction of competitive backhaul could actually see prices for end user services rise! "Competitive neutrality policy requires government owned businesses to provide a commercial return on their investments. On this basis, dividing existing demand in a low population area across two pieces of infrastructure could realistically result in higher rather than lower prices."

And as for the supposed high prices for regional backhaul that are the genesis of this whole scheme, those, says Telstra, are a myth. "While there has been much public comment on transmission prices in regional Australia, there has nevertheless been a high degree of commercial agreement on the pricing of the service. To date, the ACCC has not been required to make any transmission pricing determinations due to the high level of commercial agreement reached on the pricing of the service." So let's just scrap the whole thing and leave Telstra to do the job, shall we?