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Tuesday, 10 March 2009 20:03

Conroy's finest hour or depth of despair as NBN decision looms

By
There is a growing feeling that the coming week could well shape up to be one of the most significant turning points in Australian telecommunications history. The Federal Government, represented by Communications Minister Stephen Conroy, has a monumental decision to make and an equally monumental problem on its hands.

The decision of course is which bidder will be chosen to build the National Broadband Network (NBN), estimated to cost $15 billion. The problem is that none of the bidders in the race has the necessary credentials to build it.

Under the present telecommunications regime, the only organisation with the necessary capital, resources and infrastructure to build a FTTN network that will reach 98% of Australia's population is Telstra. And of course Telstra is not in the race.

The Government knows this, Telstra knows this, the public knows this and even the NBN bidders know this. Whoever is named the winner or co-winners of the NBN tender have not got a ghost of a chance of building a FTTN network without the cooperation of Telstra in some shape or form.

Looking at the bidders - Axia, Acacia, Optus, TransACT or the Tasmanian Government - none has access to the necessary risk capital to chance its arm against Telstra, not even with the promised $4.7 billion Government backing. It's not just a matter of raising the extra $10 billion cash.

Building the NBN will require access to Telstra's copper - something Telstra will fight. It will require Telstra not to build a competing service - something Telstra will almost certainly try to do.

It will require the backing of capital prepared to risk huge sums against a powerful incumbent which already has much of the needed infrastructure, human resources, expertise and capital in place.

CONTINUED Page 2


Anyone who doubts that the timing of Telstra's DOCSIS 3.0 upgrade to its cable network announcement yesterday was a direct nose thumb at the NBN has blinkers on. Telstra cable already goes past 2.5 million homes and giving them access to 100 Mbps would put them in a different league to the services the NBN could provide.

Some might say that's just a quarter of the homes in Australia and Telstra might be too expensive for many users. Yes but that wouldn't be the case if there was an opposing NBN network being built.

Telstra would get extremely aggressive with its prices with an NBN being built - great for the consumer but bad for Telstra's would-be competitor.

Then of course, Telstra could decide to implement its own FTTN or even FTTH network to compete with the NBN. The Government could try to stop it but if the NBN is a non-government enterprise like Telstra, then trying to stop Telstra from competing could be viewed as anti-competitive.

With Telstra expressing in no uncertain terms its intention to compete with the NBN, whoever Senator Conroy announces as the winning bidder is not going to have much time to pop champagne corks.

Finding the backers prepared to stump up $10 billion or more to take on Telstra on its home turf in the midst of the worst economic crisis the world has seen in 80 years is not going to be a walk in the park.

Even Optus is only prepared to put up $2 billion at most and will need to seek financial partners. If the winning bidder or bidders turn out to be duds, globe trotting Senator Conroy may as well pack his bags and join Sol Trujillo on an extended vacation.

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Stan Beer

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Stan Beer co-founded iTWire in 2005. With 35 plus years of experience working in IT and Australian technology media, Beer has published articles in most of the IT publications that have mattered, including the AFR, The Australian, SMH, The Age, as well as a multitude of trade publications.

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