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Tuesday, 20 January 2009 12:31

Telstra competitors slam Sol's tip to incoming US President Obama

An organisation representing a range of Australian carriers and ISPs has railed against Telstra CEO Sol Trujillo's "unsolicited advice" to the incoming Barack Obama administration that it should put part of an economic stimulus package towards improving fixed and wireless broadband in the US.

While I was writing the previous piece about reader reactions to Trujillo's advice to the incoming Obama administration (recently published in BusinessWeek), a press release arrived from the Tell the Truth Telstra (T4) campaign.

Not surprisingly, T4 - backed by carriers and ISPs including AAPT, iiNet, Internode, Macquarie Telecom, Optus, Primus Telecom, Telarus, TransACT, Unwired, WestNet and the Competitive Carriers' Coalition - had nothing good to say about Trujillo's words of wisdom. Now there's a surprise!

The unattributed statement reads in part:

"At least his recipe for the US Government is familiar – he asks for multi billion dollars in hand outs from tax payers with 'the right regulatory settings', which Australians will recognise as Telstra code for 'no competition strings attached, please'.

"But the truth is that Europe, Japan, South Korea have stolen a march on the US in broadband because they increased pro-competition regulation over the past decade while the US did the opposite.
"The pro-competition reforms have allowed competitors in those countries to access monopoly access network elements at reasonable prices, and seen broadband speeds and usage grow rapidly.
"In the US, the laws allowing similar access have been wound back or removed, and the US has slid down international broadband rankings."


It's interesting the way the term "competition" means different things to different people.

One of the few things I seem to remember from economics lectures is that a competitive market involves substantial numbers of buyers and sellers. The inability of any one player to affect outcomes means prices are set in the market and total utility is maximised.

And it's that maximisation that is the intellectual justification for those who favour free markets. (Unless, of course, an industry is making a loss, in which case it may be a good thing to inject public money. To be fair, pure free marketers talk of "creative destruction" in which resources previously used by a loss-making company are freed up to be redeployed by new or more successful businesses.)

But if there are only a few sellers in a market, you end up with less of the product or service being supplied, and at higher prices - thus reducing the total utility.

Does that sound a bit like the broadband market to you? Telstra does seem to have a tendency to offer lower speeds, smaller quotas and higher prices than other providers.

But then the product isn't uniform, particularly when we're talking about wireless broadband. And if the various sellers aren't actually offering an identical product, how can we talk of competition?

If your knowledge of economics is better than mine, feel free to set me straight in our forum.

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Stephen Withers

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Stephen Withers is one of Australia¹s most experienced IT journalists, having begun his career in the days of 8-bit 'microcomputers'. He covers the gamut from gadgets to enterprise systems. In previous lives he has been an academic, a systems programmer, an IT support manager, and an online services manager. Stephen holds an honours degree in Management Sciences and a PhD in Industrial and Business Studies.

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