Understandable the industry was up in arms about Telstra’s proposed price increases, amounting to some $50 million a year, to be paid for by its industry’s customers. But this is what happens when you start fiddling around with previously agreed industry arrangements, like the government is doing with its proposed MTM solution.
So much for a faster, cheaper and better broadband solution. It is becoming clear that there is no indication that the MTM can be introduced quickly – and as for cheaply, because of the delays in getting the plan together Telstra (or NBN Co for that matter) will now have to maintain its ageing copper network longer (perhaps ‘forever’) and the maintenance cost of that old copper network will only increase over time. This is a key reason telcos around the world are now installing fibre networks.
For the moment Telstra remains a vertically-integrated monopoly and is, because of the Government’s NBN policies, not under pressure to start rolling out fibre in order to reduce these maintenance costs. The original plan was for the copper network to be closed down and for the new fibre network to be operated under a structurally-separated wholesale arrangement by NBN Co. All of this is now in limbo, and under these circumstances Telstra can indeed build the case for an increase in charges for the maintenance of its copper network. And obviously this will not be the end of such increases as the copper network continues to age. Even if Telstra hands over its copper assets to NBN Co, copper (and HFC) maintenance costs will only increase.
In all reality the extra costs will have to be added to the costs of the MTM plans. These are a direct result of the changes in government policy, regardless of whether the costs will have to be borne by Telstra’s customers or by the government.
This also means that the effectiveness of the structural separation legislation is now under question. Based on the original plan Telstra’s dominance would dwindle as the copper network was shut down, but this is no longer necessarily the case – at a minimum this situation is very unclear and will be so for perhaps another year. The industry is quite correctly addressing the effectiveness of competition under this ‘interim situation’ as well as the longer term effectiveness of the structural separation under the new government policies – yet to be revealed.
What the proposed price increase shows is that we are rapidly reverting to the situation the industry had to endure over the last 20 years, where, because of its dominance, Telstra was able to prevent any form of effective competition until the ACCC finally lowered the DSL network access prices to cost levels.
As a side comment, it is now easy for the government and its supporters to blame the ACCC for the low wholesale access costs to Telstra’s DSL network (at least in metro areas), but that decision needs to be judged in the context of Telstra’s obstructive behaviour between 1996 and 2008 – when those regulatory changes finally became effective and DSL-based broadband competition in the cities started to develop for the first time.
If we go back to that situation then we can only expect these old battles to start all over again. Those were the days when, at any given time, there could be 20 or more cases in front of the ACCC with industry complaints about Telstra’s anti-competitive behaviour in the market. Do we really want to go back to that? I am sure even Telstra would answer this in the negative.
As we have been predicting since 2009 when the Coalition first launched its opposition to Labor’s NBN plans, this is a very complex matter. Once you unpick one element the whole plan will unravel.
These plans for price increases related to the copper network and the renewed discussion of the structural separation of Telstra are some of the results of this unravelling, which so far had not been recognised by the industry and the government.
As Telstra has changed under David Thodey, it is highly unlikely that Telstra would welcome a renewed period of industry conflict. It is in its long-term interest to build a modern, forward-looking company. Telstra supports an FttH rollout under a structurally-separated regime and for it to go back to those old days of constant conflict is certainly not what it wants. This is also something it needs to take into account in its negotiations with the government in relation to the MTM plans. The company can be a guiding force to a better outcome for the NBN, let’s hope it will also take into account the national interest and opt for the long-term, modern, forward-looking solution for the whole industry.
- Australia – National Broadband Network – Policies and Regulations
- Australia – National Broadband Network – Telstra
- Australia – National Broadband Network – Wholesale and Competition
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