Telstra’s joint venture with Austar in New Zealand is a clear demonstration that the company understands the importance of the broadband market. In Australia, however, they are ill-prepared.
Even though it is clear that 20%-25% of Internet users would love to use high-speed Internet access at a price of around $30-$50 a month, it took Telstra four years to get its act together on the cable modem market in Australia. However, it is still relying here on old and expensive technology, as well as on cooperation with Foxtel.
It is common knowledge that Rupert Murdoch and Kerry Packer are pretty frustrated with their Foxtel partner, Telstra.
Telstra holds 50% of Foxtel; the other two own 25% each. The media barons would like to turn Foxtel into a superhighway, but Telstra doesn’t want that because they would like to run this highway themselves. I find it quite astonishing that, given it is in partnership with the largest media company in the world and the largest media company in Australia, Telstra is not using the opportunity to turn Foxtel into a raging success story. This is behaviour typical of the old Telstra. Imagine the potential in this alliance if all three put their weight behind a national information highway built around Foxtel.
Don’t be surprised to see some interesting developments within the next few months. Optus has its cable modem service ready and is looking for a partner. We could see a repeat of the pay TV saga of the mid-1990s when the various consortia played a continuous game of musical chairs.
With the New Zealand jv in place with Austar, we could also see a closer cooperation between the two in Australia. Telstra’s broadband network only covers parts of cities, while Austar is operating in regional centres and in the bush. I do hope that Telstra has learned its lesson, because any activities with Austar will be closely scrutinised by the ACCC. If they are ready to become part of the new scheme of things, they will have to sit down with the ACCC beforehand and discuss their plans in great detail in order to avoid another knockback.
If such a merger were to be tabled, I am sure the issue of open access would be brought up by the ACCC and/or the industry. Debates are currently taking place in North America and in Europe. Open access would allow ISPs and other companies to use the broadband networks to deliver services to their customers as well. Over time this is the way to go. In the meantime the regulator will have to address issues such as investments made by the incumbent operators.
Expect some very interesting developments here over the next few months.
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