The great Telstra ADSL conspiracy?

by grogers on November 5, 2006

The social and economic benefits of faster Internet access in this country is being hampered by one company – the one and only – Telstra.

Telstra would have us believe that they would love to offer their customers ADSL2 but there’s no way they’re going to have the ACCC tell them how to sell it. It seems, if they release ADSL2, it’s going to be at their leisure and on strictly their terms. Their terms are simple – allow us to build a FTTN (Fibre to the Node) network, and allow us complete, unrestricted, exclusive access to it.

The slight fly in the ointment with this plan is that it would disconnect current copper lines from customer premises that terminate in telephone exchange buildings (where Telstra and 3rd party equipment sits), to a FTTN node cabinet on the side of the road that is 100% Telstra only. Unsurprisingly, The ACCC saw Telstra’s attempt at re-monopolising the CAN (Customer Access Network), as exactly that and denied Telstra exclusive access to FTTN.

The way I see it, having failed at the government approach, Telstra is trying trying politics.
Step 1) Limit ADSL availability and/or artificially limit the maximum transfer speed

Telstra is worried about ADSL2+ (running up to 20Mbit) eroding into their expensive and highly profitable ISDN and Frame relay business data services. Telstra don’t want businesses to drop their thousand-dollar a month FR connections for a $59.95 ADSL connection that is similar in speed. Protecting profit I suppose is fair enough, the problem is that they’re holding their residential and wholesale customers to ransom over it.
On the residential side, users are becoming sick to death of 1.5Mbit/256k – the highest residential plan Telstra offers. Some people can’t get ADSL at all, forcing them to stay with antiquated dial-up or adopt hideously expensive ISDN or Satellite connections.
Step 2) Customers get grumpy and start lobbying their local federal MP about broadband in their area

Having failed in the “direct approach” with the government, Telstra actually employs the unwitting assistance from their customers. Broadband becomes a political issue.

Step 3) Telstra reminds government that they have a grand plan to fix the problem, if only the government will relax the law and allow them exclusive access to the new network

We can fix this, says Telstra, just allow us to build that exclusive access FTTN that you denied us.

Step 4) Government agrees, Telstra builds their FTTN network

Bowing to political pressure to win votes, Government relents and lets Telstra build their FTTN, no strings attached.

Step 5) Starved of customers, other ISPs and Telcos start to die off

A glaring problem with FTTN starts to rear its ugly head. With all residential customers disconnected from exchanges and connected to FTTN nodes, 3rd party exchange equipment (such as ADSL2 DSLAMs) sit idly by in exchanges with nothing connected to them. No customers means no revenue.

Step 6) Telstra completely controls residential communications and the 15 year experiment in telecommunications competition ends.

Telstra once again has a monopoly stranglehold on the residential telecommunications market. (Optional extra – Telstra renames its residential division Telecom Australia)

It doesn’t have to be this way.

Telstra are actually pretty good at building networks, theirs is far and away the largest in the country. Telstra could leverage that experience could remain a profitable company by making the best of it – i.e. wholesaling everything it retails – and implementing true operational separation by making their retail division buy access from the wholesale division at market rates. Let the market completely decide pricing and the ACCC won’t have to get involved.

Telstra should not be holding back country areas from true competition “just in case” those areas actually become profitable some day. Sell local councils or business consortiums the existing infrastructure and let them maintain it in country areas where Telstra clearly has no interest.
Telstra bemoans the “excessive regulation” they suffer, but they don’t realise they have an active part in it. If Telstra refuses to play fairly in the market (with due consideration to their huge size and high entry and capital cost in the industry) then they are asking for everything the government and ACCC dishes out.

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