[LINK] Telstra free Internet

[ramin]

Okay
Lets examine these arguments one-by-one (and by the way, casting
dispersions on Dan's credibility is extremely poor form considering
he is one of the BEST).  

Stewart Fist wrote:
> 
> Ramin says:
> >If goConnect, FreeOnline, FreeNetOnline, Hop-On and half a dozen other
> >companies are gonna go "free ISP" and have market capitalisation in
> >excess (combined) of $1 billion, then why shouldnt Telstra also join
> >them?
> 
> There are four very good reasons why they should not:
> 
> 1. Telstra has monopoly control over sections of the Internet services --
> namely the local loop and suburban switching network, and is in a position to
> benefit from this ownership despite offering free Internet.  The whole idea of
> Trade Practices law and the ACCC is to stop people from exploiting monopoly or
> near-monopoly advantages.

Sorry Stewart.  Telstra's ownership of the local loop does not and
cannot create any ADDITIONAL benefits.  Telstra would benefit the 
same regardless of who ran the free ISPs, and to the same extent.
Offering free ISP access would not be exploiting their quasi-monopoly
on local loop in any way.  If it made you happier, they could stick 
it in a separate company (or just wait a few months and buy one of
the many free ISPs).  They CANNOT be stopped from competing in this
marketplace.  Such an interventionist role would be much more likely
to result in new monopolies being created (e.g. AAPT LMDS monopoly
created by intervention in excluding Telstra from bidding).
 
> 2. Secondly, Telstra can exploit its gigantic size, enormous finances,
> cross-subsidisation potential and vertical integration to wipe out small
> legitimate enterprises.  And that's not on either, in my book.

Whilst I cannot quantify gigantic size in any way other than brand
value, I understand the other free ISPs will have access to the same
coloured dollars as Telstra, with more likely investors expecting no
earnings or profits from their investment (other than a "flip" or
acquisition to someone like Telstra).  The cross-subsidisation 
argument is largely irrelevant - Free ISP business models have no
need for "cross-subsidisation" -- they merely need funding.  And 
finally, what are small legitimate enterprises?  In a competitive
market, smaller ISPs have all had to resort to value-add and business
customers for profit and growth anyway.  It is exactly this style
of argument that has millions of dollars of taxpayer money going
into propping up inefficient industries like Footwear, Textiles and
Clothing.  You CANNOT come close to arguing that highly trained,
network savvy ISP operators and staff will be joing dole queues, please.
These smaller enterprises would feel the pinch regardless of which 
ISPs were going free in the market, no?
 
> 3. Telstra, when I last looked, was still majority owned by the public, and it
> was charged with maintaining the public good and working to promote the public
> benefit, not just profits.  This requires an ethical standard of behaviour
> above that of for-profit companies -- not less.  The question needs to be
> asked does the nation benefit in the long-term by this sort of behaviour, or not.

I used to think Telstra was owned by the public, but I was wrong.  If
it was, I would have gotten some shares for free?  Offering high 
quality free Internet access is FOR the public good anyway.  Millions
of Australians could and would benefit from free access, and if
you believe any of the hype about E-Commerce, this has to have massive
flow-on effects, no?  Plus, I would expect that if Telstra became good
at the free ISP business, they might even invest more in managing and
upgrading the network to make it more efficient.  Right again?
Worse than all this.  I think there may have been a case of a free ISP
blocking access to a commercial site at one stage (possibly to gain
financial advantage or leverage) -- this sort of stuff is much less
likely to happen with Telstra (the value of the brand would prevent it
to a large degree).
 
> 4. FreeOnline, FreeNetOnline, Hop-On and the others are minnows in a very
> large ocean. Most observers predict that they can't sustain free services in
> Australia, but in their attempts, the won't to much damage to the legitimate
> fee-charging ISPs.  However the same can't be said for a free-Telstra service;
> the damage to others would be enormous, and the Australian Internet would
> never recover.  A few years down the track we would end up with a privatised
> Telstra, with near 100% of Internet services, charging a hefty fee for use.

Yahoo and Amazon were minnows too.I am not sure who the mythical
most observers are, but in the current stock market climate, free ISPs
could easily sustain burning cash for a very very long time.
You are only speculating about the "damage" to legitimate ISPs, and
I would put to you Sir, that the benefit (social cost-benefit) would
almost certainly outweigh any damage.  

You are also forgetting that many Internet users are moving from v90
to broadband over time (much less likely to be free) and that business
access is changing the whole game (e.g. dial-up into ISP is less and
less of a key driver of demand).  A free Telstra ISP would actually
greatly increase demand and therefore benefit the market as a whole.
People talked about the Microsoft ploy on IE ages ago, but it is 
still theoretically free and the whole world is arguably better off
because of it (except some of the Netscape shareholders) given that
it has reduced the overall cost of access by being free.

I am no Telstra or Microsoft apologist, but speaking from the heart
on such important economic issues is likely to be much more 
damaging that anything truly evil that Telstra might have ever 
dreamt about.  I would welcome economic or rational arguments
countering what I have put above.
 
> --
> Stewart Fist - writer and columnist
> See http://www.australianIT.com.au/
>        http://www.abc.net.au/http/sfist/         (some archives)
>        http://www.electric-words.com              (main archives)
> 70 Middle Harbour Road, Lindfield, 2070,   N.S.W,   Australia
> Phone +61 2 9416 7458                        Fax  +61 2 9416 4582