[LINK] How to play monopoly

George Bray georgebray at gmail.com
Fri Nov 28 11:44:03 AEDT 2008

which seems to be intermittent today.

Comment:  I think there's a real chance that the Telstra stranglehold on
Australian broadband delivery could be released eventually, but we will all
have to endure the desperate writhing of a powerful monopoly about to lose
its position. Given the unscrupulous conduct of Telstra during the recent
biding process, including manufactured "polls" released to their media
friends, I can only hope that the legislators, regulators and commentators
see through the bluff and bluster. Australia's future is more important that
-- George Bray

Alan Kohler
How to play monopoly

Let's be clear about what the National Broadband Network "bidding process"
has really produced: the government has received four requests for an
infrastructure monopoly.

It's not about the money, at least not yet. All the bidders need the
government's cash, of course, even more so now that credit markets have
shut, but they need legislation (or the lack of it in the case of Telstra)

Each of the bidders, including Telstra, has put in an elaborate request for
permission to run a statutory broadband monopoly.

If they get that, they are saying, we'll find the rest of the money, no

This clearly emerges from our KGB Interrogations of three of the four
players in the government's National Broadband Network process, to be
published this morning.

Communications minister Stephen Conroy said yesterday he feels vindicated, a
word that in politics translates as "relieved".

He could quite easily have ended up with nothing because of the financial
crisis, but he was able, in a happily smiling series of interviews and
doorstops yesterday, to claim "competitive tension" instead.

Now, he says, the expert panel (which includes a shareholder of Business
Spectator, John Wylie, the chairman of Lazard Carnegie Wylie) will assess
the bids – from Optus, Acacia and Canada's Axia – and report back.
Then, well, the panel will presumably rank them on a variety of criteria and
might even knock one of them out.

Telstra can't be knocked out because it has carefully refrained from
actually bidding. Presumably the panel will solemnly look at it, determine
that it's not a bid and give the paperwork back to Senator Conroy with their

By the way it has been quite amusing to watch Telstra stand behind the
shelter sheds occasionally yelling out that it's jolly-well not going to
play, and then when it sees that the other kids are, indeed, happily playing
skippy, running out to join in while spraying abuse and ridiculing them for
being TOTAL LOSERS. We all knew someone like that at school.

The three actual players all require two essential pieces of legislation:
the prevention of an overbuild (by Telstra) and a requirement that all of
Telstra's copper wires will be forcibly switched across to connect to the
fibre at the nodes.

This does not mean, as Telstra claims, that Telstra will be robbed of its
customers, but it does mean that it would be forced to use the FTTN network
to deliver its services and therefore to compete on a level playing field
with anyone else who buys capacity on it.

In other words, there will only be a wholesale fibre network not owned by
Telstra if Telstra is prevented by legislation from building one of its own
and if Telstra is forced by legislation to use it.

None of the three non-Telstra bidders has any money, as Telstra chairman
Donald McGauchie colourfully pointed out to us. They are simply saying to
the government that if they get a legislated monopoly, someone will give the
money to them. And they are probably right.

Telstra, meanwhile, is saying: if you don't like any of the bids because you
are worried about them getting the money, come and talk to us. We've got the
money from gouging our customers using our existing fixed line monopoly and
we don't need legislation to create a new one – it will just happen because
all of the ADSL multiplexers currently sitting in our exchanges and
competing with us will have to be scrapped.

So the choice for the government is simple: legislative non-Telstra monopoly
or non-legislative Telstra monopoly.

Except there is one very big complicating factor: Telstra's Next G network.
This is the wireless broadband network that they say currently works at
14.4Mbps (the minimum for the fibre NBN is 12Mbps) and will soon go to more
than 20Mbps.

That cannot be legislated out of existence, and if someone else wins the
legislative right to build an FTTN fixed line monopoly, Telstra will do its
best to spoil the capital raising by scaring the investors.

With capital markets likely to be difficult for a couple of years, this may
not be hard to do.

Once it wins the NBN bids, Optus, Acacia or Axia will have to round up the

They'll be doing so against the background noise of Telstra shouting from
the shelter sheds again – promoting the living daylights out of Next G as an
alternative "fixed line" data network for homes and businesses.

It will probably cut the price, extol the speed, upgrade the capacity and
switch its own cable and ADSL customers across to it as fast as the network
will bear. In the meantime Telstra's lawyers will be fighting like
schoolyard bullies in the courts.

It's hard to avoid the feeling that the awarding of the NBN tender will just
mark the beginning of the next phase of the battle to break Telstra's
stranglehold on Australia's communications, not the end of it.

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