[LINK] Optus & NBN

[stephen at melbpc.org.au]

Telstra split-up key to NBN viability, says Optus

Mitchell Bingemann | June 06, 2009 The Australian
www.theaustralian.news.com.au/business/story/0,28124,25594083-
36418,00.html


THE federal Government's $43billion national broadband network will be 
economically unviable unless Telstra is structurally separated, arch-
rival Optus says.

Speaking at the Trans Tasman Business Circle in Sydney yesterday, Optus 
chief executive Paul O'Sullivan said a monthly wholesale access price of 
$50 could be expected if NBN penetration levels hit 60 per cent. 

A $50 per month wholesale access charge would equate to a retail price 
average of about $106 per month for a broadband and telephony bundle 
today, an Optus spokeswoman said. 

"We think this is a realistic price level -- and will allow for retail 
prices which are not out of line with those paid today," Mr O'Sullivan 
said. 

An NBN penetration level of 60 per cent would be sufficient to ensure a 
viable commercial return, but Mr O'Sullivan said this could only be 
achieved if Telstra was structurally separated and its access network 
used as the building blocks for the Government's fibre-to-the-premises 
broadband project. 

"First of all, we think the NBN can be economically viable," Mr 
O'Sullivan said. 

"Secondly, to achieve this outcome the NBN must be the only network 
delivering high-speed broadband services to Australians. 

"Thirdly, the essential way to ensure that is to structurally separate 
Telstra, so that its network becomes the foundation for the NBN into 
which the Government invests. 

"But if there are two competing networks around the country, Telstra's 
and the NBN, then we think the NBN business case becomes a very 
challenging one." 

Mr O'Sullivan cited the cable broadband wars of the 1990s as an example 
of how competition could sour when new entrants attempted to take on 
vertically integrated incumbents. 

"In the HFC network wars of the mid-90s, Telstra spent billions on 
rolling out its own HFC network -- not to secure new revenues but to 
defend its existing telephony revenues. Hence the approach became known 
as the 'telephony defence strategy'," Mr O'Sullivan said. 

During these cable wars Telstra took a $1 billion write-down as it rolled 
out its network wherever Optus had gone before. It ended up being a 
successful strategy for the telco, though, as it destroyed the viability 
of Optus's cable business and protected Telstra's fixed-line margins. 

"If the Government does not act to ensure a single network for the NBN, 
expect to see 'telephony defence strategy mark II'," Mr O'Sullivan said. 

Mr O'Sullivan said Optus was now willing to vend its HFC assets for an 
equity stake in the NBN. 

"We are willing to look at putting ... our HFC network into the NBN but 
it's up to the NBN Co whether they need it or not," Mr O'Sullivan said. 

"We are willing to consider all the options as long as there is a clear, 
level playing field being created, and what we get is true open access 
and competition, and that no retail carrier can control the network."

--

Cheers,
Stephen