Telstra and the NBN do a deal

A week ago Telstra (TLS) released a brief overview of the agreement reached between itself and NBN Co over the future of its network.  So a former government-owned telecommunications monopoly (turned private-sector infrastructure monolith) reached a deal on how the new, government-owned telecommunications monopoly would trash its copper network and access it’s formerly government-owned ducts and cable trenches.

Australia certainly doesn’t do stupid by halves.

It may be a week late (punctuality is so FY11), but I’ve thrown together a brief overview of the agreement and analysed the scant numbers it provided.

The “Agreement”

For those with the time they can read the full 30-something pages here.  For those with a life, I have summarised it below by the major agreement sections.

The Subscriber Agreement: As the NBN rolls out, TLS must disconnect their copper-based network and stop broadband services on their hybrid fibre coaxial network (they can continue providing Pay TV services).  TLS must never again use their disconnected networks to provide services except in very limited circumstances (like when NBN Co can’t reach a premise).  From 20 years from the commencement date, TLS must exclusively use the NBN as the fixed line connection to provide services to a premise.

Infrastructure Services Agreement: TLS will provide NBN Co access to its “dark fibre” links (unused fibre optic cable).  TLS must ensure all dark fibre links to be used by NBN Co are up to scratch and will provide ongoing maintenance.  TLS will also allow NBN Co to access its exchange buildings and duct infrastructure (man holes, cable pits etc).  NBN Co will access TLS’ lead-in-conduits (i.e. the section leading into your house) and upon connection to the house the NBN will take ownership of the conduit.

Access Deed:When the NBN is up and running, NBN Co will not charge TLS any more than $24 per month (plus taxes) for wholesale access to the network.  NBN Co has guaranteed provision of 12 Mbps download and 1Mbps upload at peak rates.  This cost guarantee will last for 5 years from the commencement date of the agreement.

TUSMA Agreement:  The Telecommunications Universal Service Management Agency agreement basically ensures TLS will continue to fulfil its current service obligations regarding emergency service calls, payphone access for regional areas etc. The agreement mentions tinkering with the method of service delivery, but it has a very low business impact compared to the agreements above.

The wireless clause:  within the Subscriber Agreement, TLS promises not to “promote” wireless services as a substitute for fibre-based services for 20 years from the commencement date, but otherwise remains free to compete in the market for wireless services.  If anyone can see how this would be practically enforceable, shout it out.  Otherwise I’m calling this a nothing agreement.

The Numbers

To disconnect Telstra’s current network and services, as well as gain access to its infrastructure, the NBN Co is going to throw fat wads of cash in Telstra’s general direction.  However, the only numbers given in the statement were single NPV figures (along with associated discount rates and time frames) for each of the agreements.  No estimated annual payments, no justification based on existing network asset values, no forecasted revenue impacts as the copper network is decommissioned.  Nada.

Which makes summarising it easy:

The Subscriber Agreement: payments to TLS for disconnecting its networks and stopping services

  • $4.0 billion NPV (post-tax), 10% discount rate, 10 year timeframe

Infrastructure Services Agreement: payments to TLS for access to dark fibre, exchanges and conduits

  • $5.0 billion NPV (post-tax), 10% discount rate, 30 year time frame

Tusma Agreement: payments to TLS to ensure universal service obligations are met

  • $0.7 billion NPV (post-tax), 8% discount rate, 20 year timeframe

Other government sweeteners: payments to TLS for training and information campaign costs

  • $1.0 billion NPV (post-tax), 10% discount rate, 10 year timeframe

Despite the scant info, we can back-calculate the cashflows from the stated NPV figures.  Assuming that there is no initial cost to TLS (cashflow = $0 at year zero), using the stated discount rates and time frames and assuming payments increase each year by 3% (CPI estimate), I calculate that the total cash payments received by TLS are in the order of $46 billion over 30 years.  Sounds like a lot more than the “$11 billion” NPV figure stated in the media release, doesn’t it?

Don’t forget the Tax!

The NPV analysis above is based on the post-tax cashflows received by TLS – which means the pre-tax payments by NBN Co would be even higher.  Assuming TLS pays an effective tax rate of 27% (allowing for some capital depreciation) on the payments received, the actual payments made by NBN Co over 30 years come to $62 billion.

Alan Kohler has already taken a shot at this analysis in Bus Spectatorand he gets post-tax numbers pretty close to mine, so there’s a good chance I’ve got my sums right.  Kohler also questions the use of a 10% discount rate, claiming 7% is more appropriate.  I won’t quibble on the discount rate used – the numbers are big enough for me already. However, it’s still worth remembering that if the discount rate lowers, then the cashflow numbers above get a lot bigger.

How Will this Impact Telstra?

Well, TLS is obviously going to be the beneficiary of a very large and long-term cashflow.  This is essentially a reverse mortgage on the infrastructure it has built over the decades.  However, they’ll also lose revenue as the NBN replaces its current network – a network which generates profits because TLS charges competitors to use it.  At the end of the NBN rollout, TLS will have changed from a telecom infrastructure owner and service provider to just a service provider, much like its competitors.

The agreement doesn’t provide enough financial information to judge whether TLS has got a good deal for its network.  It’ll get a massive amount of money to be sure, but it’s a massive monopolistic network that’s being discarded. It might be have been worth even more if it continues operating.

A true evaluation won’t be possible until some detailed costings are released along with the NBN Co rollout schedule – which will probably be never given the combination of commercial and political sensitivity surrounding the NBN project.

There is one thing current TLS shareholders should note though:  once the NBN rollout starts, their beloved dividend-providing, monopolistic infrastructure stock will slowly morph into a telco service stock that can’t milk its competitors for rent.  It will have a guaranteed 30 year cashflow from the guv’mnt, but what it chooses to do with it is anyones guess.  Either way, their financial fundamentals will undergo a big change.

And given Telstra’s unique ability to piss off every retail customer who has ever called their service centre, being a service-only company will require some seismic cultural changes too.

Disclosure: The author is a Director of a private investment company (Empire Investing Pty Ltd), which has no current interest in the businesses mentioned in this article.  The article is not to be taken as investment advice and the views expressed are opinions only.  Readers should seek advice from someone who claims to be qualified before considering allocating capital in any investment.

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  1. Interesting. Thanks for the summary. So if I have understood you correctly Telstra will never again use its copper network if there is optical fibre present. If that is correct then Telstra should spin off a mining venture, Telstra Copper. Copper is $4 a pound. It would presumably be more economical to mine Telstra “retired” copper than mining dirt near Mt Isa. And you already have high purity product.

    Thinking out loud, if I could get a few disgruntled ex-Telstra employees together who are familiar with where these cables are located, plus a back hoe, truck and some shovels, this has the makings of a very nice black market criminal enterprise. …unless Telstra spin off TLS Copper and do it themselves.

    And given Telstra’s unique ability to piss off every retail customer who has ever called their service centre, being a service-only company will require some seismic cultural changes too.

    That ability is not unique. I have experienced the same pathetic standard with Optus, AAPT, Vodafone, and iPrimus over the years. In this country is a race to the bottom when it comes to customer service.

    • It’s incredible. Firstly, that perfectly acceptable infrastructure is allowed to die and secondly, that Telstra didn’t come up with the Telstra Copper idea already.

      • It seems like a real opportunity for people to start ripping up copper out of the ground, in an analogous way to how people pilfer copper from building sites. A bit more work involved getting the cable but hire a back hoe, buy some flouro workers outfits so you look fair dinkum, put up some “men at work” signs, and go mine copper!

        If you are a fair dinkum organized crime figure you should have access to an accountant that can run the numbers for you (cost of back hoe, metal detector, scrap price for copper ….). I’m tipping this will be a popular pastime in a few years.

        BTW what is the life of optical fibre in the ground?

        • Nobody knows about the maximum life of fiber optic on the ground, since none has failed yet. So it’s a minimum of 40 years, and maximum of around 100???

          The copper is such poor quality that it’s not worth the effort. Telstra made a mess of their copper cables (like using an insulation gel which turn out to corrode the wire worse than water!!). Under the reign of Sol, capital expenditure has been reduced, so they can’t be in good shape.

          • If the corrosion is confined to the surface then quite a lot of copper could still be harvested.

            So TLS would have no objection then to random punters digging this stuff up once it has been decommissioned?

            (notwithstanding that local councils would crack the shits)

  2. That’s the way the agreement reads to me Quimby. Whether they actually remove the copper lines wasn’t specified, they just agreed to disconnect them.

    If you find the ex-TLS employees and a back hoe, I’ll provide the balaclavas.

  3. …so…

    I (we) will have no choice but to use fiber-optics…even if i’m perfectly happy with my cheap-as-chips ADSL (copper-based) system…

    Why does that make me bristle?

    • …oh…and i would be selling Telstra shares now if i had them….

      Telstra without its physical near-monopoly has “too much” change to do, IMHO.

      • With respect to the copper network, which free market are you talking about? A monopoly provider who also competes against its wholesale customers in the retail game? That is a pretty broken “free market”.

        • Ah touche, Mark.

          Maybe I should have said “Because you don’t like governments removing choice from you, even if it is limited choice on a former government-owned network”.

          First way sounds better though.

    • Well, look at it this way – Telstra was NBN version 0.0 – a government owned entity laying out a nationwide copper-wire network. Did your grandpartents/parents bristle when they were told they can no longer use carrier piegeons or the telegraph ?? 🙂

        • Only competition from Teltra’s existing copper network.
          Feel free to go out and build your own…

  4. “And given Telstra’s unique ability to piss off every retail customer who has ever called their service centre, being a service-only company will require some seismic cultural changes too.”

    That’s a big call. Have you actually received better service from a competitor? They’re all terrible. Telstra’s already going through this cultural change, they know what’s coming. I recently spent a few days at a course with a telstra executive, just like the banks over the lat 5 years, Telstra’s big thing at the moment is improving customer service. Sol didnt want to try to improve customer service but its one of Thodey’s big mandates.

    • Whenever I ring IPrimus I get answered within 30 seconds and speak to a real person who doesn’t then push me through to 456 menu variations. Quite surprising actually – although their billing service is a bit weird..

      I’ve had less than that success at Optus, but using Telstra (I have them as my backup ISP) is like pulling teeth.

      Yes its a big call, and I think they have a chance to improve customer service – but then again the bar is very low in Australia, which is why I’m impressed when someone actually speaks to me on a phone – after that I don’t care if they do a good job or not!!!

    • Gotta say I’ve received far better service from the likes of iinet and AAPT. Telstra has, without fail, managed to screw up anything I’ve asked them to do. Now to be fair, that’s a fairly small customer sample (a grand total of one). However I have also talked with ex-employees that said TLS basically didn’t give a rats about retail customers and was focussed on business. That was a few years ago and they may be in the process of change – so power to ’em. Still a big change though.

        • This must have all been some time ago bcos as a previously regularly irate telstra customer sdrvice user, i have experienced a massive improvement in their customer service. Try it, ring them with a question now. menus are still a bit long but much improved and service has improved immensely. So much so that i have even bought TLS shares recently. Plus div is attractive now and from what i can see this bozs is getting things done

        • Make that a sample of 3, still with a 100% failure rate. Telstra kept (tried to) billing me for 12 months after I had my phone service disconnected and switched to VOIP with Internode.

          They repeatedly confirmed there was no phone number on the account, but still refused to stop charging.

  5. ‘Australia certainly doesn’t do stupid by halves.’

    Spot on.

    Q, thanks for laying out the facts, as known. It astounds me that we continue down this path. I have no doubt it will be at considerably more cost than advised. I now proponents of the technology claim it is future-proof – extraordinary in an industry where there appears no such thing. Just think back ten years with your own computer/phone/technology use – bet a fair bit as changed…

    The NBN, the Carbon Tax, and Mining Tax – we certainly don’t do stupid by halves. The only hope is one or more of the independents will show some balls and reject outright – something – anything!!! But unfortunately they are in love the the NBN and don’t understand the other two (well, nor the NBN in reality).

    I noticed Wayne Swan was rather agitated in defence of the NBN yesterday – I think he has realised what a cripplingly expensively flawed scheme it is.

    As an aside, I happened to attend an event where Lord Monckton was presenting (an invite and am always interested in a contrarian view!) – admit he managed to confirm my skepticism in regard to the carbon tax – think Swan and Julia should go have a listen. Could save a lot of taxpayer dollars, bureaucratic activity (oxymoron?), high energy use businesses and make no difference at all to absolute reduction of global emissions. Win Win.

    Australia certainly doesn’t do stupid by halves.

    • Q – I noticed in the today’s links that Warwick McKibbin cites the NBN as $50 billion waste Australia cannot afford.

    • I have to agree on the technology risk. The internet (as used by the public) wasn’t even around 20 years ago, yet some of the NPV timeframes for NBN Co and TLS are longer than that! Who knows what will happen 30 years hence. But then again, the same could have been said when they starting erecting copper wires around the joint in the 1800s.

    • 3d1K – actually McKibbins call for politicians to take shares in NBNCo instead of salary – if you look past the rhetoric – is not silly.

      There is no better incentive to get good policy and work done than direct ownership.

      Adrian – thank you for your insight.

      • Geez that is an excellent idea. I’d also abolish their defined benefit superannuation and replace it with an accumulation account predominately with NBN shares.

        • It has to be a tongue in cheek statement, it is a rubbish idea. It is a repeating theme that many of you here pay scant regard to game theory.

          All that would happen is that the two parties would operate a quango to ensure extravagent service contracts would be delivered to the NBN, ADI, etc.

          It wouldn’t matter how incompetent they are (it would likely worsen with the lack of competitive requirement), as long as the earnings are strong, dividends can provide for pollies retirement.

      • Love the idea of getting rid of the DB scheme Quimby.

        Or what about shares in ADI and other defence projects (like the subs et al)?

        I would do the same for the defence bureaucrats (and generals and admirals) “running” (sic) these projects.

        • Linking politicians salaries and superannuation to these large infrastructure projects (incl. defense) could be one of the best reforms ever introduced into this country.

          Imagine if parliamentary members of the Victorian labor party had their future incomes linked to the desalination plant — one of the recent classic textbook examples of how Australia doesn’t do stupid by halves.

          I’d also make politicians remuneration inversely proportional to the amount of government “advertising.”

          All jokes aside I think this is worth writing to independents about.

          (Authorized by the Springfield Government, Springfield, spoken by Mayor Quimby)

      • Prince

        I did see he said that – clearly indicating his view that no pollie would do any such thing – it is a bad deal – I certainly didn’t read it as an incentive to get a good job done. McKibbin know’s it’s a dog.

      • It would get more work done, better, i’m sure…

        …but I have to admit I can’t see the ceiling on how such positions are ripe for policy abuse….

        From a reality perspective, not just an idealistic one (and i’m an idealist!)

  6. I think Telstra have done a good deal here, and I don’t have much to offer other than some comments on wireless that might be of interest.

    I’m a software engineer by profession, and from 1995 to 2010 I worked developing the 3GPP spec for mobile phones (wireless broadband USB dongles are mobile phones – generally without the circuit switched voice (GSM) or WCDMA voice bearer), and that is GSM, GPRS, WCDMA, and finally LTE. I worked in the US and UK for Qualcomm who develop the reference design handset for most of the major handset/broadband dongle companies. I got into economics as there are few development jobs in Australia when I returned last year.

    Some of the comments on wireless never progressing are not correct, and with the new modulation schemes/access systems, the wireless data capacity is growing steadily, and you can see that from GMSK (GSM -TDMA scheme) through to 64QAM (LTE – OFDMA D/L [Depending on the category you can have up to 300Mbps (peak) on the D/L in Release 8 – depends on the physical layer performance – but 50Mbps should be common eventually]). Even for vanilla GSM we can now fit two calls on the same timeslot – not relevant for this discussion, but no one expected a TSC change to the spec to achieve this and double the capacity in a cell. Also, in mobile comms we increase the number cells in an area to increase the users(there are limits, but as spectrum is released more can be done). There is a huge R&D wireless industry (outside Australia) constantly improving the 3GPP specification for wireless, and well see continued progress in data speeds.

    I’ve also worked on fixed telecoms so there are two side to this debate, but for me the cost for NBN is not justified to every home.

    For me I’ll be using LTE as I can take it with me, and having seen the performance of LTE it’s pretty neat. I’m not sure with NBN, but I’ll have it cabled to the house, but if I can I won’t sign up, as LTE is all I need.

    Wireless will never have the capacity of fibre, but it has an expanding capability, and not fixes as many suggest. If you had a 300Mbps (peak) to you iPad/Laptop etc. then I think most users will be satisfied.

    BTW Telstra has rolled out LTE in all the capital cities already. Before long the mobile products will have completed the certification and testing and be commercially available in Australia

    Here is some info on the LTE Release Spec:

    • …agreed: there’s not doubt fibre is faster and fatter…

      But with wireless techs improving so much (to the satisfaction of most!), I can’t help but wonder if fibre’s most efficient place is as a general backbone, and niche connection.

      It just seems like way too much debt for all involved (which I still think will blowout in cost and time, considerably…these things just do), and also too much debt at the wrong time.

      i just think this is a very simplistic solution, and one that simply illustrates why, although I like SOME govt projects, private-market incremental-capitalism just seems like a better, less risky way to go about things.

      My 2c

    • Thanks for the info Adrian. I get the arguement that wireless won’t have the capacity as fibre optic, however as you say people may be satisifed with what wireless can acheieve in the future. If wireless can get to a point where it can stream HD-quality videos, then the typicaly user will probably be happy, with only the serious gamers and software users looking for the higher bandwidths of cable. I could bee wrong with this presumtpion, but I think the wireless factor is the biggest risk to the NBN Co business case.

      • NBN could have just been run to the exchanges or street hubs at a much lower cost, and that is the tragedy for both cost/time, and we the taxpayers.

        In fact there are four fibre rings around Australia between the capitals already. I don’t have the current configuration as Telstra/Optus have it now, but in 1995 I went to a conference in Canberra on the structure.

        The irony is that households will get 12Mbps on fibre, so why have a Gbps link. I get their argument, but economically it’s flawed as it is operationally.

        I think in general this government have a lot to answer for, and as interest rates climb as they could do over the next few years then a combined 590B federal/state debt is going to be a wakeup call.

      • “If wireless can get to a point where it can stream HD-quality videos, then the typicaly user will probably be happy”

        That makes the assumption that internet use remains pretty constant, it is changing way faster than the wireless technology …

    • Stephen Heyer

      As a wildcard on wireless have a look at this link:

      This Steve Perlman’s claims that he can increase both the data rate and range of wireless devices hugely. Suddenly, the whole picture changes with wireless (which most people prefer anyway for it’s portability) being both much cheaper to build and immensely more rugged in cases of national disaster (not a small consideration) that is, as long as the infrastructure is EMP hardened.

      Stephen Heyer

      • Hi Stephen,

        LTE Release 8 can do up to 300Mbps (peak) so the specification is there now, but what you’ve shown is another example of yet another method that will develop over time.

        There are many issues, but the 3GPP spec, which most of the world operators networks follow, (except for a few exceptions in the US/Korea and a few others), but the big deal in mobility it to be able to use your mobile or broadband dongle anywhere in the world. Some of the chip-sets I worked on provide multiple standards for 2/3/4G. LTE/Wimax are 4G e.g.. The work needed to get these systems working is massive technologically, and in every other way.

        Wireless mobility is where the world is going, and Telstra knows that. There is a lot of criticism of Telstra, and a lot of it is valid, but on the enginering and network side they are the best here. I worked testing pre-release software on handsets all over the world when there were problems between the handset/dongle, and network. I’m confident in saying that Telstra are good a t what they do. But on the customer front they have to improve…alot. Also, there are areas when Telstra and other operators don’t have good coverage and that draws criticism as well. More cells needed basically.

        • Absolutely Adrian

          For me telstra have got a good deal here, they are actually being paid to retire a network whose value will reduce over time and can concentrate on wireless which is the true growth area globally for connection as well as R&D.

          The hoy grail for the internet is as you said, being able to take a device with you wherever you go and be connected. Thats why there is so much investment in cloud solutions, and so much being invested in finding better and better wireless solutions. the OnLive announcements are the kind of thing that are game changers and will reduce the issue of shared bandwidth over time.

          a fibre-to-the-node solution would have been a better idea IMO. Not all households will want fibre to the home, while a to-the-node solution would create the backbone of an excellent all-round network.

    • “…having seen the performance of LTE it’s pretty neat.” Absolutely! And this technology will naturally evolve.

      It’s also interesting that companies like Sprint in the US are adopting Wimax 2.

      The problem I have with fibre is the life expectancy in ground is between 25-40 years and 15 years aerial. I’ve not seen anything of late that would indicate this has changed.

      The other issue is a high likelihood of a cost blow-out. This government doesn’t have a glowing record in this area.

      • I’m confident that if NBN goes the distance we will have quite large cost blowouts. We’ll get a NBN levy to cover that one if Julia and co are still with us.

      • Even private industry’s record with large projects blowing out in time and cost isn’t crash hot…

        …govt seems to be worse, but the reality is that big projects just have so much that can (and do) go wrong.

    • As long as it does not fry our brains, why not !!
      NBN is probably trying to achieve economics of scale with the fibre to home model – it probably does not cost a lot more to rip out the copper-to-home and replace it with fibre compared to the cost of maintaining the copper network (owned by Telstra).

      • That may be the case Mav, although my instinct tells me otherwise. But we’ll never know becuase we don’t have enough information. That’s why Turnbull has been banging on about a cost-benefit analysis. It’s all generalisations about
        “e-health” and the “new economy” with very few costing details. Until we see some numbers it’s just unaccountable smoke and mirros.

  7. LPRS. Labour Party Rentier Scheme. Where has that Machiavellian s**t, Mike Kaiser gotten to? More labour party millionaires, nothing more than that here.

    The NBN is just a vehicle. It does not have to provide a service. It has to provide stolen loot.

  8. I don’t know how NBN are going to handle emergency situations (I’m thinking of the bushfire scenario’s) where power goes down to an area, and under that situation even the mobile network can be configured such than only the emergency services can use it – this is real and there is a NOC setting to do it on a MSC (mobile switching centre) area. After a while the UPS can fail, and if there is no diesel backup the segment is dead. With the PSTN copper network it’s powered from batteries at the exchange.

    I’ve not seen anyone discuss this.

    A bit of the economic topic, but general info.

  9. Chances of TLS using all that cash to start building some of the wireless tech mentioned above?

    Straight swap for them – old tech to brand new and the taxpayer pays….

    • The capital cities have it already, but I don’t know how many cell sites they have operational, but yes I’m sure they plan to have LTE in all cells eventually. They don’t need to throw anything out, as LTE on the radio side integrates into the current GSM/GPRS/WCDMA cells. The have to add a new data link back to the controlling node.

  10. “The wireless clause: within the Subscriber Agreement, TLS promises not to “promote” wireless services as a substitute for fibre-based services”
    Probably refers to Fixed line wireless service as opposed to Mobile wireless service.
    i.e. Telstra cannot use wireless for last-mile connectivity from the exchange to your home (Fixed line).

      • Telstra/Optus etc. will rollout LTE and over time users will see the benefits. And like you say the operators won’t advertise it. Optus etc. are loving this.

        There is another product called a LTE Femtocell (there are 2/3G versions already), this will give 4G LTE wireless to small areas like homes/offices/cafe’s etc. I’ve put a link which shows a diagram, and the 4G version is under development now. A fibre bearer with the appropriate bandwidth is all it needs as well as the network controller.

        This is what NBN are very afraid of IMO. It will be a while before it’s commercial, but it’s a great business opportunity when the 4G version is ready.

        NBN’s whole business case is shaky and that is why they need all the legislation. Check it out if in doubt.

    • That’s right – it only relates to wireless services competing with NBN service provision. So nothing to do with mobile hpones as such. Still a totally uneforceable clause.

      • It can be enforced if they put in the terms like Landline or fixed-line service cannot be delivered by wireless media.
        A bit of history: In India, Reliance telecom got a cheaper Fixed line license and then started providing mobile services without a license for it!! They did by claiming they are using wireless only for the last-mile connectivity (allowed under the fixed line license).
        In the end, they had to settle with the government. Their landline handsets were very mobile-like 🙂

  11. I see this as the best outcome for Telstra, even if it is involuntary. They effectively sell an aging (and less and less utilised each year) infrastructure for a nice 30 year annuity.

    If the execs at Telstra have any brains they will pump every $ from that annuity into their wireless service, at the same time as bringing their customer service levels up to where customers expect it to be – let’s face it, nearly every trendy gadget that comes out these days has 3G connectivity. Why do you want a fixed line fibre optic connection to your house when all your internet-connected gizmos connect directly to the internet over 3G (and LTE in the future)?

    If (and yes it probably is a big if) Telstra can match or exceed the customer service offerings of its competitors, while at the same time delivering a higher-spec product (ask a iPrimus iPhone owner about their satisfaction with internet browsing over the Primus 3G network), well I expect them to have the entire Australian communications market pretty much entirely to themselves.

  12. The NBN is not econominical, because it strifes to provide the same level of broadband to nearly all Australians at the same price. A huge subsidy from the city to the country areas is not ‘free market’, however it’s something most Australians believes in.

    The Rudd government was originally going to pay Telstra to build a FTTN network. When you look at the original bid document, no one else except Telstra could have won. Sol, in his infinite stupidity, decide to submit a 13 page bid for the 15 billion dollar contract. Even if you include the cover page, it’s over 1 billion dollars per page!!

    Telstra’s version of NBN seeks to eliminate competitors’s ADSL offering by yanking out the copper from the exchange to the node. The other ADSL providers will have their ADSL equipment ‘stranded’ and become Telstra resellers. Further more, Telstra threatens to sue the Government if the contract is awarded to anyone else, which will delay the project by at least an election. The Rudd Labor government had a choice : they can keep things as they are and get hammered by the Coalition for breaking the promise to build the NBN, or they can ‘double down’ and build a FTTH. Labor decided to ‘double down’.

    A FTTN network is expensive. The network can achieve almost the same performance if you use wireless/VDSL for the ‘last mile’ with an option for businesses and ‘power users’ to pay for their own fiber link to the home. Telstra’s 20 billion+ dollar legal threat destroyed that option. Australia is therefore buying a ‘Rolls Royce, gold plates’ broadband solution because a more vanilla option would cost the same, and we can all ‘thank’ Sol for it. Did I mention that Sol got paid over 4 million to leave one year early and not pay tax in Australia?

  13. No one has brought up potential costs to households to wire-up residences to NBN standards – not to mention the cost of battery back-up if you don’t want to be ‘off line’ in the event of power black-outs.

    • Hi IJF, agree, and that is my point above [July 1, 2011 at 12:30 pm]. You would have thought it’s part of the system, but I’ll bet it’s only at the exchange, and not in the street, and certainly not in the home.