Telstra divides and conquers NBN

History doesn’t repeat but it sure does rhyme.

In 2011, the Gillard Government agreed to pay Telstra $9 billion in instalments for its fixed line customers to migrate to the National Broadband Network (NBN).

This decision was made, in part, to remedy the structural mess made by the Howard Government when it privatised Telstra in the late-1990s, in turn giving it control of both the wholesale and retail networks and creating a vertical integrated monopoly.

Over recent years, Telstra has actively attempted to undermine the NBN, first by lobbying for deep price cuts to NBNs Co’s wholesale charges, and second by pledging to steal market share from the NBN via Telstra’s 5G mobile broadband rollout.

Both actions would obviously lower NBNs Co’s profitability and reduce its value.

Earlier this week, Communications Minister Paul Fletcher flagged that Telstra’s infrastructure arm could acquire the NBN in the future, thus once again giving it control of both wholesale and retail networks:

In an interview with The Australian Financial Review… Communications Minister Paul Fletcher has left the door open for Telstra’s infrastructure arm to acquire the National Broadband Network in future…

His comments will prick the ears of Telstra CEO Andy Penn, who has long harboured plans to try and buy back the wholesale revenues lost to the NBN…

Mr Fletcher has previously downplayed the possibility of Telstra acquiring the NBN, due to legislation forbidding the owner of the wholesale network from also being a retailer…

Mr Fletcher now suggested it could be possible, when asked about InfraCo being spun off by Telstra as a separately listed company…

In March a Parliamentary Budget Office report into the financing of government projects, quoted a “fair value” estimate of NBN Co of just $8.7 billion at 30 June 2019.

The government has invested $29.5 billion in the project, as well as a $19.5 billion loan that NBN is due to refinance in 2024.

So, after already being paid $9 billion to cede its fixed line network to NBN Co, it looks like the fix is in for Telstra to buy the NBN wholesale network back at a peppercorn price.

Telstra look set to emerge as the biggest winners from the NBN debacle.

Leith van Onselen

Comments

  1. Goldstandard1MEMBER

    Hating Telsta aside though, do you think that if the NBN is written down as it should be via a sale, that it will be a better overall result for business and consumers than the current debarkle (via lowering of prices)? It could then be upgraded as it should have been originally?

    • kannigetMEMBER

      considering the basic reason the NBN was devised a such was because Telstra would not upgrade basic services, actively restricted competition, and was repeatedly paid billions by the Federal government to supply services to country areas that never received them….

      I would say no, the NBN would be as good as dead and gone in 5 years…

      Better to get the political interference out of the way, let the NBN borrow money at reduced rates and get on with doing what they should have been doing in the first place.

  2. I never would have predicted that…oh hang on; I did (you’ll have to take my word for it).

  3. If I remember correctly they also got money so their HFC network would not compete with the NBN.

  4. So the NBN is worth $8.7 billion and Telstra got paid $9 billion just for the coppers wires and cable?

    • innocent bystanderMEMBER

      Kerry Packer would be laughing.
      “You only get one Alan Bond in your lifetime and I’ve had mine.”- Kerry Packer

  5. Our government invested $30Billion into something now worth $8.7Billion ? Way to go!! #Straya

  6. Pauly 📡MEMBER

    Write it off, or keep in on the books somehow in some accounting dark corner. But don’t sell it FFS.
    Its a fraction of a jobkeeper accounting stuff up.

    Ditch the CVC charges.
    Digitise the economy.
    Get real speeds moving.

    Its about time we also removed the telco act anti competition clauses too. Considering they’re calling job done on the NBN.

  7. No one has addressed the very basic question as to why on earth any Gov would privatise a de-factor public utility monopoly to a private party, only for the general public to be price gouged later on? (without strict price controls by Gov).

    Governments are supposed to fight kartels and monopolies (ACCC anyone), not create new ones. So what is the motive here? The feds don’t need the money (the NBN market value is peanuts relative to the recent fiscal Covid stimulus); and almost with virtual certainty the NBN will be managed worse under Telstra and its prices will be higher (as private shareholders want a profit).

    The lack of innovation and terrible monopoly behaviour of Telstra was the very reason why Labour came up with the idea of a all-fibre NBN in the first place (e.g. Telstra giving its own retail arm advantage over competing retailers).

    This is just a plain Economics textbook case – if they sell the NBN they might as well sell the ATO, the Navy, roads, Land Title Offices, Main grid powerlines … Oh dear; did some of that not already happen?

    Selling public de-facto monopoly utility assets will be judged by history as an economic crime against a country’s citizens.

    • drsmithyMEMBER

      No one has addressed the very basic question as to why on earth any Gov would privatise a de-factor public utility monopoly to a private party, only for the general public to be price gouged later on?

      Because whichever mate(s) they sell it to will make a (even bigger) fortune.

      See, for example, privatisations of other natural monopolies (toll roads/Transurban, airports/Macquarie, etc)

      Governments are supposed to fight kartels and monopolies (ACCC anyone), not create new ones. So what is the motive here?

      Ideology, and sweet, sweet advisory roles and board positions for relevant politicians after they’ve spent long enough in the business to qualify for a pension.

      Selling public de-facto monopoly utility assets will be judged by history as an economic crime against a country’s citizens.

      History is written by the winners.

      (And it’s painfully obvious that we’re losing).

      Sorry there aren’t any better answers.

      • We need to either call our politicians to account, or simply vote a party in that at least has read Economics-For-Dummies AND has the general public’s interest at heart.
        Somehow I suspect politicians can get away with this because the Australian High School curriculum generally doesn’t have at least some compulsary macro-economics in it – the voters don’t have a clue possibly.

    • From what I can see Oz taxpayer is not supposed to own anything as per the Lima Declaration & probably subsequent trade agreements.

      • That can’t be true; any essential by nature common utility infrastructure that is monopolistic in nature needs to be owned by the public/Gov; otherwise we would have no roads, publicly owned waterworks, taxation office, etc. All over the world in normal democracies those asset classes are publicly owned.
        Just by pure logic it can be seen that without price-controls privatisation of these assets leads to extortion; as has been confirmed by history extensively.
        Only in cases where vested interests have corruptive influence over Governments will assets be privatised. The argument that private commercial sometimes are better in managing or operating those assets can’t be used for their privatisation. As this may well be true in some cases the usual most optimal approach for the general public is to outsource just the _operation_ to the party with the lowest cost (tender/auction), but to _never_ sell the ownership.
        E.g. a government can outsource/tender the maintenance or construction of roadworks or even tolls to the cheapest private party, but should never sell the road itsel or the right to toll a road into all eternity.

  8. StephenMEMBER

    Of course this could happen, given the quality of our politicians, but it would seriously be the stupidest decision possible here. Even just privitising the NBN at all would be absolutely insane. Telstra’s market power over the natural monopoly of fixed line connectivity was the whole reason we needed an NBN… When they had their monopoly, they were extremely anti-competitive (just look at the cable wars), offered poor products for high prices that lagged way behind other countries (e.g. 1.5Mbps maximum on ADSL when it was perfectly possible to provide up to 8Mbps, and ADSL2 was rolled out many years late in a lot of places) and what ever gains that were made back then (like having other providers access lines for ADSL) were hard fought by regulators. The only reason they have a decent mobile network was because it was possible for other infrastructure providers to compete, otherwise it would have been high prices for minimal service. But that just isn’t possible with fixed line.

    And since mobile capacity is limited (by physics, not technology), we will always need fixed line for 60% or so of people and almost all SME customers (currently less than 5% of internet traffic in Australia is via mobile/cellular broadband and the rest is fixed line) so we will need to fix the NBN eventually. And that just won’t happen if it’s sold off.