From
http://www.theage.com.au/opinion/pol...1101-hrjx.html
WE MUST be mad. Telstra is obliged under the universal service obligation to
offer telephone customers a basic telephony service for $30 a month. The
Rudd Government wants to replace this with a new service - the national
broadband network - which on the most favourable assumptions will cost
customers $60 to $70 a month for a basic telephone service.
And to ensure customers will take up the new service, the Telstra copper
wires that enable the $30 a month service will be ripped up.
This is called levelling the playing field for fair competition. But this is
not the end of the gouging of Australian telephone users.
In their capacity as taxpayers they will have to compensate Telstra
shareholders for the loss of the ''free revenue'' - estimated to be about
$3.5 billion a year profit from the fixed network.
The Government will be up for an up-front payment of between $17 billion and
$35 billion (depending on whether the profit flow is discounted by 10 per
cent or 20 per cent) if it wants to give fair compensation to Telstra
shareholders. It doesn't.
Under the current arrangements, not all of that $3.5 billion is passed on to
Telstra shareholders as dividends. In fact, most of that money is reinvested
in the network.
The network has been built over 100 years. It came out of the retained
earnings of the Post Master General/Telecom/Telstra and has been
progressively upgraded.
In the past 30 years this has involved the replacement of manual exchanges
with automatic exchanges and digitisation of the network. This work has been
funded largely out of retained earnings from customers and the massive
savings from the opportunity to cut staff by more than 40,000.
In 2005 Telstra came to the then Howard government with a proposal to
upgrade the network further by progressively replacing copper to the node at
the end of the street with fibre.
Telstra told the government that the roll-out would begin in the major
capital cities and it would be financed 80 per cent from retained earnings
and 20 per cent from borrowings.
As with the other major upgrades of the network, there would be savings to
offset the costs.
Fibre would bypass Australia's 950 major exchanges, which would allow
Telstra to close them down and sell the properties, contributing about $2
billion to the cost of the broadband roll-out.
In other words, a win-win situation for the government and telephone users.
The complexity of the transition from copper to cable and the fragility of
the ducts that take the cable mean that the only way in which diabolical
complications can be avoided that lead to days or even weeks where customers
are without telephones is if the task is done by the outfit with the
knowledge gained by building and maintaining the network - that is Telstra.
But the problem the Howard government was not prepared to confront was that
by bypassing the exchanges, it would put Telstra's competitors out of
businesses.
The proposition put up by Telstra should have been seen for what it was - a
bonus.
It was not seen that way. The Government bought the line that competition in
telecommunications drives down prices. It doesn't.
It is technological change, leading to investment, financed by monopoly
profits that drives down costs and improves services. Prices can be
regulated.
The competitors are arbitragers. They make money cherry-picking the most
profitable customers and getting access to the Telstra network cheaply and
reselling it more expensively.
In the cities they access the network for $15 a line and rent it out for
$30. In the bush the cost of a line is $34.
It is no accident that none of Telstra's competitors have attempted to
capture any bush customers from Telstra.
The arbitragers have never been in the business of cross-subsidising the
bush and never will no matter what arrangements will apply if the national
broadband network legislation to split Telstra gets through the Senate with
the help of two National Party senators.
Communications Minister Stephen Conroy said that the wholesale price of a
line on the national broadband network will range from $40 to $70 a month.
To this must be added the retailer's costs and mark-up.
This means that rental charges for an equivalent standard telephone will be
$60 to $90 a month or at least double the cost now.
The 2 million customers - equivalent to 20 per cent of the fixed-line
customers - who only want a basic, fixed-line service will migrate to the
mobile service.
The capital cost of this fiasco will remain the same irrespective of the
number of paying customers, meaning the cost of servicing this debt will
have to be 20 per cent higher for each remaining customer.
Even the most superficial business case or cost benefit analysis for this -
the most expensive infrastructure project in Australia's history - would
show that it has no merit whatsoever, especially as the only entity with the
capability to build broadband will be destroyed in the process.
Competition is gouging phone users 
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