September 15, 2009 11:00pm
STEPHEN Conroy's announcement of "historic reforms to telecommunications
regulation" is actually a monumental admission of incompetence, failure and
both policy and regulatory weakness. In other, plainer, words, it's a total
It might also be too clever by half. Clever, as in: making Telstra an offer
it will find impossible to refuse.
But just too clever, as in: Telstra gets to sell off its 20th century
network, while not simply retaining all its 21st century options, but much
more importantly its practical dominance. And it might even get to pocket a
few billion dollars of taxpayer money on the way through!
For starters, what was said yesterday totally contradicts what Conroy, the
grandly named "minister for broadband, communications and the digital
economy", told the Senate just three months ago.
His shadow Nick Minchin, with persistent questioning, got Conroy to say that
structural separation of Telstra was not in the (government's regulatory
reform discussion) paper, And further: "I do not believe I have ever
Now Conroy as we can now see was being decidedly 'cute', and he was at it
For in June he followed that comment with the observation: "Telstra may
volunteer it. Who knows . . . ?" In retrospect, hint, hint, s******,
s******, perhaps I do.
While yesterday he was stressing, cutely, that it was the Government's clear
desire for Telstra to "structurally separate, on a voluntary and
Yeah, sure. You "volunteer" to separate or we the Government destroy your
Now the proximate reason for this, itself "cute", approach is a little
matter of compensation. Start at a billion and go up.
If the Government forced Telstra to break itself up, that would almost
certainly be ruled an "acquisition of an asset", and under the Constitution,
the Government would be obliged to pay Telstra.
Indeed, that was precisely the reason proffered by both government and
competition czar Graeme Samuel for abandoning the proposed $12 billion FTTN
(fibre-to-the-node) broadband network and jumping to the much grander and
also much more expensive $43 billion FTTH (fibre-to-the-home) one.
That the FTTN network would have cut into Telstra's basic copper network,
depriving Telstra of its use; and as a consequence the Government would have
had to write out a $20 billion or so compensation cheque.
That brings us to the core substantive point. The grandiose FTTH network was
supposed to be the killer move against Telstra's dominance, and in
particular, its integrated structure.
In the most direct and basic sense, the FTTH network would 'structurally
separate Telstra'. Instead of forcing it to sell off its basic copper
network (and the Foxtel cable), they would be rendered obsolete and useless.
So what does the Government trying on the old structural separation gambit
tell us? It's something between admitting the FTTH is a dead duck. At least
in commercial terms. The Government could always decide to still build the
mother of all white elephants - and pour $43 billion of taxpayer money
literally down holes in the ground.
Something, between that and a last desperate negotiating play to get Telstra
to come to the FTTH table.
Either way, a monumental admission of weakness on the part of the
Government. Albeit dressed up with a very clever - or, too clever - offer.
On that basis it could 'work'. That depends in part on whether the
post-Trujillo Telstra intends to be as softly-softly about actually exerting
its market muscle as its public presentation has become with the departure
of both former CEO Sol Trujillo and chairman Don McGauchie.