Broadband, Telstra and Poker

The Australian telecommunications sector has been a mess now for almost two decades. Poor decision making by the Hawke, Keating and Howard governments gave Telstra an infrastructure monopoly that stifled competition and innovation. What is almost universally acknowledged is that Telstra should have been separated into an infrastructure company and a retail company, allowing competitors to have the same level of network access as Telstra enjoyed. This seemed an impossible task, Telstra and their shareholders were hostile to the idea and full privatisation had left the government without any meaningful way to wield influence. That all changed last week.

The announcement that the Federal Government had rejected all of the private tenders for a national broadband network and would instead build the project itself dramatically changed the telecommunications landscape. By surpassing the original proposal of fibre to the node and instead planning fibre to the home the government has completely side-stepped Telstra, effectively making their entire network redundant.

While a lot of attention has focussed on the possibility of 100 Megabit per second internet speeds to every home I haven’t seen a lot of attention paid to how this will affect the way we do things. It will mean a lot more than High Definition streaming porn video services and fantastic ping times for online gaming, it has the potential to completely change how services and other things we consume are delivered.

An obvious starting point is telephony, Voice over IP technology is already very good, but with ADSL 2 being the most common method of broadband delivery in Australia the uptake has been relatively small as you need a phone line for your internet connection anyway. More recently ‘Naked ADSL’ services, phone lines with broadband but no voice service, have changed this somewhat, but this will be nothing compared to the impact of FTTH.

High quality, reliable connectivity means that utilities will be able to use ‘smart meters’ to ensure accurate billing and even introduce variable pricing with a lot more precision than traditional ‘off peak’ services. Home automation, presently a geeky hobby will become much more a part of our lives as we see the benefits of being to remotely access and control many of the systems and appliances in our homes.

Entertainment will also be dramatically affected as the spectrum constraints that have limited broadcast TV and radio since their inception are completely removed. Content providers will have to move to a new model because the bar for their competitors will be significantly lowered. No longer will a TV producer have to rely on being selected by one of five TV networks to go ahead with their show, if they believe that they have an audience they have a delivery medium available. It’ll mean good-bye to most video stores too, as services like iTunes movie rental and Netflix replace them.

Telstra’s copper network, the connection between homes and the network backbone, that has long been the cause of many of their competitors access problems has neatly been eliminated. With one announcement, the government has effectively induced the structural separation that been called for for years. And as a result of this, only a week later, Telstra has blinked, and volunteered to look at the possibility of structural seperation.

It seems that Kevin Rudd and Stephen Conroy have just played the best hand of poker ever. Telstra’s long winded bluff, refusing to tender properly for the initial broadband proposal, has been called. They’d gone all in but have been left with no option but to fold at the last second.

13 thoughts on “Broadband, Telstra and Poker

  1. Dave, that is the most comprehensive rundown on the governments proposals I have seen. Blind Freddy could see that the copper wire network would become a dinosaur – we in the country have been aware of it for years.

    It is such a great move for the consumer that I have been disturbed at the opposition it has engendered. It is now obvious that the protests have come from those who benefit from Telstra’s stranglehold of the landline network. A great post Dave

  2. Thanks Greg. I actually wonder whether taking over the network build was part of the government’s strategy from day one? It solves so many problems at once, political, commercial and economic that it seems almost too good to be true.

    I think the reason that we’re seeing so much opposition to this proposal is that the LNP are so desperate to find some point of difference from the government that they’ll argue against anything. While remote properties will never get their own fibre run, small communities will benefit greatly from this project, the Nats should be screaming for joy at what this will deliver to their constituents. There is a lot of self delusion going on in opposition ranks at the moment.

  3. No worries jr. This project really is a 21st century Snowy Mountain Scheme, not just because of its size, but also because of how it will provide an economic backbone to business for decades to come.

  4. Well said, Dave.

    Tell me, a few years back we had a big group of Maoris staying at GG (yes, it was BEFORE we renovated) and these guys were putting a fibre optic cable from Melbourne on top of the HT power lines that run through Bright. Does this mean we’ve already got the feed here?

    And secondly, and most importantly, will I still be able to watch Austar and live footy?

  5. Firstly, it depends on who owns the existing fibre and whether it’d be good value for the government to acquire it rather than roll out new gear.

    Secondly, not only will you be able to watch Austar, your reception won’t turn to crap whenever it rains. Although you may find that instead of buying from a single supplier you take a package from the AFL, one from Cricket Australia etc.

    This is a disruptive technology, it’s hard to predict what the new model will be, but in hindsight it will seem obvious, these things always do.

  6. I think it was SP Ausnet. The Maori guys reckoned it was for future use but I bet it was going to Falls Creek for the corporates … and Thwaites.

    Yeah, there’s no doubt that satelitte is NOT the answer.

  7. There’s a lot of unused fibre running around Australia, with a variety of owners, which I predict will end up being bought by the government. It’ll be the last mile that will take the most work, but will make the biggest difference.

    The current scare mongering about price shows what short memories people have. Turnbull, who claims people will never pay $100 a month for broadband, should know better. My first ADSL connection cost $110 a month, and it was from Malcolm’s own Ozemail.

  8. I was going to say I bow to your superior intellect on all all matters geek, Dave. But then you ‘dun went’ and said it yourself with your latest Twitter comment: “Time to unpack the Dungeon Master’s Screen once again,” which kinda puts it all into perspective.

  9. I’m rather partial to my current 3G wireless service, I said “Goodbye” to any Telstra service including the landline (so sweet), kept using my normal phone handset and number and got fast ADSL to boot ( reports between 1.6 and 3mb/sec, not bad for a 512kb plan).

    Sure, it’s not perfect, but it costs the same as I was paying Telstra anyway, except I get ADSL and the satisfaction of not giving Telstra any money either directly or indirectly.

  10. Dave, yesterday’s eloquent explanation has got me thinking and I suspect this whole shebang might have a rodentish aroma about it, AKA a hidden agenda.

    Seeing as Foxtel and Austar have sort of hit a brick wall with their quest to sell subscriptions to all and sundry, could it be that the government have discovered a way of going into cahoots with them, sharing the spoils, in lieu of supplying the HD movie material?

    Wouldn’t the the pay TV industry love supplying a captive market, eh?

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