Telstra needs real competition: Alan Kohler

Next week the so-called G9 consortium of everybody except Telstra will appoint a chairman and a bid manager to handle the tender for the Government’s national broadband network (NBN).

It will be a much-needed boost to G9’s efforts to block Telstra’s inexorable march towards re-establishing its monopoly, but the truth is they’re in trouble, and their failure to get serious before now is a massive disappointment.

The main reason for that failure is that up to a few weeks ago the leader of the consortium, Singtel Optus, was conflicted, having won the Howard government’s $958 million subsidy for regional broadband, which was in direct political competition with the Rudd Government’s own $4.7 billion plan.

The result is that the G9 has lacked leadership and is now starting the main game from behind.

Apart from anything else, it’s now G7 because of mergers. Some in business say it won’t be long before it is G6 or G5, and most of them are tiddlers and not really in any position to cough up any real equity.

But their main problem is that they may have left it too late to come up with a viable bid for a $10 billion infrastructure project by 25 July.

They’ve been having meetings and phone hook-ups for more than 12 months, but those inside the consortium are saying privately that the only way they will be able to compete with Telstra in the bidding for the Government’s request for proposals on an NBN is if they get an extension on the closing date.

Given the importance of having at least two bids, extension will almost certainly happen. It’s not just Communications Minister Stephen Conroy who will be interested in maintaining some competitive tension in the process – the rest of Federal Cabinet these days is actually far more pro-competition than the Howard cabinet.

But Telstra is beginning to resemble a steamroller in its dogged pursuit of a national fibre broadband monopoly, for three reasons:

• It has shown the Government that it will litigate furiously at the slightest opportunity.
• It doesn’t really need the money.
• Its NextG wireless network has been a stunning success, while the promised Singtel Optus 3G network has simply not materialised.

The game is now all about whether Conroy and his cabinet colleagues can stare down Telstra’s demand for a regulatory holiday before it will build a fibre broadband network. The best way to do that is with a competing proposal.

Ironically the Singapore Government stared down Singtel’s similar demand and eventually achieved a good result, but Prime Minister Kevin Rudd has invested a lot of political capital in getting high-speed broadband to 98% of Australians.

If G9 doesn’t come up with a bid and Telstra folds its arms across its chest, it will be quite awkward, and Telstra will be in a strong position to demand a favourable regulatory environment.

Specifically, it may not be required to separate management of the network from its retail operations. Telstra would remain an integrated behemoth, but this time it would not have the discomfort of ADSL competitors using enforced access to its copper wires. At least that’s the plan.

There is much at stake in the G9’s so far feeble efforts to produce a viable alternative to Telstra, and to stop CEO Sol Trujillo and chairman Donald McGauchie from triumphantly regaining the company’s monopoly.

This story first appeared in businessspectator.com.au