NBN and the impact of Australian Telco's Business Practices.

AUSTRALIAN TELCO BUSINESS PRACTICES

Australian Telcos aren't just uncooperative, their behaviours are pernicious, obstructive and often perversely self-injurious. This (and the GFC) is why Telstra's share price fell around three times pre-NBN, and has recovered over 10% in the short time since the NBN arrangement has been completed.

There are 4 incontestable examples of this:

• Telstra/Optus cable rollout.
• ISDN only as a 'premium service'.
• ADSL 1 (ACCC intervention), ADSL 2 turn-on and ADSL 2 DSLAMs & ULL (non) churning.
• Mobile roaming.

The massive and predictable waste of money caused by Telstra purposefully overbuilding the Optus network, even as they deployed, was sheer bloody-minded behaviour. When they'd beaten Optus to a standstill they proved that to "queer the pitch" (prevent others from 'scoring') was their only objective by never completing their own cable network.

Telstra had the resources and capability to finish their roll-out to 85-90% of the population, thereby laying the foundations for a viable Australian Cable TV Industry. Their bloody-mindedness destroyed a whole industry - we know what should have been from the businesses in the rest of the world. The critical enabler, sufficient penetration of a distribution network, was deliberately prevented by Telstra.

Presumably their interest in Foxtel was also along the same lines, deny competitors access to necessary resources rather than exploit those resources themselves. [Following part of the Accounting definition of 'control' - the ability to deny others access to a resource.]

ISDN was technically superior and cheaper/easier to deploy/operate and hence much more profitable. It also used existing customer cable-plant much more efficiently, avoiding massive, costly plant upgrades. But despite what even the USA did with residential ISDN, Telstra always priced ISDN as a 'premium service', denying themselves access to newer technologies solely to preserve PSTN profits and keep out competitors who might've used it to fuel a broadband Internet and a slew of new
services. Despite years of this "protectionism", revenues and profits from the PSTN network went into decline around 5 years ago.

It needed the intervention of the ACCC to set wholesale ADSL-1 pricing to sane levels. Then it's take-up exploded and fuelled the broadband Internet in Australia.
It took Telstra years to remove their arbitrary speed-cap of 1.5Mbps on ADSL-1, allowing those whose lines were good enough, up to 8Mbps. There was never a technical reason for this, and in economics terms, Telstra left a lot on money on the table by not providing higher speeds at a premium as soon as technically possible.

By then, Telstra had deployed/upgraded all its DSLAMs to be ADSL-2 capable, with a maximum speed of 16-24Mbps, again if you lived close to the exchange, not for those 8km away.
But Telstra would not turn it on, forcing competitors to deploy their own ADSL-2 DSLAMs, unnecessarily replicating the Telstra network, even though the same cable-plant and exchange buildings were used by everyone. Rolling out 4-5 parallel networks into ~1200 exchanges was slow, expensive and crippling for all but the largest operators. Not the least, causing intense competition for the services of installation contractors.

When competitors finally deployed their own ADSL-2 DSLAMs, Telstra would not make ADSL-2 available to customers on an exchange until competitors had rolled DSLAMs into those exchanges. Sheerly perverse economically and totally against the customer interests and wishes.

Having forced competitors to multiply overbuild an effective and efficient (and upgradeable!) ADSL network, Telstra then used the opportunity to deny customers "fast churn", using the fiction of the ULL. Customers could be transferred to another ISP's ADSL-2 network with a single phone call or email. Undoing this became onerous and extremely lengthy - simply because Telstra had refused to permit what had worked transparently and brilliantly for customers for years on ADSL-1.

Finally, our many times overbuilt Mobile networks.

There is no technical reason Australia doesn't still have a single, shared mobile phone infrastructure, especially for less used network areas, exactly as it started with the "Gen 1" (analogue) mobile phone
network in the late 1980's.

Since GSM/CDMA (G2 digital) Telstra and all the mobile switching carriers have overbuilt each other with completely parallel networks, often on the same towers. There is no way this is efficient or effective for the carriers and carries a huge economic cost for consumers and the country - and unnecessarily gives us all a maximum cost, worst-performance service with limited coverage.

In both the USA and Europe, a fundamental digital network feature, "roaming", is supported by carriers. It's acknowledged that no carrier has the resources or desire to build their network everywhere. Carriers willingly sign roaming agreements with each other. They cooperate, because it is in their own best interests, and possibly that of their customers too.

The Fibre-to-the-Node network was never going to happen while Telstra owned the last-mile.
The Rudd/Gillard gift to the opposition is buying back what Howard sold-off: the shared distribution network.

Given the long-term behaviour of all Australian Telcos, we were never going to get a Fibre-based consumer network, FttN or FttH, until Telstra could no longer avoid it.

In light of long entrenched and well-known business practices, selling Telstra as a vertically integrated company was massively unwise and exactly contrary to the National Interest.

With the perverse Business Practices of all Telcos, not technical or cost reasons, a single wholesale/backbone network is necessary in Australia.

This corporate behaviour wouldn't be accepted in a kindergarden and is far beyond the simple "doesn't play well with others".

Addenda 17-May-2012: Somewhere in late April 2011, just before the June-2011 agreement with the Federal Government, Telstra share prices broke away from the ASX200. The market is voting with their wallets that Telstra is now a competitive enterprise with a strong future, including real growth. Is that just the influence of the "structural separation", the selling/leasing of the residential copper network, or the new co-operative CEO, David Thodey, or both? I've no idea, but the shares are performing very well...