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Alan Kohler is one of Australia’s most experienced commentators and journalists. Alan is the founder of Eureka Report, Australia’s most successful investment newsletter, and Business Spectator, a 24-hour free business news and commentary website. He also hosts Inside Business, a half-hour Sunday programme on the ABC, is the finance presenter on the ABC News - and producer of the nightly graph (or two).
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TECHNOLOGY SPECTATOR: Quigley's pedal to the metal

Supratim Adhikari1 Mar 2012, 11:04 AM

Now that Telstra's separation is assured NBN Co can get on with rolling out its network, and Mike Quigley will be pushing hard to see it reach the key 20 per cent mark.

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Technology Spectator

Pedal to the metal for NBN Co

Now that the dust has settled on the Labor leadership stoush in Canberra we can finally take pause and reflect on just what the politics mean for the NBN. Julia Gillard’s victory ensures there is no immediate danger to the network and, whether by fortune or design, the political machinations within the Labor Party have seemingly acted as a potent catalyst in pushing the initiative into its next critical phase.

With Telstra’s structural separation undertaking (SSU) proposal getting the nod from the Australian Competition and Consumer Commission, NBN Co can now finally concentrate on what it needs to do the most, get cracking on the rollout. There is no doubt that NBN Co is running behind schedule but, then again, the regulatory wrangling over Telstra’s separation was a key impediment to the process. With that hurdle now crossed, NBN Co will now get access to dark fibre, ducts and Telstra exchanges and all the information it needs to accelerate the process.

The Rudd-Gillard scrap did raise the possibility of an early election, albeit briefly, and that would have almost certainly put the NBN on very thin ground. For now, the status quo has been maintained and with an election due sometime in 2013, the rollout has to get beyond a point of no return to not only ensure its survival but also that of the $11 billion Telstra/NBN deal.

The magic number for NBN Co boss Mike Quigley is 20 per cent, according to BBY analyst Mark McDonnell, who told ABC Radio that the deal does have break clauses, which offers Telstra compensation of $500 million if the NBN is scrapped. The payment kicks in only if the network has rolled past 20 per cent of households before being disbanded. So crossing that 20 per cent mark before the next election is crucial. Right on cue, Quigley was out this morning telling ABC Radio that take-up rates on the fibre so far would be the envy of many telcos around the globe.

With NBN Co’s initial projections not due until mid-2014, well after the next federal election, McDonnell adds that there is still ample scope for changes. An outright cancellation of the project seems highly unlikely but McDonnell is right to point out that potential cost blowouts and less than expected revenue flows could force this government, provided it somehow manages to win the next election, to modify its position.

As for the Coalition, digging the existing fibre out of the ground is clearly not an option but Tony Abbott and co will pursue the fibre-to-the-node (FTTN) strategy that they have so far espoused. Telstra will still be split into two but the entire exercise will have to be restarted from scratch.

The acceleration in the rollout will also mean that the billions will slowly start rolling into Telstra’s coffers. However, as The Australian’s John Durie points out, the telco’s shareholders will have to wait a little longer before finding out how much the cash is headed their way.

Telstra and its NBN prices

Staying with Telstra, the telco also released its long awaited NBN pricing, which was immediately met with a wave of derision from customers and users. Their rage is understandable because on face value what you see here is the old Telstra, a bully hitting its customers with ridiculously high prices and forcing them to hold on to the copper line a little while longer.

The cheapest access package starts at $80 per month, for 5GB of data at a download speed at 25mb per second. For an extra $10 customers can gain access to an extra 195GB of data per month. The bundles are packaged with a home phone line, a free Wi-Fi modem and free installation.

The telco is doing what it does best with regards to extracting a little extra from its customers, but as The Register’s Richard Chirgwin points out keeping the copper-based telephone connections for as long as another 18 months isn’t exactly a bolt from the blue and not entirely in Telstra’s control.

Meanwhile, the ever dependable David Braue puts a slightly different spin on the issue, saying that despite the grumbling it is more than likely that most of the telco’s customers will probably stay on.

Telstra for its part is almost certain to release better and cheaper bundle packages down the line, and releasing bargain basement packages did have the potential of sending the likes of Optus and iiNet into a tizz. As far as the government is concerned the current scenario sets up a perfect platform to spruik the competition benefits of the NBN. Telstra’s customers in the past had no choice but to swallow the bitter medicine, that’s not the case anymore. There are plenty of ISPs and plenty of choice.

Coalition’s missed opportunity

Finally, the way things stand right now, the Gillard government is unlikely to retain power at the next election and one would think that it might be a good time for the Coalition to perhaps further articulate its position on what it intends to do with the NBN. Actually, it isn’t just about the NBN, the Coalition needs to tell Australians what plans it has for securing the nation’s broadband future. So far the approach has focused too much on fiscal considerations.

Here’s what shadow communications minister Malcolm Turnbull said in his blog after the news on Telstra's SSU getting the all clear from the ACCC and the subsequent press conference by Conroy and Gillard.

"The truth is, as she well knows, that the Coalition supports structural separation of Telstra, supports upgrading the broadband services across Australia but will ensure that is done in a manner that promotes competition (as opposed to stamping it out) and is done in a manner which is cost effective resulting therefore in Australians getting very fast broadband sooner (because a more cost effective approach could be completed more quickly), cheaper (because a mix of technologies including FTTN costs less than FTTP) and more affordably (because a less expensive network and a more competitive environment will result in lower prices).”

The comments highlight the party line that the best alternative for Australia is a network that provides just enough broadband to keep us ticking along but very little in the way of future-proofing.

Liberal MP Paul Fletcher had a similar tone at Media Connect's Kickstart conference, where the former Optus executive was keen to point out that using public money to pursue a "big bang approach" to ubiquitous broadband coverage is a recipe for disaster. Why? Because the government can never mandate take-up and the public will never choose anything other than the basic NBN packages. A lack of interest in the high tier NBN services would put the NBN business case on shaky ground. He also added that betting big on major technology initiatives is a dangerous game even for private sector behemoths and, after all, we're talking about taxpayer money here.

Fletcher suggests that an incremental process is far more likely to deliver better results and the Labor government’s high risk/low reward model was not only anti-competitive but also forcing people to change their behaviour. What’s sad here is that Fletcher could have used the event to present a forward-thinking approach from the Coalition, one that espoused the case of a broadband infrastructure that would serve the nation well into the future. Instead he chose to present a spurious argument predicated on an opinion that people simply don’t need the NBN and won’t use it. Just imagine if one applied the same argument when planning for highways and bridges, real infrastructure. That’s what the NBN is, critical infrastructure that should not be hampered by short-termism.

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