Commentary |
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Comment |
Don’t be fooled by the Australian Competition and Consumer Commission’s rejection today of the G9 proposal for a new fibre to the node network.
The reason the ACCC has ruled the G9’s access undertaking proposal unacceptable is that it is not specific enough about prices after the initial three years and gives the G9 too much discretion.
“We could not accept so much discretion from a gas, electricity or rail firm. Access seekers would not know where they stood,” said the ACCC.
This should not be a problem. The G9 should be able to cobble together some medium-term pricing undertakings that will satisfy the ACCC.
In fact, one wonders what they were thinking, trying to get away leaving the pricing entirely open after just three years.
More important in the ACCC’s response to G9 today was not what the regulator knocked back, but what it accepted – namely the pricing and the proposed vertical separation.
The G9’s proposed wholesale access price is $29 to $50 per month depending on the speed. This seems to be at least $30 per month less than Telstra is proposing for the same thing, although Telstra has refused to engage with the ACCC on this subject and has not submitted any pricing undertakings, so we can’t know that for sure.
Nevertheless, today’s announcement looks a bit like an ACCC price benchmark.
If Telstra comes up with $80 a month, as generally believed, it will likely be turned down flat – which is, of course, why Telstra hasn’t been talking to ACCC’s Graeme Samuel for 12 months.
Instead, CEO Sol Trujillo and his team have been working on the Governments, past and present, using all the tricks in the book. They got nowhere with John Howard and communications minister Helen Coonan, and there are early signs that they are getting nowhere with their successors, Kevin Rudd and Stephen Conroy.
In fact Senator Conroy has signalled that the ACCC will be front and centre of the pricing and access parts of the bidding process for the $4.7 billion debt/equity/PPP/whatever subsidy that is the centrepiece of the ALP’s broadband election policy.
In other words, there will be no escaping Graeme Samuel under the Rudd Government.
Meanwhile, the ACCC’s approval of the vertical separation proposed by the G9 (that is for separate ownership of the network and operation of the access business) is undoubtedly also a signal of its preference for this structure in general.
That idea is supported by the broadband rights auction currently underway in Singapore, in which the Government is demanding vertical separation.
Another point to bear in mind is that G9’s prices are based on very conservative assumptions about connecting to Telstra’s network because it cannot get the information it needs for accurate calculations.
Essentially any builder of a new fibre to the node network other than Telstra will need the equivalent of M&A due diligence on Telstra’s side of the network: details on customer locations, duct lengths, copper wire lengths, equipment quality, and so on. That’s because it is not a stand-alone national network that is being proposed, but one that is connected to the existing Telstra infrastructure to create a new monopoly, but with two competing owners.
So if there is to be a competitive bid process, Senator Conroy will have to force Telstra to provide other bidders due diligence on its copper network. This will be deeply provocative to the pugilists at Telstra, so some legislation might even be required to force the company to cough up the information.
The good news is that if Telstra is both kept on a leash and forced to disgorge due diligence, then there will be enormous interest from around the world in building a new broadband monopoly in Australia using $4.7 billion of Government money.
It must be getting close to time for Telstra to see the writing on the wall, and either stop mucking about and start building a fibre to the node network, or to give up the fight and announce its own vertical separation and demerger.
Follow @AlanKohler on Twitter
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