Telstra's Copper Glut

Senator Hon Nick Minchin, Shadow Minister for Broadband, Communications and the Digital Economy raises the issue about the Rudd government's plan on structural separation of Telstra, and despite being a card carrying Liberal member, I have to agree with the Labor party on the plan to split Telstra into a retail and wholesale company.

I went to a NSW Young Liberal party a few weeks ago, and I got to see Malcolm Turnbull speak about freedom, and his vision for a country where people (this was targeted at young people by the way) had freedoms to be able to choose to run a business, to start a family, to educate themselves, and to live their life, and to have the freedom to stand up and bring about change. The contrary opinion he provided was that the Labor government wanted to tell us what our freedoms are rather than provide them.

I agree with all those concepts Turnbull spoke of - who doesn't want freedom to educate themselves? Who doesn't want freedom to start a business? This is not to say one should do any of those things, but it's about choice. These are things that every Australian has a right to.

So what does truth, justice, freedom, reasonably priced love and a hardboiled egg have to do with Telstra?

Back when I was a boy (so the early to mid 90s), Telstra (back then, Telecom) was wholly owned by the government. This was fine because Telecom pretty much had the market to itself for fixed line and cellular communications. We could call it a monopoly, and it isn't quite true, but the label is close enough an "oligopoly" I think would be the correct word given there were several competitors, but not really worthy of speaking of. It wasn't very competitive, you had to really have a niche market to focus on, and you almost always had to buy from Telecom to resell them. In particular, was the copper wiring connecting you to the switch (or exchange).

Now adays, there are x.DSL telco's left right and centre, yet not much else has changed. Telecom is now called Telstra, the government owns a lot less than it used to (through Telstra IPOs), but Telstra still leases the copper wiring out to it's competitors, unless they have installed their own. A business has little freedom in that regard, it has to lease copper from Telstra, you might be able to get it from Optus, and in small patches, AAPT.

Given that it was the Federal government that paid for the installation of the copper lines across the country, I believe that the Federal government should still manage it. ISPs should then lease the lines from the government, and Telstra should be no different. Instead, a private company now owns the majority of the last mile infrastructure in the country and ISPs have little freedom in lining their competitors pockets. What really stinks is that Telstra didn't even pay for the copper. It's a cash cow for them.

Anyway, no sense worrying about that now, what's done is done, it probably won't get fixed, however, Conroy does raise an interesting idea that, although it won't put the copper back in the hands of the government, it does provide many of the benefits as if it were there anyway.

Minchin asks how this split will benefit rural Australians. It benefits Australians (not just the rural Aussies you seemed to be focused on) as it allows for greater competition across the country. Telstra's company will be in exactly the same position as every other ISP out there, subject to the same terms and conditions, in effect, breaking the monopoly up. An ISP will still have to pay Telstra, but it's now a wholesale company it's paying, rather than a wholesale division of the same company. An ISP no longer has to increase it's competitions profit margins as it is no longer competing in the same market. Wholesale and retail are two different markets.

Now let's talk the real buzzword that I have not kept any opinion on until now... NBN - the National Broadband Network. If a true NBN is to be created, it should not fall within the hands of any single ISP. Under an unsplit system, any broadband services would ultimately be Telstra copper, regardless of how the data was back hauled, and Telstra would be able to charge the ISP an arm and a leg for access to regional areas of copper, whilst not paying a cent for it's own retail customers in that same region. This allows for more competition, which ultimately benefits the consumer. The consumer is free to choose from more ISPs. The ISPs are free to focus on various aspects of marketing (be it regional, type of client, or bundled services).

Everyone wins. Except Telstra's profitability as it now has to pay wholesale like everyone else.