The Government has made a giant leap and will now form a company that is 51% public owned to build fibre to the premise for 90% of Australians. The remaining 10% of the Australian public that will not gain access to fibre to the premise will be supported by better wireless and satellite broadband access.
More details emerge daily and summaries of what we have learnt to date abound. What is of more interest is what we have not learnt so far through all of the press releases and statements by Government MPs. The list of things we need to know is quite large and some of the more pressing items include whether a new cable will be laid to Tasmania or will the fibres laid with BassLink to be used to overcome the current Telstra connection bottleneck to the Apple Isle. What this leads onto is the question of a second national wholesale backhaul network and whether this is going to be built independently of the existing Telstra wholesale backhaul network or will Telstra be able to offer existing infrastructure for equity in the new entity?
One scenario that sends a chill down the spine of many is the thought that Telstra may utilise the strategy of selling existing infrastructure into the new entity and then when 2022 rolls around, Telstra buys the company either through the initial offering or through the market after the dust has settled. If you were running Telstra over the next 5 to 10 years you would have to consider this a reasonable approach as the status quo today remains after 2022 and the cost to shareholders should be minimised by the initital sale of infrastructure for equity in the new entity and subsequent profits to shareholders. This approach also means that the new entity would be responsible for the upgrade and maintenance of any infrastructure that Telstra was able to offload. Telstra may consider the strategy of trying to sell anything from the Telstra wholesale backhaul network that is in need of upgrade or is expensive to maintain and can be bypassed if it is sold to the new entity.
Anyone want copper cable? Selling cheap. Telstra management has been quick to announce the Telstra strategy to move beyond copper to fibre to the premise. The recently announced upgrade to the cable network is a pre-emptive strike at providing fibre to the premise to the customers that Telstra values most. The people currently paying for FoxTel are in Telstra's eyes more likely to pay for FoxtTel and 100 Mbps. By securing this market quickly Telstra could starve the new network entity of a valuable market segment.
Will the $43B provide a completely new wholesale backhaul network built around Australia using the latest technology or will the new entity be looking to purchase second hand network segments? It does not need to be stated again that the most important announcement yet to be made by the Government is whether Australia will be provded with a second wholesale backhaul network that is independent of Telstra and for that matter independent of any other telecommunications company. Two competing wholesale backhaul networks are vital for true growth to occur in the telecommunications sector. Through competition and growth will come more services and cheaper prices for consumers.
The expenditure announced and the 8 year timeline for the final result to be achieved leads to the anticipated outcome being something that Australia needs. Australia is no longer a manufacturing nation and is one of the few countries in the world today that has made significant reductions to tariffs. The future for Australia lies in its ability to utilise technology to develop new opportunities for employment. To remain stagnant, as has been the case for the last 10 years under the Telstra monopoly, Australia would have ended up with a crippled future in the one area that is left for Australia to excel - technology. A bold step has been taken and we must support it.