Broad: Would've been cheaper to buy back Telstra

By Ry Crozier on Apr 12, 2011 6:01 AM
Filed under Telco/ISP

The NBN alternative.

AAPT chief Paul Broad has argued the Government could have structurally separated Telstra for less than the $36 billion cost of the National Broadband Network by buying it back.

Broad told the ABC's Four Corners program that the structural separation of Telstra had "driven much of the [NBN] agenda... right from day one."

"Telstra's market cap is, I think, probably $32-$33 billion," he said in an interview that did not make the final cut of the program but was published by the ABC online.

"They [the Government] could have bought it, structurally separated, sold all the bits back and incrementally rolled out fibre to the areas [of Australia] that demanded it."

Broad said he had "no argument" with the Government spending taxpayer dollars to roll out fibre into broadband blackspots "in the bush".

"It's a very good idea, [and] if that's what we want to spend taxpayer dollars doing, OK," he said.

But Broad took issue with the Government taking areas that the private sector was happy to roll out fibre infrastructure to.

"I happen to think the market's delivering up really good outcomes," Broad said, when quizzed about how far the private sector was willing to go to deploy broadband technology to Australians.

"The market is the cornerstone of change. Technology is driven by clever people coming up with clever ideas, not by governments rolling out big infrastructure programs.

"I think it's fundamentally flawed [that] you can't cherry pick or you can't put infrastructure into areas where you think you might make a dollar."

However, Broad's view was isolated by others, including from NBN Co and Optus.

"It's just simply too expensive for a private company to build this type of nationwide network," NBN Co chief Mike Quigley said.

"Will they build in specific areas where they can make money? The answer is yes. Will they build it nationwide? The answer is no."

ACCC commissioner Ed Willett added: "If you're looking at the greater part of Australia, that infrastructure works best as a natural monopoly. If you go outside the CBDs you don't have to go very far and the economics of the natural monopoly characteristics prevail."

An interview with Internode chief Simon Hackett also did not make the cut for the final program, but featured Hackett talking about the cost of the NBN project.

"It is a very expensive network [but] I think for its stated amount of money it's remarkably great value," Hackett said.

"It's cheap compared to the road system and we've all absorbed that cost and decided it was good.

"There is a reasonable argument that it may run over time and over budget, however, and thats not based on anything about this project in particular - it's merely based on the past history of massive government projects.

"They don't tend to run on time and on budget."

The interview offcuts featured in a section of the ABC website entitled 'the Great debate'.

Broad: Would've been cheaper to buy back Telstra

6 comments in this discussion

"If you think that Telstra could be bought for $32-$33 billion, you are forgetting that Telstra is greedy, has share holders who would have to agree and has enough sway to kill any such motion ..."

By ITnovice

Tags

paul, broad, aapt, buy, back, telstra, structural, separation, nbn, nbnco, 4corners, four, abc, broadband

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Comments: 6

MerariSchroeder Apr 12, 2011 8:17 AM	Broad said he had "no argument" with the Government spending taxpayer dollars to roll out fibre into broadband blackspots "in the bush". "It's just simply too expensive for a private company to build this type of nationwide network," NBN Co chief Mike Quigley said. Quigley took Broad out of context - a very political act. Broad only said he thought the private sector could build the value areas, with the Government prioritising fibre to black spots. If that meant the private sector paying a "rural levy", then so be it, at least there would still be scope for innovation. Unlike the current plan for an NBN.
Treb Apr 12, 2011 8:52 AM	As to buying back Telstra, that would not have fixed the problem. We would have had a more compeditive industry, but it would not have ment the roll out of fibre. I personally think that would have been a waste. However I do not agree with the idea that private companies could have provided the social benifits of the NBN by cherry picking. For a start it would not alow us to turn off the copper network eliminating the benifits of the network effect. Secondly it would increase the cost of providing the fibre to regional area which would further increase the digital divide. We have seen the result of competion infrustructure in Australia with HFC technologies which were only ever rolled out in capitals. I would suggest that that experiment has failed
mrhasbean Apr 12, 2011 10:04 AM	"I happen to think the market's delivering up really good outcomes," Broad said, when quizzed about how far the private sector was willing to go to deploy broadband technology to Australians. He's kidding right? The problem is all of these people live in metropolitan areas. There are many many blackspots that aren't "in the bush" - in regional areas with populations well into the hundreds of thousands - and into which Telstra, AND their current competition, have absolutely no plans to roll out fibre or even improve the existing copper / fibre hybrid offerings. I live in a very new estate - less than two years old - in a regional location with a population of more than 300,000 people, and during peak time our speeds average less than 0.5Mbps. I have spoken with Telstra and all of the other players in the area and nobody has plans "for the foreseeable future" of upgrading anything, yet there's another couple thousand homes slated for this immediate area in the next few years. Comparatively our internet "solutions" in this country are a joke with a sizeable chunk of the population restricted to 25 year old+ technology, while even our supposed third world neighbours have unmetered fibre available for half what we pay for our slowest, and metered "broadband" offering. Australians just need to wake up to see how much they're being shafted...
longsword Apr 12, 2011 11:00 AM	@mrhasbean the NBN isn't coming anywhere near regional australia for quite some time (unless you live in one of the Independant's seats). The Four Corners story last night was extremely poor and was like an ad for Conboy and Labor rather than a detailed examination which I would have expected from Four Corners.
Ace Apr 12, 2011 12:01 PM	So if you allow infrastructure cherry-picking, how do you avoid a) duplicate networks and b) vendor favouritism? Many will be aware of the cable tv/broadband rollout lunacy of two networks drooping down poles on suburban streets, and now half delivering nothing. Many will also be aware of the problems so many have faced through use of competitors networks (Telstra/Optus). Why does Broad want to return to those bad old days? @mrhasbean's experience is repeated in inner Sydney suburbs. For whatever reasons, large estates have horrible bandwidth because the likes of Telstra and Optus don't want to go near them.
ITnovice Apr 13, 2011 11:14 AM	If you think that Telstra could be bought for $32-$33 billion, you are forgetting that Telstra is greedy, has share holders who would have to agree and has enough sway to kill any such motion through the media like the mining companies did. Then you have the cost of hiring many workers and buying lots of networking kit like fibre etc and a lot of trenching and cabling work to do and after all of that is completed, you then have the huge expense of structurally separating Telstra which would easily reach the same cost as the current rollout. Paul Broad's argument is largely ideological because its not based on the real cost of what he is proposing!