Extract: Telstra’s twin bites at AARNet cherry

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Extract: Telstra’s twin bites at AARNet cherry

AARNet publishes a history of the Australian internet.

Academic research network AARNet today launched a book that documents how the Internet was established in Australia. 

Titled AARNet: 20 Years of the Internet in Australia and penned by Glenda Korporaal, the book explores how Australia's commercial Internet network, as we know it today, was originally developed within Australia's academic community.

Of the many fascinating chapters, iTnews was most interested in where the academic and commercial world's collided. We hope you'll enjoy the extract below...

"At the Networkshop at the University of Sydney in December 1988, [ANU computer systems manager Geoff] Huston outlined the basis of a proposal which could satisfy the interests of the different groups in the universities... He put forward a proposal for a multi-protocol network which would include TCP/IP, DECnet, X.25 and OSI. It was a modest, low budget proposal but a brilliant solution to a politically difficult problem.


While the international links were developing and Huston was working on the technical side of the network, [Professor Ken McKinnon, vice chancellor of the University of Wollongong] was leading a push to put together sufficient funding for the proposal.

The Australian Vice Chancellors Committee (AVCC) also tried to get Telstra (then known as Telecom) involved in sponsoring the project. But like their forebears in the US had found with AT&T, there was little interest in the new concept from the phone company monopoly. Geoff Huston comments: “Telstra could have owned it from day one. We were struggling to get the money to do it.”

Greg Batchelor [the head of management services at the CSIRO] remembers visiting Telecom’s head office in Melbourne to try to convince them to become involved.

“We were trying to ensure the funding for the network in the early days. I had a meeting with senior management at Telstra. I remember sitting in the 45th floor of Telstra headquarters in Exhibition Street in Melbourne saying: ‘You guys should be part of this. It’s going to be the communications of the future’. The person I was talking with said that they didn’t think network communications were ever going to take off. Telstra’s main focus was voice. They didn’t think that data communications would take over from voice.

"I said ‘I think you’re wrong. You are going to eat your words’.”

McKinnon approached the Australian Research Council (ARC) about funding for the project in early 1989 and, in September 1989, the AVCC sent a formal submission to the ARC.


In November, the ARC agreed to provide $1.77 million for the establishment of the network for it’s first two years of operation.

The starting gun was fired. A lot of the behind the scenes work had been done. After years of discussion, a national academic and research network was now set to become a reality.


Huston recalls: “By the end of 1992, we were victims of success. We were exponentially needing money and linearly getting money. The two equations weren’t hitting. In Year 2 we couldn’t make things work any longer.”

[AARNet’s second employee Peter] Elford felt frustrated that they could not meet the growing demand for the internet in Australia.

“We felt we were holding back the tide,” he said.

It is not surprising that Huston and Elford were starting to become overwhelmed. AARNet was THE internet in Australia and the internet was growing at an astounding pace. Network traffic had grown five-fold in two years. Two years after it was established, AARNet connected 40,000 computers.

If things were bad for Huston and Elford in 1992, in 1993 things got even worse as demand continued to expand. In the US in 1991 the National Science Foundation had given the NFSNet more funding, allowing the US national backbone to be upgraded from a T1 (1.5 Mbps) to T3 (45 Mbps) - a thirty fold increase in capacity.

With AARNet’s growth constrained by its limited capacity, Huston and Elford were hoping they could pull off a similar outcome in Australia. Huston spent a lot of 1992 writing a submission for more funding from the Research Data Networks program run by the Federal Government’s Department of Innovation, Science and Research. The application was successful and, in August 1992, it was announced that the Federal Government would provide $13 million over the next two years to “upgrade the research data network in Australia”.

Unfortunately the money was never specifically tagged to go directly to AARNet. As a result, other organisations, including Telstra, got access to much of the funding. The experience left Huston feeling that he had been outplayed politically in the Canberra funding game.


By [December 1994] AARNet was one of Telstra’s largest customers. Telstra, and newcomer Optus, were watching the expanding network closely. [AARNet general manager Peter] Saalmans recalls getting visits from Optus engineers to check out AARNet.

In mid-1993, there were comments by Telstra executives suggesting that it could offer to “relieve” AARNet of its commercial traffic. By 1994 the internet in Australia was not only taking off, it was becoming clear to AARNet staff they were becoming part of a wider public utility.

Huston: “We always thought, even when it was gathering steam in the early 90s, that we were showing the established communications sector what they should be doing. We never thought that those folk would follow where we were. We thought that they were there to run the communications systems and we were there to play. But around 1994 or so, there was an emerging realisation that this wasn’t a game any more and that no one was going to come along and say: ‘Game’s over, we’re now going in this [other] direction’.”

By 1994, the vice chancellors were thinking it might be time for them to go in another direction. They could see AARNet was becoming a problem child turning into a major business beyond its original remit. There was also a concern at the legal ramifications of the growing organisation which was not even a separate company from the AVCC.

“The vice chancellors were very concerned about this cuckoo in the nest,” says Saalmans. “The little business they had set up to run the internet was getting out of hand.”

It was not just a matter of the vice chancellors coming up with the money. There was also the question of whether Telstra itself would be prepared to invest in the extra international capacity which AARNet might demand in future. AARNet was already Telstra’s largest customer and, if its demand continued to expand at the same rate, Telstra would have had to build an entire submarine cable system just for AARNet. It was not something it was prepared to do.

In 1994, talks began with Telstra about a deal which could see the company taking over the business.


In June 1995 Telstra acquired what was then the whole of the infrastructure that constituted the internet in Australia.


It seemed like a good deal at the time, but that feeling did not last long.


Extract taken from the new book ‘AARNet: 20 Years of the Internet in Australia’ by Glenda Korporaal and published by AARNet. Reprinted with permission.

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