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6. The National Broadband Network in Australia

When the Australian government decided to sell off a large proportion of its long-established telephone network, variously run by the PMG (Post Master General's department), Telecom Australia, and Telstra, it did so with the supposed intent of ushering in a new phase with open competition for the provision of telephone services across the country.

Whereas we do have competition in the mobile phone field, because the hardware required to provide the service can be installed independently of any other provider, and because it wouldn't be in Telstra's interests to stop its customers calling non-Telstra mobile phones, the situation with land-line phones is vastly different.

Telstra, in all its manifestations, had many decades to establish a national network, and to iron out any bugs. It was unthinkably naïve of anyone in government to suggest that a new player could establish a network which was as encompassing as the one already built, and have it running in months, rather than decades.

To overcome this problem it was necessary for Telstra to allow other companies to on-sell the telephony work, which is still provided by Telstra, and to charge those companies for it at wholesale rates. The conflict of interest was so blatantly obvious that even "blind Freddy" should have seen it coming. Was it reasonable to expect the well-established network operator to allow late-comers who had no intention of building a network to compete with its lucrative, highly profitable (and hugely overpriced), and until then monopoly "service"? I think not.

What the government SHOULD have done was to separate the network itself from the provision of service, and sell off only the service provision. It is the government's responsibility to ensure that what the community considers "essential services" are provided for all on an equitable basis. In doing so it can choose to operate as a "not-for-profit" business (which does allow it to charge enough to cover maintenance and upgrades) and allow true competition between service providers. This is how many countries have approached the privatisation of such services, and it works much better than the Australian model.

The National Broadband Network provides an opportunity to rectify some of the problems which have resulted, but few people are talking about anything but broadband services, and that's a great pity.

The existing Telstra network is based on a pair of copper wires linking the exchange to the client's premises. In most cases the links between exchanges are now fibre-optic cable, which has many advantages, including how much can be put through the fibre, the speed of transmission and the quality of the reception. Well over 90% of the cost of providing a telephone service is taken up in the exchange-to-premises link (because the cost of having the link is covered by only a small number of calls rather than the millions between exchanges) so it is understandable that a company focussed only on telephones would be reluctant to upgrade a service which works. Incidentally, that distribution of costs also means that it costs Telstra very little more to connect someone at Cape Leeuwin to someone on Thursday Island than it does to connect businesses in the same CBD building, but check you long-distance call charges and see the impact on your own bill.

The proposed National Broadband Network depends heavily on the use of fibre-optic cable to the client's premises (commonly called fibre to the node) and gives us a fantastic opportunity to upgrade from the copper network to a fully fibre-optic system. If the government installs and owns the required cabling then it can offer all telephone services providers (Telstra included) the opportunity to connect to customers using a much more capable network. In doing so it can effectively take back from Telstra the wholesale operations which should never have been included in the sale. To sweeten the pie for Telstra shareholders it would, of course, be possible for Telstra's wholesale wing, once untangled from the retail wing, to be responsible for the installation and maintenance of the new network.

What has been entirely missing from public debate, so far, has been the added advantages of a fibre-optic network.

The copper network currently in use is "old" technology, and some of it is in dire need of replacing. A basic programme of upgrades has already seen the links between exchanges shifted to fibre-optic cables, and so the establishment of a new network could be effected by running a parallel cable which would eventually totally replace the copper one. Replacing the copper connections to all homes and business will not only allow high-speed broadband to those premises, but it would allow additional telephony services to be extended to all customers, and it would allow high quality free-to-air, as well as pay, television to be transmitted to customers across the state without the need for broadcasting towers. Remote customers would be able to enjoy the same television programmes, at the same time, and with the same quality of service, as their big city counterparts. Mobile phone connections could also be run through the new cable for those living in areas of poor reception.

These suggestions are only scratching the surface. The opportunities are endless. What we need to do is get our heads out of the "broadband only" box, and think laterally - then we'll get a good service, and it won't cost anywhere near $43b.

© 2009 Steven Secker