Uncommon Wisdom

Nov 3 2009   5:14PM GMT

Telstra’s separate susidiary buzz: Government plan could zap ROI



Posted by: Tom Nolle
Tags:
access network
Broadband
ROI
service layer architecture
Telstra

Telstra, Australia’s national carrier, remains locked in a dispute between its shareholders and the Australian government, which proposes to break Telstra up to support its broadband network initiative. Telstra believes it can play a role in NBN, as the network is called, without structural separation. Discussions on how that would be accomplished were proceeding nicely, according to Telstra, until the legislation for separation was introduced.

We are of the view that separation like this is not likely to succeed at its objectives and in fact is more likely to compromise them. In addition, it would clearly undermine the value of Telstra’s shares, which have been sold off to the public for some time through yet another government program. To take steps to devalue them now is not likely to create confidence in any new government process, including NBN.

Then there’s a very important truth, which is that competition always lowers price and always creates overbuild and thus always lowers net industry ROI. There are situations where that is reasonable; some geographies have ample demand density. Australia doesn’t appear to be one of them, according to our model.

If the government’s goal is to create competition in the interior or service portion of the network by making the access network into a shared utility, it should have clear indicators that the ROI in that service portion is sufficient to create real opportunity. Without that, there could be a lot of future failures in the center, which would undermine the profitability and sustainability of the new edge—whatever it turns out to be.

 Comment on this Post

 
There was an error processing your information. Please try again later.
Thanks. We'll let you know when a new response is added.
Send me notifications when other members comment.

REGISTER or login:

Forgot Password?
By submitting you agree to receive email from TechTarget and its partners. If you reside outside of the United States, you consent to having your personal data transferred to and processed in the United States. Privacy

Forgot Password

No problem! Submit your e-mail address below. We'll send you an e-mail containing your password.

Your password has been sent to: