Uncommon Wisdom

Jun 22 2010   6:42PM GMT

Could Telstra-NBN deal serve as model for U.S. broadband deployment?

Tom Nolle Tom Nolle Profile: Tom Nolle

It looks like Telstra and the Australian government have finally struck a deal for the acquisition of Telstra’s access infrastructure for the rollout of Australia’s National Broadband Network (NBN). If everything goes smoothly, the deal may become an example for other countries struggling to get strong broadband deployment in the face of falling return on investment (ROI) on broadband infrastructure.

Telstra would get a total of $11 billion Australian for infrastructure assets and management of structural separation issues like universal service. Since the deal still needs both regulatory approval and a shareholder vote, it’s not in the bag, but it appears likely that something very similar to this package will eventually be accepted by all. If that’s true, then Australia will have taken perhaps the most radical step of any major industrial nation in creating a new broadband deployment model.

Since the FCC is tackling the issue of broadband regulation here in the U.S., it’s not out of the question that a model like the Australian one would be proposed here as well. In our view, however, there are issues with such an approach.

First, whether there’s payment or not, there was at least in the Oz case a threat that makes the move just a sanitized form of nationalization. Second, we believe that the process won’t accomplish the titular goal of “competition.” There is still only one supplier — in this case, NBN. Competitive local exchange carriers (CLECs) didn’t work in the U.S. because you don’t create competition by having one producer and a number of middlemen. That’s still the problem in Australia, unless the government can make “retail” players compete at the service layer.

Will they? Would the FCC? Neither Australia nor the latest Notice of Inquiry advance any specifics there. Therefore, we’re skeptical, to say the least.

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