Uncommon Wisdom

Feb 26 2010   6:36PM GMT

Telstra’s government broadband tangle could backfire on users

Tom Nolle Tom Nolle Profile: Tom Nolle

Telstra’s problems with the government and the government-owned NBN Company subsidy policy have taken a new and potentially ugly turn as the latest legislation proposes that the NBN not-for-profit company that will build out broadband infrastructure to wholesale to others might in some cases receive permission to operate in a retail context.

This is seen as a way of inducing Telstra cooperation, something that Telstra shareholders aren’t sure is fair to them. We’ve always been a bit concerned about the NBN story because it seems to fly in the face of our model on natural economic viability for advanced services.

As a market, Australia is among the lowest-density of all the advanced economies in the world, far less dense than Qwest’s territory here, for example. It’s hard to see how, in such a market, the NBN model could produce services at a fair price and still sustain its business entities. There seems to be an almost-political face-off here, a rivalry between the government and Telstra that’s grown out of the extreme regulatory posture long-taken in Australia and from the adversarial relationship that has created. We hope it doesn’t backfire on the population.

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