Telstra FTTN Bid: Not bidding a big problem

Telstra’s CEO, Sol Trujillo indicated that time is running thin for the government to get together its independant group of professionals (in the governments opinion) to determine the fibre to the node proposals that exist, establish a framework, and decide who will build the starting leg of Australia’s next generation network.

FTTN isn’t supposed to be “the end solution”, as it’s only to a node. It still uses highly overpriced copper for the tails to the customers house, and that tail is technically incapable of carrying future proof speeds.

But that’s not to say FTTN would be a waste of money, because we won’t need blistering speeds until 10 – 15 years or more from now, in which case the nodes offer a upgrade path, by simply replacing the cards in the node, and the tail to the customer with fibre, you end up with fibre to the home, and somewhat “blistering” speed internet access.

So, the decisions surround FTTN are more than just.. let’s get them faster speeds now, and the problem will be solved permanently.

It’s foolish to believe that, because Australia still doesn’t have 100% penetration rates on broadband, so moving right to FTTH might offset expenses from the future, but if broadband takeup isn’t at 80% or more, it might not be worth it until more people discover the importance of broadband services and upgrade (competition drives prices down, therefore pushing broadband into more homes and lower pricing helping the decision process).

Points to consider for FTTN are:

It’s going to create another monopoly, no matter what.
Telstra get the rights to FTTN, we are stuck with the wholesale rates they force upon everyone for as long as they choose to, subject to regulation

G9 get the rights to FTTN, we are stuck with G9 FTTN, as they want overbuild protection to make sure they don’t get duplicated and forced out of market by Telstra.

So, the monopoly will exist either way.

Competition should rank important, but so should viability.
Telstra’s prices of $59 with phone and 512k speed, ex GST, ex Data, ex Calls, ex Backhaul are somewhat far fetched, they are silly. They would lock us into 3 figure retail prices proudly. There is no question here though, that the project is viable, it’s viable to the tune of consumers paying more for a service of lesser value!

G9 prices are staggered, but the most wholesale will pay is $60 for both the broadband service and the phone tail ready to be connected (optionally). G9 plan might not be viable without customer numbers however, so they would need a way of forcing traffic on their network to ensure that they can get the numbers for carriage of traffic.

That’s not to say their pricing isn’t viable, it likely is, the non viable part is the customer numbers part, just under half the market are sitting over at Telstra, getting them to move in Metro areas where choice exists, might be hard, in regional areas, not so hard!!

Proposal should promote competition.
The proposal should promote competition, so that we don’t end up with a virtual competition model we have now. If Telstra went broke (un-bloody-likely), a lot of competitors would come tumbling down, solely because of their customer base being on Telstra and dependant on Telstra providing the service.

This dependancy should be somewhat less dependant so that more real competition in fixed services comes to fruition and we see more companies make big moves.

Look at the case of ADSL2+ providers now, they got sick of Telstra’s slow ADSL2+ artificially shaped crap and decided to roll out their own ADSL2+ infrastructure.

In the future, we might see such competition change from “G9 are slow”, let’s roll out duplicate nodes in selected areas, using .. well line cards at the node, and fibre to the customer premises (optionally).

Naturally, this won’t happen for some time, if at all, as the upgrade path for FTTN is FTTH, and that path would generally be done by the owner of the nodes (ie. G9).

The competition at that point might occur at the node further, with competiting fixed cable carriers basically using different pricing, different technologies to gain market share from the neighbour node.

We might even see Node Sabotage.. Car Accidents into nodes hit record numbers? Not likely, not that funny, but.. a possibility.

So, the model proposed needs to ensure competition is viable after the initial costs have been recovered. Telstra can go without for 15 years and then start from scratch. The tables can turn, and they can be forced to enter a market. Ouch, that might hurt them, but they’ve hurt competition and Australians. Karma? Maybe. Maybe Not.

Consumer price competition
Without the need for the ACCC to force it, such a proposal for a network should be built around consumer price competition, so that companies can compete on a more level playing field for customers, and have more than just one thing setting them apart.

For example, some competitiors might like to provision services differently to others, at different prices, so that they can be competitive by either slowing down broadband speeds (and therefore the dollars) or speeding up connections, and offering phone services for different pricing (competitive).

This is very important, any proposal needs to increase the competition around pricing, and create a level playing field for everyone.

In fact, I would also rather see multiple wholesalers for the infrastructure layer for the avoidance of any price squeeze that might happen at that level. The only dictator of pricing should be solely the regulated rates that are required for the rollout to make a return (and a bit for the investment as well).

If the proposal doesn’t meet key competitive pricing criteria, I would expect it to be thrown in the rubbish along with the company that generated it. Australia cannot afford to get further behind as a result of such bully tactics employed by Telstra.


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