Wednesday, August 09, 2006

Tech: Broadband - politicking nobbles the future

Going into the future, I expect most broadband use to be mindless entertainment - isn't that what happened to tv? However, outside that doldrum, the internet is revolutionising knowledge, communication, and collaboration. Hence it is going to be an essential part of everyone's future.

Industry analyst Paul Budde (previously blogged here) loves to call broadband in Australia "fraudband".

Of course, broadband comes in many sizes, contrary to what most telcos tell the public. Many people end up with common copper wire, the cheap phone lines. From ADSL to ADSL2+ protocols, they try to squeeze more out of a piece of string. The only future-proof answer, as Budde keeps saying, is fibre optics all the way. That's FTTN then FTTH, or Fibre-to-the-node (local exchange) then fibre-to-the-home. FTTN is the main issue, and this is already available in the major population centres, so why the argy bargy?

It's really only about the less-densely populated areas. Australia's a wide country, but most of the population huddles in a few spots around the edges. If broadband is rolled out only on the basis of profitability, there will still be a large number of people that would miss out. Hence USO, the Universal Service Obligation - public subsidy for broadband to uneconomic areas. The argy bargy is about how much that costs. And in a rare moment of clarity, politicians agree that decent internet access is important to everyone.

Hmm, scrap that. There's votes at the fringes, and the government is scrambling for them.
It's politics, with irony piling upon irony. Telstra, the ex-government carrier, happens to be still 51% owned by the government. Howard's mob have been trying to sell off that remainder for years, but the share price has been languishing in the doldrums, and only ever seems to go down. Hence the threat from Telstra: we reckon the USO will cost us this much, and if you make us swallow it for less, you'll kill our share price, and we'll be a lump of wet cement when you try to offload us.

Telstra had brought in an American head, Sol Trujillo, for a few truckloads of money. Praise the lord, says Howard, he won't carry the sentimental baggage of an Australian, who might want to see everyone get a fair go. Unfortunately for the government, their strategy is now biting them: they can't get Telstra to appease their rural constituency, yet dare not - as the majority shareholder - tell Telstra what to do, because that's just what they're trying to move away from.
So, as Budde foretold, Telstra is now bluffing it out. According to Internet analysts DSL Prime, “Telstra is absolutely lying about the costs, which they are placing at twice what AT&T is costing for a near-identical build”; AT&T is said to be stretching it anyway, to recover costs profitability after downturns in the voice market.
It's possible the truth lies somewhere in between. It's possible much of the costing is finger-in-the-air estimates. If there is some risk involved, there would be an amount of capitalising that risk.

In May, Budde reckoned Telstra would capitulate in a few months. That's yet to happen, and the game is by no means over. Ahh, politics.

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