Abbott paving a telecoms road to nowhere

Fish, barrel; fox, henhouse; Abbott, NBN. Mocking Tony Abbott's ignorance of telecoms has become so easy and habitual that his latest pronouncements would normally hardly merit a response. But with his latest policy speech being seen as an informal roll-up to next year's election campaign, and Telstra's recent behaviour reaffirming the need for government intervention in the telco sector, it's important to once again weigh the implications of Abbott's cost-redirection policy against the reality of the situation.

Tony Abbott fronted the National Press Club in Canberra with a 19th century vision for the 21st century, but will it hurt or help his election run?
(Screenshot by Josh Taylor/ZDNet Australia)

Most glaring is Abbott's ongoing commitment to redirect NBN expenditure towards building roads to ease congestion. It's not the first time he has made this commitment, it emerged during the Coalition's response to last year's Labor budget, but the fact that he's still repeating it confirms that he really believes in its value.

Abbott completely disregards the fact that the Labor Government's practice of accounting for the NBN as an investment, rather than a straight budget expense, has been recently validated. By contrast, Abbott's plan would bring those off-budget investment dollars back into the budget, laying down hundreds of kilometres of roads to ensure that even the outer suburbs of Sydney can get access to CBD-style congestion. And all this, without a shred of suggestion on the costs and benefits of his vague roads plan.

Sure, he may well argue, the government could position its funding as a commercial investment by establishing them up as toll roads, thereby extricating money from taxpayers who would pay again for their passage on taxpayer-funded roadways. Yet that approach has had its share of problems, most recently and famously in the form of Sydney's Cross City Tunnel, which will remain in private hands until 2030 and has long been running at a loss, despite a myriad of price adjustments and road closures to force people onto the network. Traffic volumes have just not met projections.

Does this track record have ominous parallels for the NBN, which also includes methods to encourage customers onto the network and has been plagued by criticisms, most recently by a vocal Malcolm Turnbull, that its volumes will also not meet projections? Not necessarily: as a wholesale backbone, the NBN is a complete replacement rather than a costlier alternative network that customers can choose to bypass.

Abbott's hatred of Labor, and all it stands for, has driven him down a policy blind alley that continues to play out as a syllogistic nightmare.

Disregard for a moment the broader question of whether building more roads is a long-term solution to easing transportation congestion. If Abbott is advocating the funnelling of public money that will generate a return on the NBN, into roads that have been proven as loss-making time and time again, how can he claim that he's making better use of taxpayer funds? Heck, 12,000 would-be ex-public servants (whose jobs Abbott wants to cut) might suggest there would be a better return by helping them clothe and feed their families.

Abbott's hatred of Labor, and all it stands for, has driven him down a policy blind alley that continues to play out as a syllogistic nightmare. Consider the NBN as a modern manifestation of that 1990s-era term "information highway", then contrast it with the concrete highways Abbott wants to build. Both are trying to build more, and broader, roadways that will improve services to areas that can't currently get them. Both are intended to resolve currently abysmal congestion in the flow of traffic. But only one is likely to make even a modest return during the course of its public ownership, and it's not the tollways.

Where Abbott's latest proclamations veer from the ignorant to the offensive, however, are in his claims that "better broadband will once more be delivered through market competition". This is the Liberal Party line, but I and other commentators have repeatedly pointed out how the competitive market created by deregulation in 1997 has failed the country's telecoms environment, over and over again, and how relying on the private sector will never deliver equitable services in rural and remote Australia.

In a case of uncanny timing, Telstra was this week actively showing just how much today's competitive market will actually deliver better broadband: that is to say, not at all.

Turns out Telstra wasn't too impressed by the plans of Nextep, an NEC-owned communications services provider, to offer wholesale ADSL access to communities along the 6000km Regional Broadband Blackspots Program (RBBP) fibre-optic cable. RBBP, you recall, was intended to enable the delivery of competitive backhaul to regional areas that would never otherwise get it through private investment.

RBBP generated excitement when it allowed new internet service providers (ISPs) to enter the market in rural Geraldton, Western Australia. However, this sort of thing worries Telstra, which was faced with losing wholesale customers like Adam Internet and Internode to Nextep. In response, Telstra did what any good monopolist would do: it re-zoned its services so that the areas in question are now in a lower-cost pricing band.

If Telstra's changes mean Nextep can no longer justify the investment to build competing ADSL infrastructure ... what hope is there for Abbott's much-loved 'market competition' to deliver on his vision?

This may have reduced Telstra's wholesale revenues slightly, but it also torpedoed Nextep's business case. Nextep's negotiations with ISPs are now currently on hold. And if Telstra's changes mean it can no longer justify the investment to build competing ADSL infrastructure even where competitive backhaul is available, what hope is there for Abbott's much-loved "market competition" to deliver on his vision?

Then there's TPG, which alleges its customer churn to Telstra doubled after the company increased its wholesale rates, thereby eliminating TPG's ability to undercut its prices.

The fact remains: Telstra's continuing dominance of backhaul and last-mile services means it can make "market competition" unviable with nothing more than a few changes to a rate card. Even the best-intentioned private investors can't justify sinking money into this kind of market, and they will fall by the wayside as Abbott's blind faith in private enterprise masks the truth. When Abbott speaks of "market competition", he is really talking about Telstra and its ability to compete with any effort to unseat it. And that's hardly forward-looking.

On the eve of the 2010 election, 18 months ago, I took on Abbott's "lust" for the prime ministership, his willingness to compromise Australia's communications network for his own gain, and his support of deputies that discredited legitimate nation-building exercises by branding them "talentless".

Now, it appears we'll be dealing with a similarly constrained world-view as Abbott races towards a 2013 election while trying to avoid getting a well-deserved knife in the back. That this (metaphorical) knife would most likely be wielded by his communications shadow minister, Malcolm Turnbull, adds another element of intrigue to discussions about a policy platform that looks more and more irrelevant the more it's repeated.

Roads or information highways? Will Abbott's position hurt him in the 2013 election, or help him?