Be vewy quiet: we a-hunting white ewephants

You may not have noticed, but last month the western black rhinoceros, a rather ugly and lumbering beast that ranks among Africa's majestic big-game beauties, was declared extinct. Score another point for greedy idiots who believe powdered rhino horn would imbue the power of telekinesis or some such.

It may not involve powdered horns or boost sexual prowess, but Australia's telecoms sector has long endured poaching from a coalition party that long ago decided that it wanted to make the NBN extinct. No matter what he's asked about the NBN — as when I recently lodged some quite sensible questions with his office — Tony Abbott's only contribution to the debate has been to repeatedly dismiss it as a white elephant, and he the Elmer Fudd who would shoot it dead. Malcolm Turnbull has been less zoologically inspired in his rhetoric, but no less determined to put a bullet in the head of Labor's NBN.

Tony, get your gun — but has NBN progress during 2011 made the coalition's metaphor irrelevant? (Image by Ikiwaner, CC BY-SA 3.0)

The thing is: as the real NBN evolves, Abbott's cries of "white elephant" seem to have become less and less relevant. Consider the origin of the phrase, which refers to an expensive gift that is unwanted and must be cared for at great expense. Wikipedia tells us that Siamese kings of lore used to gift white elephants to "obnoxious" courtiers, so as to financially ruin them.

Is the NBN — and I'm talking about both the FttP roll-out and the structural change around it — really all that bad?

It's a curiously deprecatory description for a project that is fundamentally about putting a broom through the shemozzle that is Australia's telecoms industry. Even better for NBN Co, the project made massive advancements during 2011, whether it was the launch of commercial NBN services, the opening of the network's operational control centre, the subjugation of Telstra shareholders who overwhelmingly supported the company's deal with NBN Co or the release of a 12-month plan that confirms that the NBN is, eventually, coming to a neighbourhood near you.

With TransACT and other ISPs under [iiNet's] belt, the move seems entirely appropriate — especially since Hackett spent most of the year convincing NBN Co that its pricing model made it all but impossible for small ISPs to compete. Internode has, apparently, fallen victim to Hackett's own rhetoric.

Now we are seeing the flow-on effects of the project as small, non-competitive ISPs execute their exit plans. If you'd said a year ago, for example, that 2011 would conclude with the acquisition of one of the industry's most-loved ISP brands (Internode) by its fastest-growing (iiNet), you would have been shouted down by Simon Hackett's rabid fans. But with TransACT and other ISPs under its belt, the move seems entirely appropriate — especially since Hackett spent most of the year convincing NBN Co that its pricing model made it all but impossible for small ISPs to compete. Internode has, apparently, fallen victim to Hackett's own rhetoric.

The subsumption of fiercely independent Internode adds a significant wrinkle to the NBN debate. Is this, as Turnbull would have us believe, a case of Labor's white elephant trampling yet another bastion of competition as it lays waste to the telco marketplace? Or does it simply reflect the growing trend towards industry consolidation, which will, in theory, help customers benefit from better services and lower prices as economies of scale help large ISPs capitalise on the NBN?

There are two sides to this story, and both may have their justifiable proponents. Yet small business does not have a natural right to exist, any more than the corner milk bar has an intrinsic right to survive when challenged by a new Subway nearby. Business is all about survival of the fittest, and the looming threat of the NBN is pushing small ISPs to extinction as large ISPs — iiNet in particular — embark on customer land grabs to bolster their positions.

There is an interesting irony in all of this: the coalition's proclivity for light-touch policies philosophically favours big business; indeed, much of Turnbull's objection to Labor's NBN has been based on the fact that it interferes with and manipulates the free competitive market. So how can Turnbull justify attacking iiNet's purchase of Internode? Is this not just another case of business leaders making commercial business decisions that reflect changing business circumstances?

The coalition's proclivity for light-touch policies philosophically favours big business; indeed, much of Turnbull's objection to Labor's NBN has been based on the fact that it interferes with and manipulates the free competitive market.

If Labor's NBN had never happened, one might argue, the deal would never have happened, because Internode would have been able to just continue doing its thing. And perhaps that is true: inertia is always the easiest business model. But that doesn't mean that it's the best one; business is ever changing, and progress only ever comes as a result of willingness to change. This deal's effect on pricing is still unclear (although it's worth noting that Internode had generally higher NBN prices than iiNet), but the growth of iiNet into the new Optus can only benefit consumers through better economies of scale, and, presumably, better customer service.

And this, as you sit back and carve your Christmas turkey, or roast your Christmas snags, or catch your Christmas fish, or whatever else you do to enjoy your well-deserved holidays, may be the biggest lesson that the industry can take from 2011.

This year, telecoms-market improvements came from those willing to change — from the government's willingness to challenge free-market strictures to deliver equitable wholesale services to Telstra's willingness to formally embrace its new structure to Simon Hackett's willingness to change his mind about whether fierce independence was a practical long-term ISP strategy.

Vodafone was willing to change, tapping into the NBN to explore a completely new business model. Even the coalition proved willing to change, backing away from its ridiculous election policy to a $17 billion (and probably more) FttN policy that at least doesn't plumb the depths of ignorance and foolishness, although it leaves more unanswered questions than Turnbull cares to acknowledge.

We start 2012 with a far firmer picture of the NBN's strategy, a better sense of where the telecoms industry is headed and the sense that a looming election means that it's crunch time for the NBN. Next year, perhaps, we can put the old arguments aside and accept that change is inevitable. I'm sure the coalition will continue taking shots at it throughout 2012, but one wonders how long it will be before Turnbull realises that his elephant gun is loaded with blanks.

Wishing you a very Merry Christmas and holiday season, and all the best for 2012. Yours in telecoms,
David.