2Oct 09
All about separation, or all about copper?
Posted by David Braue @ 16:38 64 comments
Labor's fibre-to-the-premises NBN was meant to be an act of freedom, a breaking-free from 100 years of copper infrastructure legacy and the start of something new. So with the NBN now underway and new regulatory legislation on the table, why in the world are we still discussing Telstra's copper network?
And we are most definitely discussing it. Senator Stephen Conroy's recent mandate that Telstra separate, by hook or by crook, not only mentions the copper network, but in a speech Conroy offered some examples of how Telstra might go about it:
Importantly, the government retains an open mind on how structural separation may be achieved... For example, it may involve the creation of a new company into which Telstra could transfer some of its fixed-line assets. Alternatively, it may involve Telstra progressively migrating its fixed-line traffic to the NBN over a period of time and under set regulatory arrangements, and for it to sell or cease to use its fixed-line assets on an agreed basis.
With NBN Co apparently scouring the market for potential infrastructure buys, the former option would suit it to a T. The latter option doesn't really mandate separation, so much as an eviction order forcing Telstra to empty the copper network of traffic and dispose of the physical assets.
As the NBN slowly inches towards reality, how do we explain the government's seeming determination to acquire the copper network?
The government has clearly put a lot of thought into how it might gain access to Telstra's copper network, which is essential for current ADSL services and was crucial to the now-defunct FTTN network but has no actual role anymore. So, as the NBN slowly inches towards reality, how do we explain the government's seeming determination to acquire the copper network? In-ground copper has little to do with the NBN, after all, and the government really should be able to find land for its own fibre exchanges.
Conroy, who I noted last week has backed away from the sledgehammer approach of the initial announcement, is now painting the initiative as a victory for progress — a wake-up call for Telstra that it needs to make some concessions to partake in the "exciting" wireless future. Whatever that means. All Telstra has to do is split its copper network off into a format suitable for easy integration into the NBN.
Little wonder that some are becoming sceptical of the government's magnanimity: Conroy's interest in the copper network seems to be less about the copper itself as the labyrinthine network of underground ducts through which it passes.
Digging these ducts is not only expensive, but introduces complex access issues that will require more than a casual conversation over Friday-night beers to resolve. Conroy has previously conceded that the NBN may involve extensive overhead cabling, which would work in many areas but is hardly universally applicable; the NBN simply must have a significant underground component, and separation legislation so far seems to have been architected with this goal in mind.
Architected how? Well, given that Conroy's department received extensive and detailed maps of Telstra's entire network as part of the original NBN tender last year, it's not a stretch to assume that these maps have guided the design of the current fibre-based NBN. Overlaying the two networks must have produced a lot of overlap and cost redundancies.
Given the cost pressure on the NBN, it's likely that Conroy is counting on Telstra separation not only for its industry benefits, but its ability to deliver a more politically expedient new network. Indeed, many analysts have dismissed the separation pronouncement as nothing more than a negotiating tactic, and both the government and Telstra have indicated negotiations are indeed ongoing.
But why is Conroy proceeding on the apparent assumption that any divestiture must immediately benefit the NBN? Why couldn't Telstra spin off its copper network into a joint venture in which it retains a 50 per cent or 49 per cent interest, thereby retaining shareholder value while satisfying the government's desire for it to lose exclusive control over the copper network?
Heck, the other half could go to private investors, an overseas telco — or even Optus. With the NBN looming, the copper might directly benefit them more short term than long term — but if they could gain ownership of the network's rights-of-way, how would Conroy handle the resumption of the network's information highways and byways?
If one is going to poke a bear with a stick, one should make sure one is on the opposite side of a strong cage first. While the separation mandate is long overdue, assuming it's a slam dunk for competition may be optimistic.
The full extent of Conroy's real motivations are only known to him and inferred by those with whom he is negotiating. While some sort of change is now likely, whether this all results in Conroy getting unfettered access to his precious copper — and the underground ducts NBN Co needs — is still anybody's guess.
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Another old saying David simplistic but true is, if you poke a bear in the eye with a stick just make sure that the stick is longer than the bears arm.