26Nov 08
Dear Telstra: pack up your toys, go home
Posted by David Braue @ 16:30 221 comments
If you've ever played a board game with a young child, you've probably dealt with the internal struggles one faces in trying to establish a fair contest. Do you just let them win to boost their confidence; do you whip them outright to build their constitution; or, perhaps, do you agree to their requests for one-sided rule changes that favour their particular capabilities?
As Telstra's embarrassing half-response to the Federal government's NBN tender rockets through the media today, I couldn't help but think that the company's board has been spending a bit too much time playing Monopoly — the board game — with their grandchildren.
And not only have they been offering small perks like the pick-up-the-fines-when-you-land-on-Free-Parking or get-$500-when-you-land-on-Go rules, but they're likely relaxing hotel zoning laws and actively dipping into the bank to slip money into the lucky grandkids' hands. Is that a casino I see over on Ventnor Avenue?
Telstra has submitted not an NBN bid, but a proposal that basically flips Conroy the bird and promises Telstra will still come to the table
This sort of thing just doesn't fly in the real world — but the people behind Telstra's bid just don't seem to have gotten that particular memo.
After months spent unsuccessfully trying to wrangle special concessions from Senator Stephen Conroy, Telstra has submitted not an NBN bid, but a proposal that basically flips Conroy the bird and promises Telstra will still come to the table — later, and on its terms — if the government wants it to.
Incredibly, the terms of Telstra's proposal don't even vaguely resemble the requirements of the NBN RFP. Now, I know this issue will be dissected a hundred ways to Sunday before the week is over, but here are a few major points to contemplate:
Telstra is proposing to invest up to $5 billion in the new network. This gives a total network value of just $9.7 billion — about half the $20 billion at which Telstra executives priced the network at the company's annual general meeting last Friday.
This means either Telstra has decided to do its sums using the same number system as Terria and other analysts — who have repeatedly slammed Telstra's inflationary estimates — or that Telstra's proposal is more limited in scope than what it was previously suggesting.
Amazingly, the latter seems to be true. Telstra's proposal says that "up to 90 per cent of the population would be covered".
Even those with a casual interest in the bid know Conroy has explicitly required "high-speed, fibre-based broadband network, providing downlink speeds of at least 12 megabits per second to 98 per cent of Australian homes and businesses". It's right there on the NBN main page.
Which version have Telstra's executives been reading?
Telstra's proposal will deliver 25Mbps to 50Mbps to "65 percent to 75 percent of the footprint" and "between 12Mbps and 20 Mbps" to everyone else. The remaining 10 per cent of Australians get ... just what they have now.
For most, that will be the sad reality for some time, since Telstra seems to be cabling rural areas on an as-needs basis — witness its $5.5m investment in rural south-east Queensland, announced on the eve of the NBN deadline.
Telstra's proposal talks about "a $29.95 per month entry level 1Mbps retail broadband pricing plan" over its new network. Again, what proposal is Telstra reading? I thought it was pretty clear to everyone that 1Mbps services were to go the way of the dodo.
The NBN is about progress, not about spending billions of taxpayers money to get a service slower than what I can already get today from the likes of TPG, iiNet, and others.
Telstra wants the government's $4.7 billion provided as a concessional loan, not a straightforward contribution. Despite the clear desire of the government to have an equity stake in the NBN through its contribution — and, potentially, to get a return for taxpayers as the network takes off — Telstra wants it structured as a loan, of all things.
This, of course, is so Telstra can pay back the loan and eventually own 100% of Australia's next-generation broadband network. Does this sound like what you voted for?
Telstra's proposal is nonbinding — just a promise of what it might deliver if the government makes the concessions it has so far refused to. I don't recall this possibility ever being described in the tender documents. Telstra was supposed to submit its NBN bid, and it did not.
Telstra called a press meeting to announce its lodgement with 45 minutes' notice, and unfortunately I couldn't make it. But I was at Telstra's AGM last Friday, and I was somewhat amazed (albeit not too surprised) to see chairman Donald McGauchie continuing to rail against the government and call for regulatory guarantees that Conroy had explicitly ruled out just the day before.
Conroy may have his own shortcomings, but his refusal to cave in to Telstra's demands for preferential treatment are to be commended. By pushing its own party line right up to the deadline, Telstra has not only shown that its executives are simply not paying attention — but that they have managed to get themselves ruled out of the running for the NBN entirely.
Rejecting Telstra's proposal, after all, is the only conclusion Conroy can reach: as someone whose entire philosophy is built around transparency and process, he simply cannot keep Telstra as part of the NBN bidding process anymore.
Its proposal falls short of the tender's requirements in so many areas that any other conclusion would be both a fatal lapse of prudence, and a slap in the face to the three (or more) other companies that duly submitted compliant bids in good faith.
I am reminded, suddenly, of the (quite funny, if you haven't seen it) movie Forgetting Sarah Marshall, in which the aforementioned Ms Marshall dumps our anti-hero protagonist, only to try to get back together with him — in a way that is far too risque` to describe in a PG-rated blog — when she comes to regret jettisoning him.
He is tempted for a second, but then realises that, even though it would have been inconceivable to him throughout most of the movie, he is better off without her.
When shareholders grill the management about its exclusion from the NBN at next year's AGM, Telstra will blame the government. But in truth, it has only its stubbornness (and, its bid suggests, inattention) to blame. Telstra's underdone, useless proposal is exactly the same as Ms Marshall's: an offer that, when Conroy gets tired of what Telstra feels are unequal rivals, he is welcome to crawl back to kiss McGauchie's proverbial.
After more than a decade of Telstra's utter contempt for Australia's broadband policies and technological future, and a proposal that reflects more of the same, one can only hope that Conroy is equally strong-willed.
7%
2%
So if Telstra has submitted a non-bid and someone else wins the contract and rolls out fibre to the nodes, will they have to pay Telstra for access to the last mile of copper? Can the government take away this asset from Telstra and pay them a nominal fee? Can Telstra bog down the whole rollout in the courts?