Optus threatens war over Telstra's fibre plans

The 'Fibre to the Node' (FTTN) network announced two weeks ago will see fibre extended from Telstra's telephone exchanges out to neighbourhood 'nodes' with the aim of providing high-speed ADSL2+ broadband Internet to metropolitan areas.

However Telstra has said it will not commence construction unless it gets a government guarantee it won't have to let rivals use the network for a fee. In addition, Telstra's plans have the potential to block customers' access to the ADSL hardware of telcos like Optus, which is spending AU$150 million putting infrastructure in exchanges, as they could eventually see some copper cable on which third-party retail services depend replaced.

O'Sullivan said Optus would go to any lengths to prevent Telstra from keeping its network to itself, including legal action and taking matters up with the nation's competition regulator, as it had done in the past over past Telstra transgressions.

"We are one hundred per cent, root and branch, die in the ditch, until the last breath in our body, opposed to it," he told a packed Sydney business lunch today, with an audience including vendors like Juniper and other network operators like AARNet.

If Telstra tried to avoid what O'Sullivan saw as its legal obligations to play fair with competitors, Optus would "use every possible legal and regulatory avenue to drag Telstra kicking and screaming to the table", he said.

The executive claimed Telstra wanted to return to its monopoly days.

"Telstra is using its imminent privatisation to try to leverage regulatory outcomes from government -- so that it can stitch up a new monopoly in broadband over the next decade," he said.

The comments echo those of the managing director of Perth-based telco iiNet Michael Malone, who was reported to have said shortly after Telstra announced the plans that they were "a ridiculously transparent attempt to return to a monopoly position".

This could not be tolerated, according to O'Sullivan, because mammoth growth of broadband in Australia was creating an opportunity to break Telstra's dominance in fixed-line voice communications, in the process creating a competitive market that would bring benefits to consumers the way the mobile telephony market had.

Other than its planned FTTN network, the Optus chief claimed Telstra had two other strategies to cement a new monopoly.

Firstly, he said, Telstra was dropping its retail and ADSL pricing, while preserving the prices on its wholesale offerings which its its competitors need to use to gain a true nation-wide presence.

He added Telstra was pressuring the government to change the price structure on the 'unconditioned local loop service' (ULLS) -- or in other words access to the copper cable that telcos like Optus need to to link customers to their own networks starting in Telstra's exchanges. The cost of access to the ULLS is currently the subject of a debate between Telstra and the Australian Competition and Consumer Commission.

O'Sullivan alleged Telstra had recently backflipped and was supporting an average price for ULLS no matter what area of the nation services were delivered in with the aim of jacking up ULLS prices in the cities to deter competitors from rolling out services.

"It wants to preserve lower per customer economics for itself -- and be protected from making it available to competitors," he said.

Working together
O'Sullivan noted one potential solution to the nation's need for bandwidth could have seen a joint FTTN network built in partnership between Optus and Telstra -- in a similar way that Optus and Vodafone have collaborated on construction of a third-generation mobile phone network.

"I wrote to Telstra a few weeks ago indicating Optus' interest in a joint investment in a FTTN network," he said.

"Regrettably, Sol wrote back to me saying that Telstra was not interested. In his letter dated 17 October 2005, he said that '...we have no plans to proceed with a national FTTN network. There may be speculation by some that you may have read but it is not accurate."

"Since that time, clearly things have changed," said O'Sullivan, noting Optus was still open to the possibility of such a joint effort going ahead.

However he declined to say how much capital Optus could contribute, saying only "we do not believe we are capital-constrained".

New kids on the block
Calling Telstra's new chief executive Solomon Trujillo and his management team drawn from overseas "a band of mature age backpackers on an extended working visa," O'Sullivan said Optus was "quite ready" to educate them to the knowledge they couldn't "bully their way" into overturning the existing regulatory framework in Australia's telecomms industry.

"If that means delay, if that means regulatory uncertainty, if that means litigation, if that means prices being unsettled for a considerable time, well we're not the ones who have a prospectus to issue," he said.

In the light of what O'Sullivan sees as Telstra's monopolistic intentions, the executive said it was ironic Telstra had complained it faced an unfair regulatory burden.

"It is like Trevor Chappell complaining about not getting a fair go from the umpire -- even while he is rolling an underarm ball down the wicket," he said in a reference to an well-known international cricket scandal.

He further attacked Trujillo and his team's commitment to Australia's national interest.