Australian innovation plummeting: Optus

Australian innovation plummeting: Optus

The tit-for-tat war of words between Telstra and Optus over the National Broadband Network process continued last week at the 2008 Australian Telecommunications Summit, as Optus' head of government and regulatory affairs, Maha Krishnapillai, warned that Telstra's submission for an open access NBN is akin to free and open elections in Zimbabwe.

Krishnapillai claimed that Telstra's regulatory wish-list it submitted to the government in late June, where the telco said there is no need for structural or functional separation, is illustrative of how the incumbent's public declarations and actual intentions are "radically different things".

He contrasted the success of competition in Australia's mobile market -- which with four different networks has seen prices driven down and innovative services delivered to consumers -- to the stagnant, monopolized fixed broadband market where Australians are slugged the highest prices in the OECD for services that perform at the poorest end of OECD standards.

Also presenting at the summit was the executive director of the Competitive Carriers Coalition, David Forman, who echoed Krishnapillai's dismal analysis of the fixed line broadband market in Australia.

"All the international evidence, from independent sources such as the OECD over the years, has painted a picture of a market that has been falling behind the rest of the world across all measures of consumer benefits...we know that Telstra charges some of the highest prices in the developed world for its services...we know that it's been one of the slowest companies in the world to release new services such as ADSL in its various forms." Forman said.

Forman pointed to Telstra's bucking of international trends through its growth in PSTN revenue since 2005, and the fact that the incumbent's annual report showed Average-Revenue-Per-User was up 6.9 percent for broadband services over the past year, while the UK has seen average broadband connection prices drop by 8 percent.

"[While] the rest of the world continues to show a decline in the total number of incumbent [PSTN] lines, Telstra has reversed the trend. That's a triumph for Telstra, but it's a national embarrassment for the rest of us. We're up to 10 years behind the rest of the world now...and we're going backwards," he warned.

According to Krishnapillai, the construction of multiple fixed broadband networks to engender the kind of competition that the Australian mobile market enjoys is pure fantasy. Australia will have a single broadband network and it will be a monopoly, so it must be regulated appropriately and be structurally separate to any other retail organization so it cannot give preferential treatment to its own arm.

"And what does Telstra respond by saying? It says 'no we will not do structural separation. What we will do is we will continue to give ourselves preferential treatment in order to retain the ability to extract monopoly profits'.

"When you go through the details of Telstra's [annual report] results, they are earning 55-80 percent EBITDA margins on their fixed broadband networks. They are protecting desperately those margins by running a campaign of fear and delays around the NBN process, to slow it down as far as possible to protect those very lucrative margins in the fixed broadband network."

Drawing on Telstra's annual report, Krishnapillai stated that the incumbent controls 78 percent of industry profit, while Optus holds 15 percent and the rest of the sector around 6 percent -- figures he claimed are "not the sign of a healthy market".

"[Telstra] is the international gold medalist in terms of profit earnings across the entire developed world. Sol [Trujillo] said last week, to quote him, 'we've sustained both broadband market share gains and Average-Revenue-Per-User growth, a feat virtually unheard of among incumbents around the globe'...he is genuinely and understandably proud that they have been able to maintain profitability because of the poor market structure and poor regulation we've had in Australia, and the end outcome is we have the highest broadband prices in the OECD."

He urged attendees not to misunderstand claims in the press by Telstra that other NBN proponents are dragging their heels or looking to slow the process down.

"Let's look at the facts. Clearly Telstra is earning massive amounts of profits in the fixed broadband network and its going to do everything it can, take every legal avenue it can, to slow down development of the NBN."

Krishnapillai warned that Telstra's regulatory wish-list would see current regulations inapplicable to the NBN builder, and there would be no role for the ACCC in setting access prices.

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Tags Telstranational broadband networkoptuscompetitive carriers coalitionnorth koreaZimbabweMaha Krishnapillaiinternational news2008 Australian Telecommunications Summit



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