Is Network Co. the way to go?
Probably the most interesting thing to come out of Malcolm Turnbull’s speech at the National Press Club yesterday was the idea that the coalition, given the opportunity, would separate Telstra and transfer the wholesale assets to a new “Network Co”. At TechWorld we posed a similar idea, but we can’t help but ask, is it workable?
First let’s consider how such an idea could come about to begin with.
If telecommunications was ever going to be meaningful in the country then it would most certainly have to involve the absolution of any potential conflict between the network operator and service retails for most of the last-mile residential network.
As it happened, the Australian taxpayer built up a national telecommunications provider in Telstra (then also known as Telecom) which provided retail fixed line and mobile telecommunications services while maintaining control of the majority of the backhaul infrastructure.
When deregulation went ahead in the nineties Telstra wasn’t structurally separated and the only real difference made was competitive players could offer fixed line services off Telstra’s network. So the level of competition was only ever going to be as good as Telstra would allow it.
Fast forward to today and the federal government is full steam ahead building a national communications monopoly to rival Telstra in the form of NBN Co. So at a fundamental level there is little difference between an independent Telstra Wholesale and the new NBN.
Is there a half-way house? Well, yes, there is. The mandated structural separation of Telstra and another government-owned wholesaler created out of the ruins is that half-way house.
Turnbull calls it “Network Co”, but at TechWorld we dubbed it ATIC – Australian Telecommunications Infrastructure Corporation – more than two years ago.
Consider it this way:
- Telstra’s wholesale assets get transferred to “Network Co.” or “ATIC”.
- The new wholesale-only provider’s network progressively gets upgraded to FttP
- The existing management systems of Telstra wholesale are leveraged
- The bureaucratic overhead of a new NBN Co is eliminated in favour of a re-branded “Network Co” or “ATIC”
So on paper it looks reasonable enough. The big question is whether it could ever work in practice. Could Telstra ever be separated to an extent which rivals the independence of the new NBN Co? Given that Telstra’s copper network is scheduled to be replaced by NBN Co’s fibre then the answer to that question looks like being an inevitable yes.
Telstra will eventually have to come to terms with its wholesale monopoly position being eroded.
However, as Turnbull said, Telstra is encumbered by its wholesale infrastructure legacy right now. I’m just not convinced the modern – and quite diverse – Telstra retail service provider won’t be able to compete with alternative providers without owning all the network. Just this week news surfaced that Vodafone is losing thousands of customers – perhaps mostly to Telstra – to rival mobile service providers.
If Telstra was treated “like another customer” for wholesale access, do you really think its marketing machine and customer service operations would be put at an inherent disadvantage?
We’ll have to await the outcome of the next federal election to see whether “Network Co” becomes a reality. Until then, lovers of very fast broadband will yearn for the day NBN Co fibre passes their front door. They have until November 30, 2013 at the latest until the guarantee gets jeopardised.
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