Australia’s Broadband Bombshell

April 8th, 2009 by · Leave a Comment

In a surprise attack on Telstra’s dominance of the Australian telecom market, the Australian government announced a new initiative to bring 100Mbps FTTH to everyone.  Well, 90% anyway with the rest needing wireless or satellite presumably because they are out in the outback or close enough.  The network will be purely wholesale and no private owner will control more than 20%.  The government will own 51% while the network gets built over the next 7-8 years, by which time the government will have sold its share.  The total price tag? Over AU$43B or about US$31B.  The amount the government is committing right now? AU$4.7B or about US$3.4B.

Now, this is for the moment just politics, nobody is digging trenches yet and nobody likely will unless private industry joins the effort.  I think it will join, but they may haggle first and the question of where the early money comes from in the teeth of a global recession is not clear.  But regardless, it is one of the boldest moves seen in a while – one that takes the municipal broadband dream national.   Open access for everyone, no ILEC competing for retail customers and hindering the competition, and with taxpayers paying just enough to get it started.  What do you think, will it work?

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Essentially, the government is trying to construct by fiat a giant wholesale-only fiber ILEC that will end Telstra’s last mile copper monopoly, and then set it loose basically like a regulated utility.   Is it socialism?  No.   Is it capitalism?  No.   Proponents liken it to building highways of course, that fiber is the new infrastructure a country must get right.  But can such an entity really succeed on a wholesale-only basis? I mean, users will love it, but will shareholders?  One could argue that since economics have never produced such a beast, that it is not likely to be viable without continued government support to balance out its regulatory burdens.  I have no idea and I doubt anyone else does either, but at least it will be fun to watch it play out.

They intend to start this summer in Tasmania, which no doubt will act as something of a pilot project. It will be interesting to see how both consumers and Telstra respond there. No doubt this will add more fire to the arguments about functional separation over in Europe, where governments might threaten to do the same if their dominant carriers don’t play ball.

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Categories: Fiber optic cable · ILECs, PTTs · Old · Polls

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