More Telstra Madness
'The Pigs' has argued for some time that the full privatisation of Telstra was fraught for the simple reason that the company controls the 'local loop,' ie, the last few kilometres of copper cable that connects customers to the exchange. Telstra has fought competition by restricting access to the local loop, usually by charging high prices for the privilege.
The competition regulators are kept busy trying to keep tabs on Telstra's wholesale pricing, with some success. It is now possible for competitors to 'uncouple' the local loop by connecting the copper directly to their network, but Telstra will always have a measure of control while the local loop is connected through their exchanges.
In my opinion, a better idea would have been to keep the local loop and the exchanges' back ends in government control, and privatised the service component of the telco.
Anyway, this is all history as the government is pushing ahead with the full privatisation, and the measures to control Telstra's pricing seem to be working. Telstra is having difficulty in maintaining income at past levels. The market value of Telstra has fallen significantly.
Recently, Telstra proposed an upgrade of the local loop using optical fibre technology. This is a positive step as it will allow far larger data throughput to customers. However, it's an expensive exercise and the catch is that Telstra proposes to maintain control over the network with regards to pricing and access. In other words, reinforcing its monopoly.
Telstra's proposal is a cynical move to influence the government.
Telstra shares are a dead cat to retail investors after the T2 fiasco. The government would like to maximise returns from the sale of the remaining 51% of the company. It's a sad fact, for all the financial markets' lip service regarding the joys of competition, there's nothing that lights up the eyes of investors more than thought of investing in a company that controls the competition. Telstra is hoping that the government will sacrifice the long term benefit of an open telecommunications market for the short term political advantage of having extra cash to throw at the voters during election year.
Not surprisingly, Telstra's proposal has alarmed the other telcos, who have proposed a similar local loop upgrade financed by all the major market players; one that would allow more equal access to the network.
Ideally, the government will realise the importance of this infrastructure, provide funding and give itself a measure of control. As this is unlikely to happen, the next best solution would be give the consortium the go ahead.
We'll just have to wait and see whether the government will sacrifice the long term good of the nation for short term political gain.
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