From an article on the new NBN draft legislation:
“The talk in Canberra is that Telstra senses the government is on the ropes, and with an election coming it thinks now is the perfect time to play hardball.The closer we get to the election date the more desperate the government is likely to get and the better compensation handout it will consider.
The Rudd Government is on the ropes ? In what reality? Going by the Polls, Labor is at ahead a comfortable, 53-47% spread, while the markets have Labor at around $1.20 to the Libs $3.80 (ie around 75% odds on favourites), add in the honeymoons due to end for Abbott, that the public always give govts a 2nd term (at least since ww2) and that the government hasn’t yet switched to an election footing, you’re kidding yourself you think this government is “on the ropes”. And even if those numbers suggest to you Labor could lose, why would anyone in the government believe that giving in to Telstra would be good politics? Their original plan for an NBN and split Telstra was popular with both the public and the press, and the government’s already taken heat over being too close to business (utegate, Free-to-air tv handout, wasteful stimulus spending).
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Rudd’s NBN/Telstra split seems to be already starting to have benefits
Telstra has flagged price reductions for its broadband products and services as it fights to maintain market share in the highly competitive sector.
Chief executive David Thodey said today price cuts were “imminent” as the telco giant wanted to compete aggressively on broadband offerings.
“In some parts of the market we’ve gone too far out of line and we need to come back,” he told an investor briefing.
Telstra’s most recent annual results showed a drop in fixed broadband take-up, but its wireless broadband revenue grew by 69.2 per cent to $587 million.
A strong focus of Mr Thodey’s presentation to investors today was improving customer service.
“We must focus on our core business and our customers, this is where we create value for shareholders,” he said.
“At its simplest, the next stage in Telstra’s long-term strategy is to focus on satisfying customers, invest in new capabilities, and drive growth in new businesses.”
Who’d have thought. Threaten to take a monopoly away from a company and they suddenly begin seeing the benefit of shaping down into a competitive form. Telstra knows its likely to lose its wholesale control, so now it has to make its retail arm competitive. It’s as if you guaranteed the host nation the gold in each race at the olympics, would their athletes have any incentive to stay in shape? More slimming down please! (Thats you Mr.Fielding, no delays, time to deliver).
In other short news, Kelly O’Dwyer the Liberal replacement for Higgins is putting an impressive foot forward. O’Dwyer has the establishment backing, a safe seat, and a joke of a Green candidate, and yet is still apparently pounding the pavement, meeting voters and personally securing their vote. Compare to say, Dutton. Who knows what her politics will be like, but clearly a capable operator.
Finally, a delay is better than a No, but prospects for overturning the ban on parallel imports for books don’t look good. Having seen how competition has helped immediately with telstra, lets hope Rudd’s team rediscover their support for markets and get rid of this tariff. (They’d even get to announce plenty of give aways to artists as compensation whats not to love). Still, e-book readers and a high aussie dollar may help reduce some of the pain to book buyers. It just means Amazon instead of Collins and Borders get my money.
Telstra to be split up
Senator Conroy told the media in Canberra this morning that he did not believe Telstra or its shareholders would need to be compensated under the plan. In early trade, Telstra shares were down seven cents at $3.17.
Under the legislation to be introduced to Parliament today, Telstra will be able to voluntarily submit to an “enforceable undertaking” with the Australian Competition and Consumer Commission to structurally separate.
If it chooses not to separate, the legislation allows the government to impose functional separation requiring Telstra to:
– conduct its network operations and wholesale functions at arm’s length from the rest of the company;
– provide the same price for its retail business and it does for other carriers in accessing its wholesale network;
– implement governance structures to make the separation transparent.
About time, though expect a clear backlash from Shareholders for the changes. But the Government should prevail. Howard ought to have made this change almost a decade ago, but squibbed in order to get a higher price in the sale. Money that was used largely for political purposes, buying out groups (such as environmentalists) to help justify the privatisation agenda. Privatisation has been an immensely profitable and sensible step, but allowing private monopoly control of core infrastructure cripples any resulting benefit. By returning this to public control it will enable significantly greater retail competition and lower prices and more data quotas for ISP consumers. Many of us believed the chance was lost when the final parts of Telstra were sold, but if the Rudd Government holds its nerve on this, it will be an important and useful step, enabling significantly greater competition in the telecommunication and ISP market. While the Liberals love deregulation, they have never supported competition policy (Paul Kelly’s book quotes Howard’s Chief of Staff Arthur Sinodinos saying Howard ‘hates the word’ competition.) Labor however since Keating has been able to claim this as a economic principle both in line with modern economics and long held party principles of social justice.
Good move Conroy.
Update: At the end of the trading day it was announced Telstra shares are down 14 cents to $3.11 a 4% drop (though the rest of the market dropped slightly too). Given the scope of this decision, isn’t the big news how little the market seems to mind? Its pretty good evidence Howard was wrong to baulk at splitting the company before selling.