The government should not sell Telstra, but defy an apoplectic commentariat and resume full ownership of Telstra by buying shares back. Here’s why.

Telecommunications infrastructure is a natural monopoly. It has cost serious money to install Australia’s telecommunications network and would cost about $4 billion to install a Fibre to the Home (FTTH) network reaching all premises in major cities. The twist is, once a network (especially a FTTH) is built, it costs almost nothing to run.

If Telstra built a FTTH it would have to charge consumers so as to get back its $4 billion. Interminable fruitless arguments about what Telstra should charge its competitors for their use would continue.

When the government has resumed full ownership of Telstra (gloating over its arbitrage profits) it should retain the infrastructure: the cables and exchanges. It should set charges for the use of the infrastructure very low, even zero. Australians should have free national phone calls and free, fast, access to the internet. Government should divest and encourage vigorous competition for equipment (fixed phones, mobiles, PDAs etc) and services (e-commerce) that use the infrastructure.

Research shows that a FTTH network (rather than Australia’s slow broadband service) has positive effects on a nation’s economic growth and living standards. The government budgeted $2.6 billion on roads next year; a one-off $4 billion payment for a fibre network looks like a bargain.

The government has consistently botched technology issues, making Australia a technological backwater.

Digital radio is available in Britain and America, not in Australia. Digital spectrum has been given gratis to incumbent radio networks; a sure and certain way of stultifying innovation and new services. Policy on digital television might as well be written by the incumbent moguls. The invertebrate government will evidently preserve the incumbents’ oligopoly indefinitely, killing consumers’ access to new technology, new services, and cheaper prices. Viewers are treated with contempt.

I am thinking of starting a new political party (“Technology Now”) that will run Senate candidates committed to giving Australians access to the benefits of new technology, especially in telecommunications. If interested, please email me at [email protected].

Peter Fray

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