Did anyone else see the irony that while Telstra holds back on investment in “free-market” Australia, it is quite willing to plunge a few hundred million bucks on a website in a “control economy”?

China? I must admit that online real estate sales wouldn’t be my first obvious choice as a starting point for Telstra in China. It seemingly possesses all the warning signs that a foreign investor in China might want to avoid – it’s in an internet sector notorious for shifting regulations, there appear to be limited barriers to entry for domestic players and above all, it’s not clear what value Telstra adds as a

n owner other than deep pockets.

But there’s one good reason why this is a sensible bet for Telstra. The very simple fact is that the business valuations for companies that provide services over the internet are much better than for those who provide access to the internet.

I’m indebted to a comparison chart designed with a slightly different polemical goal in mind: in this case, an American Consumer Institute paper designed to push the telco cause on net neutrality. Its simple conclusion is that the giants of the Web such as eBay, Amazon, Yahoo!, Google and Microsoft enjoy much superior returns on invested capital, returns to equity shareholders, net income margins and shareholder valuation of cash flows than the access providers such as AT&T, Verizon, Comcast and Bellsouth.

So a major China real estate sales website just might be worth considerably more to Telstra than a fibre run to the kerbs of Sydney and Melbourne. According to my copy of the World Gazetteer, there are 99 cities in China with populations of more than one million – compared to five in Australia.

Assuming that Telstra can overcome all the speed bumps associated with doing business in China, there’s no doubt that this is a much better proposition in terms of wealth creation than anything remotely connected with network provision in a difficult market such as Australia.

Given that the growth prospects in conventional telco businesses – courtesy of direct pricing regulation and regulated leg-ups to otherwise uncompetitive market contestants – are so wan and pathetic, who can blame Telstra for directing its investments offshore into non-core areas?

Which, of course, raises questions about that advanced broadband infrastructure that we keep on being told needs to be built for the sake of the nation’s economic competitiveness. It simply will not be built quickly or ubiquitously when the end economics of the enterprise are so poor, particularly with so much of the value of broadband locked up in the content and application layer.