Has the new Federal Government stitched up a deal with Telstra, or does the big telco have a whole brace of new reasons to worry? Or perhaps it is the Government that should be worried.

Yesterday afternoon Telstra’s spinner in chief, Phil Burgess, sent out a letter to its Telstra Active Supporters lobby group (some would say it’s piece of Astroturf) implying that the company had the contract to build Labor’s promised Fibre to the Node network in the bag.

The letter includes this paragraph:

In the coming weeks, we will engage with the new Labor Government with the aim of helping them transform their policy commitment to a nation-wide high-speed broadband network into a long overdue reality. Telstra has already completed the engineering, network planning and logistical preparatory work required to undertake a major nation-building project. The Telstra Board has approved the investments required to complete the build. In short, we are ready to go.

But is Labor ready to go with Telstra, or is Burgess engaging in, um, boostering? The industry believes that no deal has been done – and what’s worse, that the plan the Telstra Board has signed off on is not about open access, but about an attempt to catapult the telco’s infrastructure monopoly into the future.

Matt Healy, spokesman for the T4 group of Telstra’s competitors, says that Burgess’s letter should be seen as Telstra trying to do an impression of a sheep in wolf’s clothing – signaling that the Government needs to do things its way, or face the same kind of monstering suffered by the Howard Government.

“To mix metaphors, Telstra doesn’t know how to change its spots,” he says.

As this pre-election article by former Beazley staffer turned telecommunications consultant Kevin Morgan makes clear, the new Government’s Broadband policy has a lot of holes in it. Yet Broadband is central not only to communications but to the “education revolution”, with its promise of a computer on every students’ desk.

Also, it might be added, to media diversity, health care, rural and regional Australia – in other words just about every aspect of the nation’s future.

It has always been the case that Telstra held most of the cards in the battle to build the network, since if we are still talking fibre to the node, rather than fibre to the premises, the existing Telstra copper wire will be needed to carry the signals from the nodes on street corners to individual homes and businesses. Telstra would certainly fight any compulsory acquisition or less than favourable deal over this.

So perhaps this paragraph from Burgess’s letter is significant:

In all that we do, we will work hard to find areas of agreement – where our technology, talent and financial resources can be used to advance the national interest, including a healthy competitive environment, as we move to strengthen the digital future of Australia’s communities and business enterprises. When we do have differences, we will work hard to resolve them to the benefit of consumers, shareholders, and employees.

The reality is that Telstra remains in a very powerful position, yet has been very friendly to Labor all the way through the election campaign. So can the new Government keep this new media behemoth in control? Have any deals been done?

Morgan said:

The ALP can only stare down Telstra and succeed, where the Coalition failed, if Labor is prepared to escalate the regulatory war by threatening structural separation, effectively breaking Telstra into a wholesale network and retail companies.

This, of course, is something that has been recommended widely for some time, whimped by the former Government, and opposed vehemently by Telstra. It is the big stick that could be used to whip the Telco into line.

So is the battle on?

According to the office of Labor’s Communications spokesman, Stephen Conroy, “The Labor government will run an open and transparent tender process to decide the FTTN. The Government’s ambition is for this process to be completed by the end of June ’08. As portfolios have not been allocated at this stage it is not possible to comment further. “

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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