One of the would-be-builders of the national broadband network (NBN), Terria, is in trouble. In the last week, consortium members TransACT and Soul/TPG have walked away from the organisation, whose senior partner is Optus. AAPT walked the week before.

The cynical minds behind Telstra’s bullhorn/blog, Nowwearetalking, will doubtless chalk the departures up as another sign that Terria is a legal convenience without a dollar to its name. The Telstra line has long been that Terria has only the Yellow Pages’ listings for network equipment providers and backhoe operators as a potential source of the kit and muscle needed to build the new network. Terria has also failed to convince anyone, not even Optus parent SingTel, that it is worthy of a few billion investment dollars. Telstra hasn’t been shy pointing that out either.

Terrifyingly, given the shrill and self-serving tone of NWAT, Telstra’s arguments are now looking almost prescient. In the past it’s been possible to rubbish Big T’s line that only it possesses the resources and smarts to get the job done, because the pared-down company would hire all the labour anyway. And all the kit comes from overseas suppliers, who are happy to fire up a production line for anyone with a cheque in hand.

But in recent weeks Optus has shown itself to be a less-than-entirely-competent operator. First it was embarrassed into revealing that a single bundle of cables was all it offered by way of connectivity for the perennial growth corridor that is south-east Queensland. Its 3G network has been up and down like a yoyo of late, too. That’s not the performance you want for the operator of a network touted as dragging Australia into the future.

The loss of two Terria partners compounds Optus’ woes. Soul/TPG and AAPT have decent swags of subscribers that would have made nice ballast for the new network. TransACT is one of a few carriers in Australia that has experience delivering combined phone/data/pay TV services, and now says it will apply to wire the ACT alone. All are reported to have backed out, at least in part, because they now realise that the cash needed to build the network just won’t be on offer. In AAPT’s case, parent company Telecom NZ has already shovelled in millions of good money after bad and is bleeding at home, making further investments near-impossible.

Terria Chairman Michael (let’s not mention the NSW economy) Egan says the group will nonetheless press on and deliver a cracker of a proposal. SingTel, however, has shown few signs of wanting to talk to its bankers about the NBN.

But Telstra, with rivers of cash derived from what it shamelessly admits are premium-priced products, says it can build the network without the need for vast borrowing. And if it gets the chance to do so, it will continue to charge top dollar.

Quite what Senator Stephen Conroy, now marked by the coldly efficient Nick Minchin, makes of this is anyone’s guess. Conroy is currently navigating the murky waters of Internet censorship while defending several slips to NBN deadlines. And this is all before he gets to the really hard part – devising a regulatory regime under which the NBN will be operated. If Telstra loses its NBN bid, the company has said it will move on and do its own thing. Whether it can resist some messy court action is another matter.

The Senate will be another hurdle. The coalition may not be able to resist opposing a regulatory environment that lowers the value of all those Telstra shares it handed loyalist voters. Messrs Xenophon and Fielding, meanwhile, must by now have noted how Brian Harradine milked boondoggles galore out of the Telstra privatisation process.

And watch out for another issue to emerge, too, in the form of whether or not we are building the right network. The NBN currently assumes that most of the nation will get a twelve megabits per second connection. As a couple of ISPs have pointed out lately, this speed is already delivered in most major cities. IT pundits, meanwhile, are talking about the “terabit age” — two orders of magnitude beyond today’s speeds.

This is bad news for Conroy, given that over-investment is unlikely in these cash-strapped times.

But the greatest pressure of all could fall on Kevin Rudd. The NBN and its benefits for the economy — smarter kids, friction-free-capitalism for business – were one of the centrepieces of his election campaign. If the NBN gets bogged down in the courts, the Senate, or the messy business of digging holes and stringing wires on a tight schedule, broadband could become a symbol of the government’s inability to convert vision into something Australians can touch and feel.

That would be no laughing matter.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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