Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Conroy holds gun to Telstra's head - shoots own foot

Download PDFDownload PDF


23 June 2011

Conroy Holds Gun to Telstra’s Head - Shoots Own Foot

Today’s agreement between Telstra and Labor may be a good deal for Telstra’s shareholders

but it will not deliver value for taxpayers nor will it deliver more affordable broadband

for consumers.

The people with the biggest interest in this deal - the taxpayers of Australia - were not

represented in the negotiations.

Telstra understandably negotiated the best deal for its shareholders. Senator Conroy

negotiated the best deal for Labor’s political interests. But no one at the table sought the best

deal for the millions of Australians whose taxes will bankroll the $50 billion NBN and pay

Telstra to scrap its copper network.

The deal will have damaging consequences for consumers - that is, every Australian that

purchases broadband or telephony services during the next decade. The NBN Co corporate plan

makes it clear that broadband prices will be high and stay high.

Competition to the NBN from other fixed line networks, such as the HFC pay TV cables owned

by both Telstra and Optus, has been eliminated - so much for competitive markets.

Right now many Australians are using very fast broadband over the Telstra and Optus HFC

cable network. That network could have provided real competition for the NBN and in doing so

kept prices low, but in this extraordinary deal those HFC networks will not be allowed to

compete with the NBN. The ability of the monopoly NBN to charge high prices will be


And the cynical deal Conroy has struck sets up Telstra for further paydays and a break fee of up

to $500 million if a future government of either persuasion attempts to stem the vast cost of this


A case in point is the irresponsible decision to pay Telstra to decommission its copper network

but not to acquire the right to use that copper - even the last few hundred metres - if a future

Government decides to build a network at lower cost or open up facilities-based competition.

The deal also commits the government to paying $290 million to Telstra every year for the next

twenty years to deliver universal service obligation services (access to phone services over the

copper wires, pay phones, and the 000 emergency call service). Again, this is an extremely

generous deal for Telstra - up to $5.8 billion for services Telstra will only have to offer to 7 per

cent of Australians, if the NBN is completely rolled out.

Insofar as this deal will lead to the structural separation of Telstra, it is the slowest and most

expensive way of achieving it.

Separation will take eight years, compensate Telstra with payments equivalent to a third of its

current market capitalisation and disadvantage Telstra’s competitors in gaining access to

infrastructure in the meantime.

Jon Dart - 0457 999 879