Bad Telstra vote could help scuttle the NBN

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news An independent expert’s report commissioned by Telstra has found overwhelming benefits to the telco from cooperating with the Government’s flagship National Broadband Network plan, but has also highlighted the potential for a shareholder vote against a Telstra deal with NBN Co to help cause the termination of the project.

The report — put together by advisory group Grant Samuel — was released by Telstra this morning (annexure 1 in this PDF document). It constitutes an examination of the benefits to Telstra in its $11 billion deal with NBN Co to shift its customers onto the NBN fibre and shut down its copper network, as well as the potential alternatives should Telstra shareholders vote against the deal.

In the document, Grant Samuel states that it is in the best interests of Telstra and its shareholders to proceed with the NBN Co deal. Shareholders will vote on the deal at the company’s annual general meeting on 18 October this year.

If Telstra proceeds with the NBN deal, the firm notes, Telstra will be “substantially better off” in financial terms than if the company does not proceed — to the tune of $4.7 billion added to the company’s net present value, or about 38 cents per share. Most of this value will come from the cash payments which NBN Co will make to Telstra as the company shifts its customers onto the NBN as the fibre is rolled out nationally.

If Telstra does not proceed with the NBN deal, Grant Samuel notes that the telco’s “only real choice is to compete with the NBN”. This would entail the company further developing its HFC cable network, selling services on the NBN network itself in some areas and attempting to maintain its copper network as long as possible.

In this scenario, a range of punitive action could possibly be taken against Telstra that would also add additional harm to the company, beyond the loss of the NBN Co payments. For example, Telstra may not be able to acquire wireless spectrum needed to develop its Next G mobile network (including that needed to fuel its 4G/LTE aspirations), and it would be forced to functionally separate its wholesale business from its retail business, adding additional costs.

Furthermore, Grant Samuel warned, “it is likely that Telstra would face a more adverse regulatory environment if the proposal is rejected”, including the potential for the Communications Minister of the day to exercise “considerable discretion” in the area. Even if the Coalition took government and decided to terminate the NBN, Grant Samuel notes, Telstra would still be better off approving the NBN deal initially — because of the payments it would attract in the meantime and the ability to avoid punitive regulatory controls.

However, the advisory group also noted there could be other consequences to the wider NBN project from a “no” vote from Telstra shareholders.

“The more complex consideration is that, in Grant Samuel’s view, rejection of the proposal would increase the likelihood that the NBN rollout will be terminated or severely restricted because it would increase the cost of the NBN to the Commonwealth, potentially delay the rollout and substantially reduce the subscriber base of the NBN,” the firm wrote, although it noted that a decision by Telstra shareholders to reject the plan was unlikely to be the determining factor in a Government cancelling the NBN.

It would be impossible to know precisely what how much more likely the NBN project was to be terminated if Telstra shareholders reject the NBN deal, Grant Samuel wrote, with a number of factors weighing on the issue — such as the timing of federal elections, the evolution of Coalition telecommunications policy and so on.

In a letter to shareholders published today, Telstra chairman Catherine Livingstone noted that the company’s directors unanimously recommended that Telstra shareholders voted in favour of the NBN deal.

“The directors consider that the proposed transaction is likely to offset part of the loss of value associated with the Government’s commitment to introduce the NBN and separate parts of Telstra’s business, and that it will deliver an overall result that is materially superior to any other option realistically available to Telstra, given current government policy,” wrote the executive.

opinion/analysis
I recommend, if you have time, reading Grant Samuel’s report in full. Skip all the Telstra guff at the start of the document and go straight to the actual report in annexure 1 — you won’t regret it. What the report lays out is a very concise summary of the stark choices facing Telstra under the Government’s NBN policy, as well as what may happen if the Coalition takes Government at the next election and decides to terminate the NBN.

After reading it, I came away with a few conclusions.

Firstly, despite all that Australia’s telecommunications industry has come through in the past half-decade with respect to the NBN, there are still some massive, massive uncertainties regarding the project and its impact on the future of the telco sector as a whole. The possibility that the NBN could be cancelled is still a real one — and one that Telstra, for one, is still taking seriously.

It is really no surprise that Grant Samuel’s report recommends Telstra proceed with the NBN deal — after all, that was already the view of the company itself, and analyst reports such as this one usually tend to broadly draw conclusions which are convenient to the desires of those who commission them. But what I do find surprising is that the report focuses so purely on the short-term implications from Telstra’s NBN deal and not so much on the long-term.

As I’ve previously written, it’s wonderful that Telstra will get handed a pile of cash as part of the NBN deal, and commentators such as The Australian’s John Durie have already jumped on the bandwagon of positivity emanating from Telstra’s board, labelling the Grant Samuel’s report as “vindication” of Telstra’s cooperation strategy.

But what will Telstra do with all that cash in the long term?

Traditionally, Telstra has been a company which specialises in building networks, and then selling services over those networks. It has been an infrastructure company. What the NBN will turn Telstra into, in many ways, in the long term, is a company much more like Vodafone. A company which will be much more highly focused on building mobile networks than fixed infrastructure, and providing value-added bundled services on top of those networks, as well as reselling fixed services on another company’s network.

To make this transition, Telstra will, as its chief executive David Thodey is attempting to do right now, need to change into a company much more focused on sales and marketing expertise than on actual network infrastructure. In short, it will no longer be an engineering-focused company and will become something completely different.

Can Telstra make this change in the long term? Personally, I don’t believe it can. Sure, it’ll have a pile of cash, but it’s coming from a standing start, compared with the likes of iiNet, Internode and even Vodafone and Optus. Nobody buys Telstra services because of the great customer service … they buy them because of the telco’s superior networks. With the NBN becoming the great equaliser in the encroaching future broadband equation, apart from Telstra’s mobile network, you have to wonder why customers will continue to buy services from Telstra at all — when a switch to another NBN fibre reseller can be made at the drop of a hat.

Of course, to a certain extent Telstra has no choice. If it rejects the NBN deal, as Grant Samuel notes, it will be subject to a host of regulatory controls which would constrict it hugely anyway. But after reading this report … and the slather of positive spin which Telstra’s directors have covered it with … I can’t help but still wonder whether Telstra’s board is bending over for the Government just a little too much on this one.

I’m sure there will be many Telstra shareholders at the company’s AGM who will agree — although of course there is very little likelihood that they will get their way.

Image credit: Telstra

56 COMMENTS

  1. I skimmed the report, it’s pretty clear why Telstra shareholders should vote yes on the NBN, it’s on page 31 of the pdf.

    Fixed line services are dropping off revenue wise, the next battleground is in mobile services, signing this deal would put Telstra in a very good position for that.

  2. Absent a major breakdown of relations between Telstra, the ACCC and NBN Co, the shareholder vote is all but certain to say “yes” to the NBN deal.

    David Thodey is a very clever operator and has planned this out well. He has made the case a no-brainer, and even barring some “political” votes and maverick holdouts, I predict around 70-80% of shareholders to vote yes. It is simply in their interests to do so.

  3. It’s a straight forward really, the only other viable alternative that Telstra could put to shareholders would be if Telstra said this is how we are going to build our own fixed line network to compete with the NBN, choose between the two, they are not offering choices.

    Take the billions and pump it into wireless and nice tight packages with the lucrative add-ons as a NBN reseller, both as a wholesaler and a retailer.

    The shareholders will vote as the Directors recommend them to, it’s not often they go against that, it has happened but it is a rare event especially with a well established blue chip company like Telstra with a basically conservative shareholder base like Superannuation funds.

  4. Functional separation is not the only alternative. Telstra could structurally separate to create the CANCo mentioned by Turnbull. That would meet the structural separation requirements in the legislation and thus avoid the penalties. The CANCo could upgrade the copper to FTTN where it wanted to and compete with the NBNCo pretty much everywhere. I don’t know what this would do to Telstra shareholders but I have a fair idea what it would do to the NBNCo. Why hasn’t Grant Samuel investigated this option?

    • it’s a tricky situation.

      Telstra’s mission is to maximise shareholder value, not destroy NBNco.

      even assuming zero competition from an alternative fixed-line network, both functional and structural separation would diminish the value of Telstra’s fixed-line franchise. the strategic advantage of “functional separation” is that it is a form of “separation” that is potentially “reversible”. on the other hand, “structural separation” results in two different corporate entities with different ownership.

      one can only speculate that, if a gun was held to its head, Telstra would choose “structural separation” and the ability to participate in forthcoming wireless spectrum auctions over “functional separation” (and the theoretical possibility that the artificial restraints imposed on it are gradually loosened in the distant future).

      also, bear in mind, the last occasion Telstra proposed FTTN was many years ago. since then, the rate of deterioration in fixed-line revenues has not slowed and the opportunity set in the wireless space has exploded. relatively speaking, the business case for FTTN is not as attractive as it used to be in terms of marginal deployment of capital.

      when you throw in the probable loss of market share from competing against an alternate fixed-line provider, the prospect of ploughing more precious capital into the copper network, voluntarily implementing “structural separation” without compensation and then compete against the government-backed telco is hardly inviting.

      from Telstra’s perspective, the balance of risks points to the safer (and compensated) path of “co-operation”.

      NBNco, with its shaky economics, will self-destruct with the passage of time.

      • Several economists and Turnbull have said Telstra shareholders would be better off with shares in Telstra and CANCo than they are now. I don’t know if this is true but I believe Grant Samuel should have considered it and included it in the report.

        CANCo would have all Telstra’s copper services for a starter. The NBNCo would have to win each and every one of those customers. ISPs could leave their services on CANCo copper and move them to the NBNCo as and when the customer asks for it. They could offer new services on both CANCo copper and NBNCo fibre. CANCo would have a fight on its hands, but not one that it necessarily loses.

        NBNCo, on the other hand, is in the deep brown smelly. They now have to completely re-work their corporate plan. Their revenue forecasts are completely trashed. They either have to increase prices to maintain revenue forecasts or they don’t make the required rate of return. The government quite likely won’t be able to keep the NBN off budget. That could kill the project.

        If the NBN project is scrapped then Telstra shareholders have shares in Telstra and shares in the monopoly fixed-line CANCo. Could the economists and Turnbull be right? Dunno :)

        • in a nutshell, vertical integration affords network builders the greatest flexibility in terms of the range of mechanisms they can implement to recoup ongoing capital investment because it allows them direct reach into the retail value chain.

          i have only just skimmed the Grant Samuel report, but it actually touches very briefly on the benefits of vertical integration on pg. 55 under the heading, “Loss of Integration Benefits”:

          “As an integrated wholesale and retail telecommunications business, Telstra enjoys the benefit in making investments of capturing all of the value chain and being indifferent to where in the chain the returns are generated. If it becomes solely a fixed line retailer, some investments, which could be justified as an integrated business, will no longer support an adequate investment case.”

          i haven’t read MT’s address to the NPC in full, but i i believe he’s basically arguing that a demerger of network ownership and retail operations will attract investors who are prepared to pay more for separate ownership of each entities than the combined entity. this is a fallacious idea.

          it’s easy to understand how separating CSR into completely unrelated businesses, viz. “sugar” and “building products business” can create value. similarly, spinning-off the relatively tiny “steel business” (Bluescope Steel) from BHP has no material impact on its iron ore and coking coal strategy because the miner’s biggest customers are the North Asian steel mills.

          to suggest that the procession of CEOs from Frank Blount to Sol Trujillo have “missed an easy trick” to increase Telstra’s value simply by splitting up the business is not very credible. if my understanding is correct, neither BT or Telecom NZ are “structurally separated”. of course, functional separation strictly enforced is just as bad for the franchise value.

          Telstra has essentially been forced to play ball by Labor — the carrot is the cash payment of billions of dollars in the non-legislated Definitive Agreements with NBNco and the stick is the Competition and Consumer Safeguards Act. according to the Grant Samuel report (pg.1):

          “In addition, the legislation requires that, even if it does structurally separate, Telstra must also divest its HFC network and its equity interest in FOXTEL in order to be able to bid for the Digital Dividend spectrum unless the Minister grants a waiver.”

          now, given the ongoing decline in fixed-line profitability, Telstra’s bottomline is entirely beholden to growth in its wireless business. that passage in the GS report seems to suggest that, if the Telstra Board so much as looks at Minister Conroy in the wrong way, their business is f—-d.

          over the short to medium term, as long as they play ball with NBNco, their ability to grow their wireless franchise by acquiring more spectrum is safe from legislative threats. also, they retain a strong competitive advantage in the post-NBN world from their ownership interests in HFC and Foxtel.

          if they choose to go head-on with the government monopoly, not only are they forced to “structurally separate” without compensation, they also risk losing HFC and Foxtel in order to protect their wireless franchise.

          assuming that a structurally-separated “Telstra Networks” is also barred from offering special deals to its largest customer, “Telstra Retail’ would then become severely diminished in value without its current competitive advantage from bundling Foxtel over HFC in the future triple-play world.

          presumably, the Liberals would never pass such draconian legislation as the CCS Act. however, the political reality is that the incoming Minister will be under pressure to offer up an alternative to Labor’s broadband vision and, more importantly, will also inherit Conroy’s legislative legacy, i.e. a loaded gun pointed at Telstra’s head.

          under the worst-case scenario with the CCS Act in force, Telstra is forced to structurally separate as well as divest HFC and Foxtel in order to preserve future participation in the wireless world.

          the Definitive Agreements offers them the opportunity to gradually relinquish control and realise the value of the copper infrastructure via regular cash payments from NBNco, while maximising the competitive advantage of their retail operations (vs all other politically-sanctioned scenarios).

          even MT’s proposal of folding both the copper and HFC networks into a separate corporate entity is considerably less attractive than the current option presented by Labor. of course, theoretically, the best outcome for Telstra is repealing the CCS Act altogether and allowing the vertical integration of both the CAN and HFC.

          in fact, Telstra’s competitors should find MT’s proposal (if i understand it correctly) much more compelling than Labor’s solution, as Conroy will presumably grant the required ministerial waiver to allow Telstra to keep both the HFC and Foxtel as long as it co-operates with NBNco with the fibre roll-out.

          • On 31 March 2008, Telecom was operationally separated into three divisions under local loop unbundling initiatives by central government –Telecom Retail; Telecom Wholesale; and Chorus, the network infrastructure division.

            You didn’t look very far to understand how things operate in other countries.

            Further, Telecom NZ entered into this process voluntary, with legislative support given by the government to allow for this.

            Telstra on the other hand have been saying they’ll separate for the past decade and have yet to actually make moves to do this. Frankly, the government here had to force their hand on this issue, and it should have been done half a decade ago.

            Tosh, it feels like to me that you’re just searching for reasons why Telstra are doing this, and the obvious reasons, the reasons the report recommend this, is all just a smoke screen because of the evil Labor forcing the companies hand.

            So Tosh, why are you even talking about vertical integration here? Telstra can be better off? Oh well let’s drop everything. Obviously the government should be appeasing Telstra’s interests.

          • “Telstra on the other hand have been saying they’ll separate for the past decade and have yet to actually make moves to do this.”

            Telstra was operationally separated in 2005 just like Telecom NZ is, to say they have yet to make ‘moves to do this’ is incorrect.

            “and it should have been done half a decade ago.”

            It was.

          • there are different degrees of separation — ranging from accounting, operational, functional to structural.

            depending on the definition employed, BT implemented functional separation, not structural separation. Telecom NZ is in the process of implementing structural separation (i.e. it is not currently structurally separated).

            look at what the increasing push for harsher forms of separation has done to the value of its franchise:

            http://finance.yahoo.com/q/bc?s=TEL.AX&t=my&l=on&z=l&q=l&c=

            Telstra implemented accounting and operational separation many years ago — they have never supported structural separation. in fact, my impression is that the previous Liberal Government was never in favour of structural separation.

            however, if you consider that structural separation is now an accepted goal on both sides of politics, then the ultimate irony is that Labor’s convoluted approach to structural separation is actually vastly superior from Telstra’s perspective in terms of minimising the damage done to the value of its remaining franchise.

            i/ by creating a Networks Co that includes both copper and HFC assets, MT’s proposal immediately eliminates the vertical integration in both the copper and HFC networks.

            in contrast, Conroy’s legislation opens the door for Telstra to maintain ownership of the HFC and Foxtel assets should a ministerial waiver be granted.

            MT’s proposal is also very radical in that subjecting a structurally-separated Networks Co (that includes HFC) to a regulated, open access regime means that Telstra’s competitors will then have open access to the HFC network at regulated prices. this is not envisioned at all in Labor’s reforms and is a radical departure from the status quo.

            ii/ while MT’s proposal hinges on a genuine separation of the copper assets, Labor’s approach is “separation by default”, in the sense that Telstra’s vertical integration is removed because the copper network is gradually shutdown over time, not because it is divested.

            crucially, the planned transition to the open access NBN regime as opposed to a structurally-separated copper regime benefits Telstra because NBNco’s business model favours access seekers with scale and product bundling capabilities.

            iii/ “selling out” to NBNco represents a superior method of “divesting” the copper network than the spin-off or demerger proposed by MT.

            some commentators have already pointed out that it would have been cheaper for the Federal Government to buy Telstra and sell the wireless, directories and retail franchise to get access to the ducts and pits.

            if this is true, then it means that the $11bln NBNco deal represents a superior way to realise value from “divesting” the copper network (in comparison to a spin-off). also, under the NBNco deal, Telstra still owns all the exchanges and ducts.

          • in contrast, Conroy’s legislation opens the door for Telstra to maintain ownership of the HFC and Foxtel assets should a ministerial waiver be granted.

            Assets which the company can continue to utilise for PayTV services. I don’t see a problem with this, since Telstra are in the process of signing an agreement that will prevent them from using this asset for Broadband services.

            Do you think there is a problem with the PayTV market that the NBN should be resolving?

            Further, why should the NBN be accounting for reselling the HFC assets when they are going to overbuild them?

            There is nothing preventing Turnbull from still following this path when he’s in power as well. Why should the government be doing all the hard with for him?

            some commentators have already pointed out that it would have been cheaper for the Federal Government to buy Telstra and sell the wireless, directories and retail franchise to get access to the ducts and pits.

            Oh, which commentators? I remember this being discussed and it was noted that the cost to buy Telstra would be in the order of $40b. Further, Do you seriously think a buyback scheme would be supported? Cheaper doesn’t mean practical.

            And again, who cares about Telstra’s interests. The fact they’re getting good value out of merely means Telstra shareholders are happy. Happy shareholders does not a health y market make.

          • @NK

            god, you’re an annoying pest. do you have to twist, turn and degrade every intelligent, objective discussion into a silly shit fight over justifying fibre greed by internet geeks?

            *I don’t see a problem with this, since Telstra are in the process of signing an agreement that will prevent them from using this asset for Broadband services.*

            ever occur to you that the ability to bundle Foxtel over HFC is a significant advantage in locking up market share on the NBN via product bundling? do you prefer to conveniently ignore comments by Internode that pay-TV delivery over HFC is cheaper than IPTV multicasting over the NBN?

            *Further, Do you seriously think a buyback scheme would be supported? Cheaper doesn’t mean practical.*

            you completely missed the point, which is that the value Telstra can realise by doing a deal with NBNco is greater than spinning-off the asset — this impacts on their choices. whether it’s practical for the Fed Govt to actually buy Telstra is irrelevant.

            *And again, who cares about Telstra’s interests.*

            of course, *you* don’t. we all know that. all you care about is getting a hard-on over 100Mbit fibre.

            *The fact they’re getting good value out of merely means Telstra shareholders are happy.*

            the CCS Act is a highly draconian legislation. the “better” value from co-operating with NBNco is relative to other options. Telstra shareholders are getting further screwed thanks to the passage of the CCS Bill. this is why TLS share price took a further plunge around the time the Bill was passed.

            *There is nothing preventing Turnbull from still following this path when he’s in power as well. Why should the government be doing all the hard with for him?*

            the structural separation arrangements enshrined in the CCS Bill are so intertwined with the migration to NBN fibre, who knows…. maybe the entire Bill will get repealed.

            nonetheless, it’s quite interesting to speculate what will happen once NBN fibre roll-out is terminated in 2013.

            i/ assuming that the incoming Lib Govt still insists on structural separation of the copper network, then Telstra will just set-up Network Co (consisting of CAN), load it up to the eye-balls with debt and spin it off.

            Telstra may then choose to capitalise on its improved financial position and upgrade the (non-open access) HFC network to compete against CAN products.

            Network Co suffocating under the ACCC’s thumb with regulated “utility returns”, being raped and pillaged by all access-seekers (incl. Bigpond) will have very little capital to invest in upgrades after servicing the massive debt on its balance sheet.

            Telstra: WIN.

            ii/ if the Govt forces Telstra to divest the HFC network as well, then same game… off-load copper and HFC into Network Co, load it up with debt to the eyeballs and spin it off.

            as usual, Network Co will get raped by the ACCC and sundry competitors and after servicing debt interest will have little money left over to invest.

            in this scenario, Telstra may then invest in FTTH in the capital cities alone in a very limited, viable footprint and, once again, out-compete the other telcos with superior product differentiation.

            Telstra: WIN.

            isn’t MT in favour of “infrastructure competition”? well, both scenarios i/ and ii/ result in said infrastructure competition. there are still many potential “outs” for Telstra.

            the most important thing is they are hanging on to wireless which is where the growth is and they still own all the basic infrastructure, i.e. exchanges, dark fibre, ducts and trenches which can be leveraged in the future for wireless network expansion.

          • god, you’re an annoying pest. do you have to twist, turn and degrade every intelligent, objective discussion into a silly shit fight over justifying fibre greed by internet geeks?

            Strawman. That is not what I’m arguing here.

            ever occur to you that the ability to bundle Foxtel over HFC is a significant advantage in locking up market share on the NBN via product bundling?

            I just said I don’t see a problem with that.

            do you prefer to conveniently ignore comments by Internode that pay-TV delivery over HFC is cheaper than IPTV multicasting over the NBN?

            Do you prefer to conviently ignore that HFC only covers about 20% of residents. The rest of the country has to have PayTV delivered over Sat.

            you completely missed the point, which is that the value Telstra can realise by doing a deal with NBNco is greater than spinning-off the asset — this impacts on their choices. whether it’s practical for the Fed Govt to actually buy Telstra is irrelevant.

            So wait a prerequisite for the NBN is to screw Telstra over as much as possible? No I didn’t miss that they get more value this way. Did you not notice the fact they are going to be $4.7 billion better of?

            And practically has everything to do with it. If it’s not practical to do something then arguing about the fact things could be “better” is irrelevant. You don’t buy a car that can go 300km/h because it could get you to Brisbane in a third of the time because practically you’re limited by the speed limit.

            of course, *you* don’t. we all know that. all you care about is getting a hard-on over 100Mbit fibre.

            You know what? Fuck you Tosh. That is by far the stupist most closed minded statement you have ever said. You clearly don’t know me at all. I’d think by now you’d have some clear understanding of my motivations behind my luke warm support for the NBN.

            Oh and regarding what is happening in 2013, speculate away. Just in case you thought I ignored that.

          • What so you’re going to post a funny video now? Oh wow. Cause that makes it all better for insulting me like that.

          • What so you’re going to post a funny video now? Oh wow. Cause that makes it all better for insulting me like that.

          • @ toshp300, quite amusing and i see you are making an analogy.

            only problem is, which one is meant to depict you?

          • Neither. You insulted me, and I told you off for it. If you can’t man up and apologise for insulting me now then it’s really telling of your character.

          • *I just said I don’t see a problem with that. *

            1/ you have one prominent ISP complaining that Telstra’s retention of HFC is problematic for maintaining a level-playing field in terms of pay-TV bundling;

            2/ Telstra explicitly negotiated the right to preserve pay-TV carriage over HFC, thereby forgoing even higher compensation for completely shutting down the network;

            3/ the CCS Legislation itself directly enshrines the notion that Telstra’s retention of HFC is a critical issue in terms of “market dominance” and may warrant denying further wireless spectrum;

            but because NK “doesn’t see a problem with that”, therefore we should all close our eyes and pretend the issue i raised doesn’t even exist.

            god you don’t even troll well..

          • What? The purpose of this legislation is to improve the Broadband market and fix the issues associated with that.

            Do you seriously think that the government should meddle in another market it has no business in Tosh? I don’t.

            The PayTV market being dominated by Foxtel and Ausstar hasn’t been considered a problem before. Why is it now? Because one ISP is asking for wholesale access and Telstra might be denyed spectrum? Diddiums.

            Did you not also remember the other supporting point I made: only 20% of the potential PayTV market is serviced by HFC? Meaning that for the majority of residents it doesn’t matter that HFC is cheaper, Internode have to multicast. Or do what everyone elsr does: launch another bird into orbit.

            And you accuse me of trolling to boot. I’m not impressed Tosh.

          • wow, you must be making a journey to the centre of the earth, ‘cuz the hole you’re digging is getting bigger and BIGGER…

          • *facepalm*

            – HFC only passes 2 million homes. I’ll point this out for the third time.

            – Hackett argued in his discussion paper that because of the advantage of HFC that the NBN should aim to bring pricing down to be more competitive via what he refered to as finer grain pricing, further the required revision of the pricing model does not hinge entirely on the fact Foxtel can use HFC. His argument was primary based upon, again, the low granularity presented by the change from 14 POI to 121 POI, just like with his requests to have revision of the CVC pricing was due to the same issue.

            – Foxtel have a far bigger advantage in that they can afford to purchase premium content licensing that other providers will struggle to acquire, meaning it will still maintain better value in the NBN world.

            – With Foxtel’s access to their already established satellite spectrum they stand to also have almost exclusive access to rural markets with high definition content where the NBN is not running fibre. With the NBN’s primary focus being Broadband, it is likely that these areas will either lack multicast altogether or only be offered a limited bandwidth compared to the fibre areas of the NBN.

            Did I miss anything? Let me point out to you that it is the NBN not the NPTVN as well Tosh. Stop making a mountain out of a mole hill: letting Telstra keep their HFC asset isn’t a bad thing. Least not forget that if they weren’t allowed to people would be complaining about it not being used for anything. Oh wait, aren’t we having that situation with Optus at the moment?

          • Getting where Tosh? I started off by pointing out that Telecom is operationally separate and is in… Oh wait I forgot that quote… In the process of being structurally separated as well. You conceded that point here:

            Telecom NZ is in the process of implementing structural separation (i.e. it is not currently structurally separated).

            You then started talking about HFC. See my points above as to why Telstra can happily keep HFC for Foxtel. For the fourth time: It only covers 2 million homes.

            You also said buyout would be better, to which I pointed out that would be impractical.

          • i never said TNZ wasn’t operationally separated. i said they aren’t structurally separated (which they are not). then you hopped in and tried to trip me up without knowing the difference between the different types of separation.

            temper tantrum? i laugh when i read your posts, esp. your desperate lengths to spin yourself out of playing down the significance of HFC which is specifically enshrined in the CCS legislation. i think you should stop trolling ‘cuz you’re “bored”.

            find a new hobby.

          • Wise man once said to me : sometimes you have to play the other prospective in order to balance well entrenched opinions.

            You are trying to pull the worst out of this legislation, as usual. I’m merely playing devils advocate.

            I notice in your second reply to CMOT yoy correctly indicated that Telecom are in the process of being structurally separated. Good man.

            I do apologise for forgetting the second quote. I can understand how that lead to sight misunderstanding but considering you corrected me I thought I’d just leave it and focus on your negative spin.

            There I apologised for my negligence. Are you going to apologise for insulting me?

            If you are going to take everything someone says as an attack on your honour or trying to trip you up maybe it is you that needs a new hobby Tosh.

          • *You are trying to pull the worst out of this legislation, as usual.*

            LOL

            have you even read the legislation? it’s a contrived piece of draconian rubbish designed to force Telstra to play ball with NBNco. (and as i have argued, if structural separation is the name of the game, then it’s definitely in Telstra’s interest to play ball with NBNco.)

            *Are you going to apologise for insulting me?*

            your posts are self-insulting — how am i responsible for them?

            *If you are going to take everything someone says as an attack on your honour*

            anonymous posters on an internet forum have “honour” at stake? oh dear, you must have read one too many Arthurian legends. switch to Brett Easton Ellis for a breath of fresh air.

            *trying to trip you up*

            that’s pretty much all you do (to others as well) on delim. which is fine most of the time, but sometimes it gets tiresome and annoying when all you do is twist other people’s arguments out of context.

          • If that’s seriously your opinion of me then you sir need a reality check.

            You’re not going to apologise? Fine. Then don’t you dare post a stupid YouTube link when I express offense.

            And isn’t a bit hypocritical to talk about an anonymous poster on the Internet when, well, who the hell are you Tosh?

          • @toshp300

            intriguing words for nightkhaos. ‘god, you’re an annoying pest. do you have to twist, turn and degrade every intelligent, objective discussion into a silly shit fight over justifying fibre greed by internet geeks’?

            i find those comments completely fulsome, when being spoken by one who will always, intentionally criticize the nbn and anyone who praises it, whether criticism is warranted or not.

            From my perspective, the nbn , australia’s largest ever national construction build, will create employment both directly and indirectly for many aussies. stimulate nationwide businesses both through technology and via flow ons. finally replace our ageing and superseded copper. provide modern communications for all aussies, including us taxpayers you say you are concerned for. especially provide for aussies who currently have 1990’s communications and deserve better, including our country cousins and much more. plus just as importantly, lessen the ‘complete stranglehold’ the now privately owned incumbent, has over our nations communications.

            so ironically, when I read your always cynical nbn comments, I think, ‘god, you’re an annoying pest. do you have to twist, turn and degrade every intelligent, objective discussion into a silly shit fight over justifying blatant idealistic greed by blatant idealistic bigots?

            peoples perceptions eh?

          • i apologise to myself for wasting my own time conscientiously responding to trolling interjections to my posts.

          • but yet you feel it is perfectly ok for you to troll on in at will, to everyone else’s comments.

            such arrogance is both bizarre and droll.

          • That coming from you RS the master of all trolling and personal attacks to the point where it got you banned multiple times is in your face hilarious, and nulls out your comment as having any validity whatever completely.

          • @alain the name is pepe.

            now read your comment and repeat pot, kettle, pot, kettle.

            when you have done that repeat, nbn monopoly, wireless competition, nbn monopoly, wireless competition.

            then revert, that should keep you amused for hours.

        • @CMOT

          as far as i’m aware, no other country in the world has forced structural separation on the incumbent telco. apart from Australia, NZ is the only other country progressing towards that model.

          also, it’s not clear to what extent the ideas expressed by Turnbull in his NPC address represent official Liberal party policy. after all, the generalities expressed in his speech are couched in terms of a voluntary undertaking (of structural separation) on Telstra’s part. if i’m correct, senior Liberal figures such as Minchin have always been staunchly against implementing structural separation.

          if structural separation is not necessarily a policy inevitability under a future Liberal Government, then Telstra shareholders have something to look forward to in 2013 when the current Labor Government is dethroned.

          however, if structural separation as a policy has bipartisan support, then i would suggest that it is in Telstra’s interest that the Labor Government retains power in 2013. Labor’s approach to structural separation has meant that Telstra has been able to negotiate an acceptable deal (or value) with a desperate NBNco in return for jettisoning the copper network.

          under Turnbull’s proposal, structural separation would involve negotiating with the ACCC instead. the CAN and other assets would be folded into a separate corporate entity to be spun-off from the Telstra mothership. the quantum of value that Telstra can extract from this demerger will reflect the amount of parent company debt it can displace onto the newly-formed “Netco” — this, in turn, will depend on the outcome of negotiations with the ACCC in terms of the allowed regulatory asset base and WACC for Netco.

          given Telstra’s poor track record in achieving positive regulatory outcomes in its dealings with the ACCC, there is a significant risk that the conventional approach to structural separation advocated by Turnbull will result in further dimunition in the value of Telstra’s fixed-line franchise.

          also, it’s clear that when Turnbull talks about “infrastructure competition”, he doesn’t envision Telstra spinning off the CAN, only to compete against the newly-independent copper network operator by laying FTTH in the metropolitan areas and cherry-picking the USO-burdened Netco.

          so, if structural separation is here to stay regardless of a changing of the political guard, it’s in Telstra’s interest that the NBN remains on track because the deal with NBNco affords them a better way of realising value from divesting the CAN. negotiating with the technocrats at the ACCC will be a nightmare compared to dealing with the sensible (and desperate) corporate executives at NBNco. Telstra will then transition from competing at the network layer to competing at the services layer.

          on the other hand, if Turnbull’s speech at the NPC is just empty rhetoric and structural separation is rejected by the new Liberal Government, then i suspect the Telstra share price will shoot up as Telstra will remain in the strategic box seat due to their ongoing control of the network layer.

    • “The CANCo could upgrade the copper to FTTN where it wanted to and compete with the NBNCo pretty much everywhere.”

      Telstra is not interested in rolling out fixed line infrastructure to compete with the NBN when it can become the biggest retail and wholesaler of NBN FTTH without any of the massive CAPEX infrastructure risk.

      The sucker taxpayer can wear the risk.

      • Telstra is not interested in rolling out fixed line infrastructure to compete with the NBN when it can become the biggest retail and wholesaler of NBN FTTH

        You’d assume people would call that a success. Good for Telstra, good for NBNco, everyone is happy!

        The sucker taxpayer can wear the risk.

        Apparently with a monopoly there is not much risk.

        • Depends if you get your anticipated 70%+ uptake and 7% ROI or not, which are the figures the whole NBN rollout justification is based on.

          They won’t.

          • Is this a prediction or is your magical crystal ball in working order? If so what percentage of connections will be made up by Telstra, you said “biggest” in you previous comment so that could mean anything.

          • Well biggest as in they have the largest share of the retail BB customer base in 2011, they have stemmed the flow of customers leaving them for other ISP’s by offering better value.

            There is no reason BigPond will not be the biggest customer the NBN Co has, and it is not constrained anymore by the ACCC because one division of the same company owns the infrastructure and you have to be careful with your retail pricing.

          • i agree alain, telstra should be nbnco’s largest rsp, after all they will be starting to migrate millions of customers, if/when the vote goes through.

            but I am glad you mentioned and now recognise that australia’s comms, whether we like it or not, being a natural monopoly, needs a better system.

            better than the conflict of interest you rightly mentioned telstra has as both wholesaler and retailer and therefore, how greatly superior the nbn as wholesaler only, minus that debilitating conflict, will be.

            good for you.

            not to mention the fact too that, all australian’s will finally have fair access to modern communications as the nbn is based around people not profit. so people will no longer be subjected to ‘missing out or not given retail choice’ because a suit says they are not profitable or because telstra ‘may’ refuse, as they are entitled, to wholesale adsl2 and hfc.

          • i agree alain, telstra should be nbnco’s largest rsp, after all they will be starting to migrate millions of customers, if/when the vote goes through.

            but I am glad you mentioned and now recognise that australia’s comms, whether we like it or not, being a natural monopoly, needs a better system.

            better than the conflict of interest you rightly mentioned telstra has as both wholesaler and retailer and therefore, how greatly superior the nbn as wholesaler only, minus that debilitating conflict, will be.

            good for you.

            not to mention the fact too that, all australian’s will finally have fair access to modern communications as the nbn is based around people not profit. so people will no longer be subjected to ‘missing out or not given retail choice’ because a suit says they are not profitable or because telstra ‘may’ refuse, as they are entitled, to wholesale adsl2 and hfc.

          • “and now recognise that australia’s comms, whether we like it or not, being a natural monopoly, needs a better system.”

            I didn’t say that.

            “better than the conflict of interest you rightly mentioned telstra has as both wholesaler and retailer”

            I didn’t say that.

            “good for you.”

            Except I didn’t say any of that.

            No change in posting technique eh RS?

            “as the nbn is based around people not profit.”

            Except where it needs to make a profit as outlined in the Business plan, is that a different sort of profit?

            “so people will no longer be subjected to ‘missing out or not given retail choice’”

            Let’s visit that one in 2020, in the meantime it’s just ‘pie in the sky’ stuff and wishful thinking.

          • They won’t.

            Let’s visit that one in 2020, in the meantime it’s just ‘pie in the sky’ stuff and wishful thinking.

            LOL

          • @alain,

            so comms is not a natural monopoly and we should have maybe hundreds of cables running to our homes?

            and the telstra retail and wholsale conflict of interest is great?

            ok got it.

            as for my comment, “so people will no longer be subjected to ‘missing out or not given retail choice’”

            and your reply, Let’s visit that one in 2020, in the meantime it’s just ‘pie in the sky’ stuff and wishful thinking.

            so you are now suggesting that if the coalition are elected and can the nbn, people will miss out on new technology and not have retail choice.

            i know, ‘you didn’t say that’, even though you did.

          • In terms of your response to me HC256 spot on, you pasted two responses from two different posts out of context as if they were together, but then you know that hence the LOL I guess.

            I tell you what, you and RS carry on, make stuff up, pretend you have argument of substance when the substance is a fiction of your own making in the first place.

          • The LOL was for your lack of consistency, I guess it is to be expected but thanks for once again proving you cant be taken seriously in this debate and if that doesnt work for you well you are just taking my LOL out of context.

  5. Got a feeling telstra wil not forgive the coaliton in their farcical dodgy opel deal with singtel where , the shareholders will likely approve the nbn deal to spite the coalition.

    And try to get the coaliton to admitt they made the mistake

  6. One of the weird things about Telstra shareholding is that its easily the most widely spread and historically politically impacted shares.

    There’s a lot of activist shareholders out there that is still pissed off over years of warfare against Govt’s policies on Telstra. They feel deceived after buying shares off the govt and watching the value plummet. And since these people are basically the general public you’d also see some effect of Fed Labor’s polling leaking into shareholding votes.

    But despite that, I suspect that as usual the institutional investors still holds the final sway.

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