news Optus has joined the chorus of industry voices slamming Telstra’s approach to replacing its copper network with fibre in the South Brisbane exchange area, with the telco’s chief executive Paul O’Sullivan last week stating Telstra was attempting to “block competition” in the area.
Telstra has chosen to replace the copper connections to about 20,000 premises in the region as its South Brisbane telephone exchange — where the copper cables terminate — is being closed in order to make way for the new Queensland Children’s Hospital in the area. The region is one of the first in Australia to receive fibre services to the home — but is not part of the Federal Government’s flagship National Broadband Network project, although the long-term plan is for the infrastructure to become part of the NBN.
Other major ISPs iiNet and Internode have expressed strenuous complaints about Telstra’s handling of the situation, with issues ranging from the company’s wholesale prices — which are claimed to be markedly higher than equivalent broadband prices on the previous copper network — to the lack of equivalent services such as the ability to stream IPTV services via multi-cast.
Speaking to journalists after a landmark speech given last week at a business lunch in Sydney, O’Sullivan echoed the ISPs’ complaints. “It’s a great example of how a monopoly will behave,” he said.
“The minute you take the pressure off any company that has the opportunity to create structural barriers to competition, and allow it to go unregulated, it will do it. South Brisbane is a great example of the incumbent reverting to its former DNA, which is to block competition and try and win customers with its structural advantage.”
It’s not currently clear whether Optus has signed an agreement to use Telstra’s fibre network in South Brisbane, as some other ISPs have. So far, prices in the region released by ISPs like Internode and TPG have in general been higher and offered less value than equivalent plans on the previous copper network.
iiNet regulatory chief Steve Dalby said in September that his company’s South Brisbane contract with Telstra had been signed “under duress”, and added that iiNet would continue to oppose what he described as ‘anti-competitive’ practices and seek a better solution. “This is a clear example as to why Telstra must never again be allowed to operate the national telecommunications infrastructure, it’s why the ACCC must be hard-nosed about the structural separation undertaking and why I will never recommend Telstra to anyone,” he said at the time.
iiNet and Internode have also filed a joint submission with the Australian Competition and Consumer Commission demanding that Telstra’s wholesale fibre services in South Brisbane be subject to regulation as the previous copper services were. A number of other concerns about the region have been expressed to the ACCC in other forms. However, it is believed that the regulator sees South Brisbane as a side issue which could potentially be dealt with as part of its ongoing negotiations with Telstra over the terms which it will deal with wholesale customers over the next decade while the NBN infrastructure is being rolled out.
Telstra has previous stated that the prices it was offering to wholesale customers — of which a number had signed up to — allowed them to be competitive, and that it had offered transitional assistance to ease the migration of wholesale services onto the network.
opinion/analysis
The South Brisbane issue continues to dog Telstra and is perhaps the most controversial issue in Australia’s telco sector at the moment. Whenever you ask any telco executive about it, they explode with frustration about Telstra’s behaviour and the lack of any initiative from the ACCC to do anything about the situation. South Brisbane is boiling over right now — and the issue needs to be resolved.
Update: We’ve received the following statement from Telstra in response to O’Sullivan’s comments:
“The simple fact is that we are vacating the South Brisbane Exchange to make way for a Children’s hospital, and in the process taking the opportunity to upgrade the area with fibre to provide high speed broadband services to the residents and businesses in the area. We first alerted our wholesale customers back in June 2010 and have been working closely with them and the ACCC over the last 18 months to ensure the transition runs as smoothly as possible.
We have been open and transparent every step of the way, and provided pricing rebates to our wholesale customers to help minimise the impact of the change on their business while absorbing costs in ours.”
Image credit: Optus
So why didn’t Optus offer a deal with the Qld Government to fibre the area after the Qld Government wanted the old Telstra exchange site for a new hospital?
Optus stopped rolling out fixed line residential infrastructure years ago, they even stopped putting DSLAM’s into exchanges in 2009 whilst their competitors are still rolling them out in 2011.
They are on permanent standby to piggy back onto the taxpayer funded NBN, then they will complain about it, oh they have started to do that already!
http://delimiter.com.au/2011/11/18/nbn-co-already-acting-like-a-monopoly-says-optus/
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I find it hard to disagree with this.
Unless you treat Internode differently that’s not the attitude you were presenting a month ago Renai .. http://delimiter.com.au/2011/10/14/crazy-telstra-prices-limit-internode-s-brisbane-plans/#comment-171065
And for reference alain Optus has been installing DSLAMs since 2009 (along with iiNet, Internode, TPG, etc), I’m not sure where you get your info from but I can guarantee that isn’t the case.
Not according to Optus.
“Optus was a notable exception in that it had no plans to further its footprint, but not due to the National Broadband Network. According to a spokesperson for the company, Optus had finished its DSLAM roll-out last year, bringing the total number it fielded to 366.”
http://www.zdnet.com.au/dslam-roll-outs-continue-despite-nbn-339296039.htm
Perhaps you can enlighten me which exchanges beyond the 366 stated have been enabled since 2009?
Why not, they would struggle to win people back, so why not try to force them back.
All i hear from Paul O’Sullivan (POS) is crying he cries all the time being it telstra or the NBN, i bet if Optus were in the same position as Telstra he’d do the same.
But no infustructure, just sit there and cry and ride the piggyback game POS!, i recall optus trying to cut everyones lunch when they hoped into bed with other ISP’s with there version of the NBN wasn’t it called OPEL or something. POS you are a has been time to move on.
“block competition”?
“anti-competitive”?
i’m sorry… but any telco can access the ducts surrounding South Brisbane thanks to ACCC declaration yonks ago… what’s stopping Optus, Internode or iiNet from laying their own fibre and COMPETING against Telstra?
ABSOLUTELY NOTHING.
why build any infrastructure of your own (or risk any of your own capital) when the biggest lesson the whole industry has learnt in the past decade is that it’s cheaper to let Telstra build infrastructure and then WHINGE, BITCH and MOAN to the ACCC and the media about what an eViL mOnOpOLy Telstra is and how wholesale access is too expensive and should be driven down by the ACCC to $0.01.
parasites will be parasites.
Because competition at that level doesn’t work at allowing providers to provide lower value products and actually only serves to drive up prices because of the extra capital that having multiple redundant networks presents. Exchange based competition, sure, hell even FTTN with open installation provided the node density is low enough to allow multiple players to overbuild each other without resulting in redundant over building.
You build Fibre to the local exchange, that piece of fibre can then serve hundreds of customers, and will actually be almost definitely be utilised. You build fibre to the local node, and that piece of fibre can then serve 10-20 customers, and will most probably be utilised. However, if you build fibre to each and every home, the only way that piece of fibre in the last mile is going to be used is if the customer takes up the service.
Now when you consider it costs thousands of dollars to lay that fibre in labour, equipment and materials, per household, do you seriously think any company with any sane financial sense will overbuild a competitor in such a fashion? Let’s assume players overbuild each other, and it costs X to build a network in that area. With one network, you have to recover X. With two networks you will have to recover pretty damn close to 2X (but not exactly because you can under-provision at the middle mile), and so on, because no where in any point in the network is there shared infrastructure. And where does this cost go? Consumers.
Telstra and Optus overbuilding each other with their HFC networks was a stupid move by both companies, and cost them billions, and Optus, iiNet or Internode overbuilding Telstra in South Brisbane is just as stupid. And there is no way in hell any company is going to repeat the insanity that was the HFC overbuilding.
Exchange based or FTTN based ULL competition can work, but only because the last mile, the one piece of infrastructure that cannot be shared between multiple households, is built and wholesaled by the incumbent. Which means that providers to the Exchanges and Nodes only have to build to the level required to serve the customers they are serving.
But sure, you call the likes of iiNet, Internode, and Optus lazy and crying anti-competitive. Why not, I mean don’t let the facts get in the way. Facts like building a network to compete directly with Telstra in South Brisbane will cause prices to go up in that area (when they’re already too high by most accounts), and that it will cost both companies millions in expenses that they’ll have to write off because they can’t actually recover the debt if they want to compete, which we know from past experience because of the HFC roll outs.
*Because competition at that level doesn’t work at allowing providers to provide lower value products and actually only serves to blah blah blah*
LOL
tell that to Korea Telecom, SK Broadband and LG Powercom…. and AT&T, Verizon, BT, Virgin Media, (loads more), etc
*Telstra and Optus overbuilding each other with their HFC networks was a stupid move by both companies and cost them billions*
stupid move by both companies? really?
“stupid” with “foresight” or in “hindsight”? who invests on an “ex-post basis”?
i/ how do you know Optus wouldn’t have made bucketloads of money if OptusVision had won the sporting rights (content) war with Foxtel, attracted huge numbers of subscribers and become the dominant pay-TV platform with exclusive carriage on Optus HFC?
ii/ why is it “stupid” for Telstra to protect its market (strategic) position by building its own HFC network?
*Facts like building a network to compete directly with Telstra in South Brisbane will cause prices to go up in that area…..and that it will cost both companies millions in expenses that they’ll have to write off because they can’t actually recover the debt if they want to compete blah blah blah*
Miss Contradiction — care to explain why prices will “go up” if the capital cost is WRITTEN OFF off like you say?
#logicfail
None of the examples provided here actually disprove my point. I didn’t say overbuilding can’t happen, I was saying that it shouldn’t, and it’s bad for consumers when it does. Or can’t you read? Obviously the fact that Telstra and Optus overbuilt each other should be proof enough that it does happen. Unfortunately for these two companies it had the worst possible result. A result which I am asserting will be replicated if iiNet, Internode, or Optus follow you “suggestion”. Why? Because in this particular case, these providers cannot provide any significant value over what Telstra is offering.
Stupid with hindsight. Hindsight which the Internode, iiNet and Optus can look over and use to their advantage. You know this already, so why the hell did you need me to clarify?
But they didn’t, and it is also irrelevant because Telstra also wrote-off millions in the HFC battle. They both lost massively in the HFC wars. Telstra just happened to come off slightly better off because they “won” with Foxtel, but it doesn’t change the fact it resulted in the combined write-off of about $2.4 billion, which represents a massive underestimation over the risk, and huge irrecoverable construction costs.
In July 1997 Telstra wrote off $961 million of its investment in the Telstra Broadband
Network. In 2002, Optus wrote down the value of its HFC network by almost $1.4 billion. – From the ACCC
I think the $961 million dollar write off should be answer enough to that.
You can write off a project as irrecoverable, but somewhere, somehow your business has to recover the debt. The fact the cost of the asset is considered paid (i.e. the debt is written off) does not mean you no longer have the loans to service. You still paid the original capital investment. You just don’t expect the investment to pay for itself any-more. Do you really think the likes of Optus, iiNet and Internode can afford to pay for a network in South Brisbane outright? Give me a fucking break.
In business accounting, the term write-off is used to refer to an investment (such as a purchase of salable goods) for which a return on the investment is now impossible or unlikely. The item’s potential return is thus canceled and removed from (“written off”) the business’s balance sheet. Common write-offs in retail include spoiled and damaged goods. – WIkipedia
Okay, but lets assume I’m wrong here, you go find someone willing to lend you a couple of million, and you overbuild South Brisbane with your own fibre network. Don’t get angst about Optus, iiNet or Internode for being pansy winging bastards, show they how a REAL ISP operates. Obviously you seem to know a lot more than they do.
*None of the examples provided here actually disprove my point.*
they do disprove all your blanket (negative) generalisations about infrastructure competition.
you made the following assertions off the top of your head:
i/ infrastructure competition serves to “drive prices up” — what evidence do you have of this? ZILCH.
all the real world evidence suggests that private telcos “price to the market” as much as possible to drive take-up. the financial risk of their NGN roll-outs are well-contained because the roll-out footprints are limited to the most attractive markets (just like Telstra and Optus HFC). also, some of these major telcos exhibit extensive horizontal and vertical integration, i.e. they are able to cross-subsidise their various investments and experiment with various bundling strategies to recoup their capital.
(this is diametrically opposed to NBNco which is: i/ rolling out fibre indiscriminately to virtually every premise (93%) and ii/ has virtually all its eggs in the FTTP access network basket and is unable to diversify its risks across different sectors.)
ii/ “no company with sane financial sense will overbuild a competitor” — this rubbish statement of yours is completely refuted by actual investment behaviour in the US, UK, South Korea (and others), etc
*A result which I am asserting will be replicated if iiNet, Internode, or Optus follow you “suggestion”.
did i say these ISPs should always overbuild an existing fixed network in every instance? NO.
but, does that mean “infrastructure competition” can never happen? what about TransACT and Neighbourhood Cable? are the people running these companies “stupid” too?
by selectively laying cable in Telstra’s most lucrative markets in the largest capital cities and threatening to undercut Telstra’s USO-burdened, national telephony pricing, wasn’t Optus “overbuilding” Telstra’s fixed line network in the first place? why is it okay for Optus to “overbuild” and drive down the returns on Telstra’s CAN, but not okay for Telstra to “upgrade” its existing fixed-line capabilities and match Optus’ newly-installed fixed-line capability?
biased much? you must be one of those nutters or one-eyed vested interests who think that “fair competition” means that Telstra must always compete with both arms tied behind their backs, or is prevented from reacting to the changing competitive landscape.
you gotta love how Telstra shareholders spent billions building their HFC network (no, upgrading your fixed-line capability in reaction to a major competitive threat is not *evil*) and (with its 50% stake in Foxtel) subsidising their loss-making, fledging pay-TV subsidiary for a decade… and just when the fruits of their risk-taking are starting to pay-off in the emerging world of product bundling, you have these greedy, zero-asset, parasitic ISPs crying that Telstra has an “unfair advantage” and that Telstra should be forced to divest its valuable assets (that shareholders risked many patient billions nurturing) to create some bullshit thing called a “level-playing field”… so, if some investment goes pear-shaped, Telstra can keep all the losses… if it turns out well and becomes a valuable asset, they should be forced to divest it…. what a f–king load of crock… “socialism for ISPs”…
(mind you, hypocrisy isn’t far away either: http://delimiter.com.au/2011/11/21/tpg-buyout-to-require-public-enquiry-says-iinet/)
*ii/ why is it “stupid” for Telstra to protect its market (strategic) position by building its own HFC network?
I think the $961 million dollar write off should be answer enough to that.*
and what’s the significance of that once-off write-off of almost a billion dollars in the context of protecting the annually recurring, MANY BILLIONS of dollars of fixed-line revenues?
the fact is if Telstra management hadn’t reacted to the major competitive threat posed by Optus cherry-picking its most profitable markets by overbuilding Telstra’s fixed-line access network with HFC, the entire Telstra management and Board of Directors should have been taken out the back at the Annual Shareholder’s Meeting and machine-gunned.
sonny jim, you don’t pay senior executive millions to just sit and watch a major competitor erode your major revenue bases. stop living in your “Telstra bogeyman” fantasyworld.
*You still paid the original capital investment. You just don’t expect the investment to pay for itself any-more.*
so how does that result in “prices going up” if “you just don’t expect the investment to pay for itself”.
#biggerhole
*Okay, but lets assume I’m wrong here*
that would be a smart habit to adopt on your part on every occasion before hitting the REPLY button.
Increased capital expenditure in a saturated market doesn’t result in price increases? That is what your point amounts to here Tosh.
So they cannot directly fund the investment in full and instead have to draw capital from other sources? Hmm, that sounds like what I was saying about them having to write off the investment doesn’t it?
No it isn’t actually. They only overbuild when they can be assured a return on investment, can pay for the investment in full and write it off, for a small player like, or their product is different enough (i.e. Virgin Media rolls out HFC cable which performs way better than the ADSL2+ products and FTTN offered by BT and can also offer PayTV services). A company overbuilding with exactly the same network, to exactly the same footprint, is actually never done. Even Optus only assumed that Telstra would overbuild only 22% of their network, a false assumption, that ending up causing them to write off $1.4 billion.
Tell me, how much of Verzion FiOS and AT&T U-Serve networks intersect? How much of Virgin Media and BT FTTN intersect? How much of KT, LG, etc networks intersect? Not much.
Oh but you tell them off for cherry picking in the other hand? So now you’re saying it’s okay for them to selectively build to the most profitable areas.
… I already said it happens. Throwing more examples at me achieves what?
by selectively laying cable in Telstra’s most lucrative markets in the largest capital cities and threatening to undercut Telstra’s USO-burdened, national telephony pricing, wasn’t Optus “overbuilding” Telstra’s fixed line network in the first place? why is it okay for Optus to “overbuild” and drive down the returns on Telstra’s CAN, but not okay for Telstra to “upgrade” its existing fixed-line capabilities and match Optus’ newly-installed fixed-line capability?
NEWS FLASH. CABLE WAS INITIALLY ROLLED OUT TO PROVIDE PAY TELEVISION SERVICES. Broadband was a secondary consequence and engineering breakthrough. So Optus were not overbuilding Telstra, because they were building the HFC network to provide OptusVision services. Or did you forget that, even through you specifically mentioned OptusVision in your last post?
Which brings me back to my point about only overbuilding when your product is significantly different enough to encourage uptake.
Okay, since this follows on for your comment about Optus overbuilding Telstra phone services, which is not why Telstra were building the network it is invalid to call me biased here because your reasoning does not hold up.
Not sure how this rant pertains to my point, however it is an interesting insight into your character and political motivations. Personally I think you believe capitalism to a fault.
Justification does not change the result. No matter how you try and swing it, that was a very expensive way to “protect their market”. An expense that is going to go onto consumers, one way, or another.
But wait… didn’t you say before that… the financial risk of their NGN roll-outs are well-contained because the roll-out footprints are limited to the most attractive markets… but cherry picking is bad, and again with the HFC for Broadband line, so OptusVision couldn’t possibly be why Optus was building the network. I’m confused. *stratches head*
I never said that Telstra responding to Optus was a bad thing, I said the act of them overbuilding was bad for consumers. There is a subtle difference here, one you can’t seem to wrap your brain around. Optus were the ones who made the mistake, by underestimating the level at which Telstra would overbuild them. Had Optus accurately accessed the threat Telstra was the overbuild probably wouldn’t have happened in the first place because Optus would consider the endeavour to higher risk. But hey, it’s easier for you to assume I blame Telstra for the $2.4 billion dollar fuck up because apparently I hate them.
Learn to check your assumptions Tosh.
You still want to extract as much return out of the product as possible. Your competition is also in the same position as you are, haven’t also written off large amounts on this dud asset. I can’t exactly see any company saying “Okay, we’ve lost this battle and wasted millions on this infrastructure that we had to write off, let’s drop the prices!”
Thanks for the insult. I would return it in kind, but you know Renai has a policy about politeness.
*Increased capital expenditure in a saturated market doesn’t result in price increases?*
that’s why it’s called infrastructure COMPETITION, as opposed to an overcapitalised, legislated MONOPOLY like NBNco that can charge like Kaiser Wilhelm’s light brigade.
*Hmm, that sounds like what I was saying about them having to write off the investment doesn’t it?*
and how does that result in “prices going up” which you repeatedly claim?
*They only overbuild when they can be assured a return on investment blah blah blah*
so overbuilding of competitors DOES HAPPEN which refutes your original blanket (false) generalisation.
thanks for stopping by.
*Tell me, how much of Verzion FiOS and AT&T U-Serve networks intersect?*
so, the local cable company being the first mover ugprades the most lucrative metro markets to DOCSIS3.0 and the local phone company thinks to itself, “gee, let’s avoid all the high income, high discretionary spend markets and lay fibre to the wooden log cabins in the back mountains of Montana instead”.
LOL
*How much of KT, LG, etc networks intersect?*
EXTENSIVELY, that’s why it’s called “infrastructure competition”.
*Oh but you tell them off for cherry picking in the other hand? So now you’re saying it’s okay for them to selectively build to the most profitable areas.*
you can cherry pick band 2 ULL to death, but don’t expect a Telstra shareholder-sponsored free ride in band 3 and 4 via WDSL.
*… I already said it happens. Throwing more examples at me achieves what?*
so, you finally admit infrastructure competition does happen as opposed to “no financially sane operator will overbuild a competitor”.
*NEWS FLASH. CABLE WAS INITIALLY ROLLED OUT TO PROVIDE PAY TELEVISION SERVICES.*
QUOTE from your ACCC link:
“In addition to providing pay TV services, the Optus Vision Network was designed to compete with Telstra’s existing PSTN in providing telephone services”
talk about sloppy trolling….go FLASH yourself in the mirror….
*Personally I think you believe capitalism to a fault.*
personally I think you’re a closet socialist.
*Justification does not change the result. No matter how you try and swing it, that was a very expensive way to “protect their market”. An expense that is going to go onto consumers, one way, or another.*
a once-off, billion dollar write-off is a drop in the bucket in protecting billions in annually recurring revenue. learn to read. and how is that “expense going to consumers” if Telstra’s written off part of the capital and given up trying to recoup it?
*I said the act of them overbuilding was bad for consumers.*
how is it bad for consumers to have 2 HFC networks competing to serve them?
*Had Optus accurately accessed the threat Telstra was the overbuild probably wouldn’t have happened in the first place because Optus would consider the endeavour to higher risk.*
Telstra announced their revised HFC roll-out to 4mln (more) homes at higher speed of construction in 1994. it took Optus 3 years to react by decreasing the size of their roll-out in 1997? that’s revisionist bullshit. the real story is Optus lost the pay-TV war big time (with Packer/PBL jumping ship to form an alliance with Foxtel/Newscorp) and tried to reinterpret history with hindsight, distort the sequence the events and use it to paint Telstra in as bad a light as possible for other obvious self-serving, regulatory gaming / PR / financial reasons.
stop being so gullible in swallowing CCC propaganda.
The specific context I stated was a saturated market. You know, like Broadband, where no new services can be extracted because all customers who could possibly want a service have signed up, which can be observed because of stagnation in market share. So what happens if you attempt to overbuild in a saturated market, the only way for you to get customers is to offer a better or cheaper service, as you need to steal off the existing player(s). In other words, if you can’t do either, you are by definition over-capitalising the value of Broadband services in the market.
Also stop bringing up NBNCo in the context of this argument, for one thing NBNCo are a regulated monopoly. I thought you liked regulation as a means of price control, after-all didn’t you try and tell me that Telstra/CAN Co should be given a monopoly on their services on FTTN and argued against ULL which is a form of infrastructure competition in all but the last mile. Now you’re arguing for infrastructure competition?
*Hmm, that sounds like what I was saying about them having to write off the investment doesn’t it?*
I attempted to explain here:
You still want to extract as much return out of the product as possible. Your competition is also in the same position as you are, having also written off large amounts on this dud asset. I can’t exactly see any company saying “Okay, we’ve lost this battle and wasted millions on this infrastructure that we had to write off, let’s drop the prices!”
After an overbuild you have two companies with large amounts of debt to pay instead of just one. And because we’re talking about Broadband, which is a saturated market, every customer lost to the competition is not recoverable. The amount of debt recovered is therefore reduced, meaning you need to extract more income in order to service your debt. You can do this in two ways, raise prices, or cross-subsidise. And my money is on the companies doing both, especially the smaller players like iiNet and Internode.
Add to this that only the big boys will be able to cross-subsidise away the debt, and the justification for overbuilding looks even bleaker for the likes of iiNet and Internode than it does for say Optus.
When did I say it doesn’t happpen? I didn’t. Stop fighting a strawman.
*Tell me, how much of Verzion FiOS and AT&T U-Serve networks intersect?*
so, the local cable company being the first mover ugprades the most lucrative metro markets to DOCSIS3.0 and the local phone company thinks to itself, “gee, let’s avoid all the high income, high discretionary spend markets and lay fibre to the wooden log cabins in the back mountains of Montana instead”.
Non-sequitor. Answer the question, how much do they intersect? Let’s have a look shall we:
FiOS coverage vs U-Serve coverage. Now, if you have a big enough screen I recommend putting them side by side. Look at all that FiOS coverage in New York and the Eastern Seaboard that isn’t covered by U-Serve. Look at all that U-Serve coverage in mid-east and up near Chicago that isn’t covered by FiOS.
Well since I can’t find similar data for the UK or SK we have to assume that they have similar topology, and to be honest, I don’t call that extensive intersection. It looks like to me they are deliberately avoiding each other in order to maximise uptake.
Now you’re presenting a strawman. I didn’t say “Is it okay for them to cherry pick and expect their competition to carry them the rest of the way?”, because that is not okay in my view (I never argued that either I might point out), no, I said is it okay for them to cherry pick? Because that is what AT&T and Verzion are doing in the United States, they are cherry picking areas of high demand that their competition has not already exploited where possible. This is in direct response to your original response here:
Which as I have been attempting to explain is all because overbuilding another network is a bad idea and can get very expensive. So, what’s stopping them? Telstra already built in South Brisbane.
Since you’re good at arguing Strawmen I need to obviously point out that when I said that I meant overbuild a competitor over their entire network footprint as I have demonstrated with U-Serve and FiOS they have limited intersection of coverage. Find me an instance, apart from Telstra and Optus (which resulted in a $2.4 billion dollar write off between the two companies) where a competitor has, street for street, built a competing Broadband network of a similar technology (i.e. no value added) to another provider? You won’t be able too, and what does that say about Telstra overbuilding Optus?
Allow me to repeat myself:
Broadband was a secondary consequence and engineering breakthrough. So Optus were not overbuilding Telstra, because they were building the HFC network to provide OptusVision services.
So, Optus overbuilding the Telstra CAN had a significant value addition to justify the expense (OptusVision), however Telstra overbuilding OptusVision didn’t. What was it I have been saying, oh that’s right:
[Overbuilding won’t work] in this particular case, these providers cannot provide any significant value over what Telstra is offering.
They only overbuild when … their product is different enough (i.e. Virgin Media rolls out HFC cable which performs way better than the ADSL2+ products and FTTN offered by BT and can also offer PayTV services). A company overbuilding with exactly the same network, to exactly the same footprint, is actually never done. Even Optus only assumed that Telstra would overbuild only 22% of their network…
Do you want more examples? My posts are literally littered with them.
No, I’m not, I do however think there are limits to what capitalism, being greed based, can achieve, and that some “socialist” intervention is required to make up for these shortfalls. Capitalism can fail us just as badly as socialism failed like likes of the USSR.
You don’t give up trying to repay debts. Any money borrowed by Telstra to fund their HFC network will need to be recovered by Telstra’s Operations. Where precisely do you expect them to recover it from, a pity grant from the government ? “Aww diddiums, Telstra has a boo-boo, here, government makes it ALL betta.”
I SAID THE ACT OF THEM OVERBUILDING WAS BAD FOR CONSUMERS.
How does that counter my statement? It doesn’t. It actually supports it. Optus frelled up big time. They shouldn’t have assumed Telstra would sit back and allow them to build an extensive network, they should have reacted better when Telstra announced and accelerated roll-out, they should have negotiated better with Packer/PBL. Instead they did none of these things, and it cost them $1.4 billion.
So, do you finally understand what I am saying? You can’t expect iiNet, Internode or Optus to just suddenly come out and overbuild the Telstra network in South Brisbane. It doesn’t make any financial sense to do so. Upgrading their own Brownfields areas of their choice? Now that’s a different story.
*The specific context I stated was a saturated market blah blah blah*
stop trying to weasel your way out of your false claims. you made the assertion that “infrastructure competition” results in higher prices than would otherwise be the case if there was only a single monopolistic provider, yet you fail to provide any real world hard evidence of this.
instead, in reality, once a network is built, it’s a sunk cost and telcos compete with each other to try to maximise subscriber take-up by pricing competitively to the market (or consumer affordability). the key point is that NGN roll-outs in the US, France, South Korea are VERY SELECTIVE in certain major cities or regions, so the capital risk is small and manageable relative to the telco’s overall diversified asset portfolio, i.e. they mostly don’t go bankrupt if things don’t work out well as planned (unlike NBNco laying fibre everywhere).
*ULL which is a form of infrastructure competition in all but the last mile.*
ULL access is NOT a form of infrastructure competition. it’s merely a parallel means of access to the incumbent’s declared infrastructure at advantageous rates, and as it has been structured in the past, facilitates cherry-picking.
*I can’t exactly see any company saying “Okay, we’ve lost this battle and wasted millions on this infrastructure that we had to write off, let’s drop the prices blah blah blah*
you just demonstrated that you don’t understand the meaning or significance of “asset write-offs”.
*FiOS coverage vs U-Serve coverage. Now, if you have a big enough screen I recommend putting them side by side.*
so, you’re basing your argument on an “incomplete map” generated by RANDOM WEB SURFERS bothering to pin their location on this flimsy website?
LOL
anyhow, using your so-called “coverage map” (*laugh*)…. i see plenty of overlap in the major markets of SoCal, Texas, Florida, Michigan, Georgia, NY, Philadelphia, etc etc etc.
you must a glass quarter-empty kind of guy.
*Well since I can’t find similar data for the UK or SK we have to assume…..blah blah blah…. It looks like to me they are deliberately avoiding each other in order to maximise uptake.*
WOW.
you jump from “i don’t know” to “deliberately avoiding each other”…. if you tried to put that rubbish logic on Judge Judy and pull the wool over her eyes, your subsequent public embarrassment and humiliation will be taped, recorded, televised and syndicated for billions around the world to see.
P.S. you don’t have to “assume” anything. if you don’t know, you don’t know.
*what does that say about Telstra overbuilding Optus?*
you’ve been trying to argue that “no telco operator with financial sense will overbuild a competitor”, yet the case of Optus overbuilding Telstra’s fixed-line networks in the capital cities and Telstra, in turn, overbuilding Optus’ overbuilding shows that overbuilding happens all around the world, including Australia!
LOL
*Broadband was a secondary consequence and engineering breakthrough. So Optus were not overbuilding Telstra, because they were building the HFC network to provide OptusVision services.*
Optus was overbuilding Telstra to provide local telephony services (as well as pay-TV) as the ACCC document you linked clearly showed. you’re the one who threw “broadband” as an irrelevant red herring into the argument to try to confuse the discussion and divert attention from your failing arguments. nice attempt at backtracking and creating a diversion to exit left.
*So, Optus overbuilding the Telstra CAN had a significant value addition to justify the expense (OptusVision)*
so, Optus building HFC wasn’t “stupid” after all, if Optus in its alliance with Ch7/Stokes had won the pay-TV/content war? nice playing catch-up.
*What was it I have been saying, oh that’s right:*
you tell me, you’re the one who keeps trolling my posts across different threads with your improvised nonsense.
*They only overbuild when … their product is different enough (i.e. Virgin Media rolls out HFC cable which performs way better than the ADSL2+ products and FTTN offered by BT and can also offer PayTV services).*
what’s the difference between 12Mbit internet on HFC and 12Mbit internet on FTTN? what’s the difference between a U-verse dial-tone and a FiOS dial-tone? so IPTV and VOD services on FTTN doesn’t exist? do you think subscribers really care whether the lead-in cable coming into their house disappears up a tree or down a manhole?
*A company overbuilding with exactly the same network, to exactly the same footprint, is actually never done. *
WRONG. it happened in Australia and Portugal. please look up the dictionary meaning of “never”.
*Do you want more examples? My posts are literally littered with them.*
LITTERED is the right word. littered with absolute rubbish.
*I do however think there are limits to what capitalism, being greed based, can achieve*
“capitalism is greed based”…. that’s your understanding of the essence of capitalism? oh, you’re definitely a closet socialist.
*You don’t give up trying to repay debts. Any money borrowed by Telstra to fund their HFC network will need to be recovered by Telstra’s Operations. Where precisely do you expect them to recover it from blah blah blah*
there’s a thing on the balance sheet called “Shareholders’ Equity” which asset write-offs are offset against.
thanks for stopping by.
***I said the act of them overbuilding was bad for consumers.*
how is it bad for consumers to have 2 HFC networks competing to serve them?
I SAID THE ACT OF THEM OVERBUILDING WAS BAD FOR CONSUMERS.**
how is the “ACT OF OVERBUILDING” bad for consumers if it creates plenty of market choice?
*They shouldn’t have assumed Telstra would sit back and allow them to build an extensive network, they should have reacted better when Telstra announced and accelerated roll-out, they should have negotiated better blah blah blah*
you clearly don’t understand how business and capitalism works. do you know how many Silicon Valley start-ups have gone to the wall each year over the past decade? do you know how many new restaurants open up each year in Sydney and eventually go bust? does that mean entrepeneurial risk-taking is bad and should be avoided or discouraged because of the unavoidable failures? of course not. stop rationalising historical events by looking constantly in the rear-view mirror. entrepeneurism is all about divining an uncertain future.
*You can’t expect iiNet, Internode or Optus to just suddenly come out and overbuild the Telstra network in South Brisbane. It doesn’t make any financial sense to do so.*
i never said anyone should overbuild Telstra in South Brisbane. stop putting words in my mouth. i don’t believe Telstra is “overcharging” anyone, so there’s no quick buck to be made undercutting TW by installing parallel infrastructure.
Nice, I love this, after all this, you attempt to undermine everything I have said and fail miserablely because without realising it you actually further validate my point. So there is no reason for anyone to build competing infrastructure with Telstra in South Brisbane because they likely cannot offer a better value proposition because Telstra are not “overcharging” anyone, and further than that, the risks associated with extracting revenue out of the area are high (i.e. no quick buck to be made), to paraphrase you.
I had a nice big, point by point retort planned, pointing out the times you have insulted me and always try and get in the last word by any means rather than actually addressing my points directly, explaining the difference between debt and investment and how I specifically referred to the debts incurred, I even was going to explain what a natural monopoly was and how that relates to the situation we are talking about.
I started to explain the relationship between greed and capitalism and how capitalism encourages greed and greed tends towards the capitalist model. Even considered referencing it with a couple of articles by professors who have studied greed vs capitalism in detail. I was going to follow this up with how governments curb this greed by regulation and providing incentives for good behaviour.
Hell, I was even going to call you out for finding a common ground between two products, and then comparing that instead of comparing the products as a whole in order to determine the value differentiation between then.
I was even going to ask you if you could provide evidence that refutes my coverage maps or proves they are not biased samples.
But why do all that, when your last paragraph sums up my position for me?
*they likely cannot offer a better value proposition because Telstra are not “overcharging” anyone*
i’m glad you have finally caught up to reality and now realise that Telstra is not *evil* but merely a private company with bills to pay, and that Telstra’s competitors are a bunch of lying, greedy, parasitic lot.
*I even was going to explain what a natural monopoly*
last-mile access network is not a “natural monopoly”. go read the Eisenbach report:
http://www.accc.gov.au/content/item.phtml?itemId=806382&nodeId=4cd390e62b5947044ccf2eac85ed4ae9&fn=Telstra%20Appendix%20C%20-%20Eisenach%20Report%20-%20Public%20version%20(June%202008.pdf
most US residential markets are viably serviced by a minimum of two fixed-line networks. there are many markets which have MORE THAN TWO fixed-line networks with “cable overbuilders” overbuilding an existing cable network.
also, Optus’ arguments about Telstra overbuilding its HFC and depriving it of scale making it unviable is completely rubbished by the report. it turns out that, given the number of HFC customers Optus has, it would make Optus approx. the 10th largest cable operator if you ranked Optus alongside the largest US cable companies and there are almost 7,000 viable cable companies in the US!
also, pay-TV markets in the US are also highly fragmented with multiple operators competing on different terresterial and satellite platforms. you don’t need to have the entire market to yourself to run a viable pay-TV operation! and the proportion of MDUs in US HFC footprints are much greater than in Optus’ HFC footprint, hence rubbishing Optus’ claim that the preponderance of MDUs reduce effective network serviceability footprint.
read the report for yourself and stop believing CCC propaganda. Telstra’s competitors have ZERO INTEREST in risking their capital and building infrastructure under the current open access regime and they will make up piss weak lame excuses, because they have been thoroughly spoilt by the ACCC with cheap, forced access to Telstra shareholder-funded, built, maintained, upgraded fixed-line infrastructure.
check out these words straight from the horse’s mouth:
http://www.commsday.com/commsday/2011/iinet-ceo-opens-industry-consolidate-nbn/
QUOTE:
“I’m delighted about the NBN, because it provides customers with a faster, more reliable product for similar prices, and iiNet’s NOT FUNDING THE CAPEX for that – THE TAXPAYER IS!”
“The [TransACT] INFRASTRUCTURE, FOR US, IS A BONUS; as always, WHAT WE’RE BUYING HERE IS A RETAIL BUSINESS,” said the iiNet CEO. “They have 40,000 customers; that’s wonderful, in profile those customers are very similar to iiNet’s.”
[MY CAPS]
God knows what’s going to happen to future infrastructure roll-outs by TransACT now that it has been taken over by a company that AVOIDS building its own last-mile infrastructure and is thoroughly focused on regulatory gaming and grabbing retail market share.
*I was even going to ask you if you could provide evidence that refutes my coverage maps*
i don’t have to. it’s a well-known fact that network competition in the US is driven by TELco vs CABLEco. and, on top of that, you have cable overbuilders introducing a third competitor cable network. and, if you factor in the fact that TELco’s like Verizon are overbuilding their copper network with FTTP in certain areas, while still continuing to market ADSL in competition to FTTP, we’re looking at up to 4 fixed networks running in parallel competing with each other.
so, instead of going “Turnbull, Turnbull, Turnbull….” and pretending to lecture someone many years your senior with many years of investment and business experience under his belt who has bothered to study what’s actually happening in the industry, you should spend some time instead educating yourself and filling in the massive gaps comprising your voluminous ignorance.
*sigh* Whatever, you win. I don’t care anymore.
The major point you are ignoring or dodging NightKhaos, is that Telstra paid for the FTTH installation with their own money, it is their own asset, and they (obviously) do not charge their own customers more money for FTTH in Brisbane.
This is probably the same reason why ACCC has (to date) done little in regards to completely going forward with the proposals about the other ISP’s that are crying
The simple matter is, there was nothing stopping Optus (or any other ISP, or company for that matter) from rolling out FTTH in that area, and then the ISP’s apart from Optus would be crying that Optus is charging too high for its FTTH service
If you want Telstra to provide a more affordable wholesale approach, then the government should give them a subsidy to cover their costs. Australian ISP’s in general have gotten way too used to acting as RSP’s and bumming off Telstra’s infrastructure
No, deteego, I’m not ignoring that point at all. In fact I agreed with Alain when he pointed out Optus had every ability to tender a better offer for South Brisbane, that was here.
I don’t agree, that now that Telstra has built the network, that building another network on top of it will deal with the competition woes and that is what Tosh is asserting. In fact that is all I have been saying, so don’t try and say I am not aware or disagree with the fact that Telstra have every right to take advantage of the fact that they built the network (to a point of course, if they are for example charging way more wholesale than retail then that is crossing the line) in order to maximise the return on their investment.
The government probably should be subsidising them I agree, since the cost of getting services seems to be too high. And if a subsidy does happen this further entrenches the point that overbuilding the network is not going to solve this, now that Telstra has a clear and distinct cost advantage over any competitor.
@NIghtKhaos
“and Optus, iiNet or Internode overbuilding Telstra in South Brisbane is just as stupid.”
In my comment I wasn’t refer to overbuild I was referring to Optus in this instance actually doing it INSTEAD of Telstra, after all it was the equivalent of a Greenfield rollout.
That sort of complaining reminds me of the whining that went on under the Coalition Broadband Connect program where funding was made available to ALL ISP’s to enable the smaller regional and rural exchanges with ADSL that would not otherwise be commercially viable.
Then the whining started after applications were approved that Telstra received the vast majority of the funding, that’s because Telstra was the only one that applied, the so called competitors in the most part could not be stuffed applying!
You may notice that I wasn’t replying to you Alain. For once I actually agree with you (I’m just as shocked as you are!), Optus and the like could have easily applied to provide services instead of Telstra in South Brisbane.
But they didn’t, and now Telstra is being accused of taking advantage of that. It’s their own fault in a way, but I don’t think overbuilding as Tosh suggests (i.e building a second network on top of Telstra Velocity) will work.
Yes but the accusations about Telstra ‘taking advantage’ are from competitors, of course taking it that one step further and bankrolling their own FTTH Greenfield rollouts and showing us all how cheaper than Telstra they could market retail plans and provide much better open wholesale access to all is never a option.
Now don’t push it. I said I agreed that Optus and the like could have offered to tendered to provide services instead of Telstra in South Brisbane. They didn’t. Now we have to deal with the consequences of that, which is that Telstra are allegedly taking advantage of their position. I have no sympathy for Telstra if they are overcharging their wholesale customers giving their retail service an unfair advantage and neither should you. Lazy Optus and the like may be here, but if Telstra is found to be genuinely anti-competitive the “Optus should have tendered an offer to build into South Brisbane ” line doesn’t hold water.
Yes but that is for the ACCC to decide assuming they have been asked to do so, if they decide that Telstra should have to offer wholesale access and pricing under the exact same conditions as the copper network despite incurring substantial CAPEX rolling out FTTH in the SB exchange area then so be it.
What is puzzling is that at some point that FTTH footprint will be under NBN Co control, which makes you ask why they didn’t do it in the first place, a question that only the QLD Government, the NBN Co, Telstra and the Department of Broadband, Communications and the Digital Economy can answer.
Agreed, however that won’t stop players kicking and screaming to try and get the ACCC to step in. The fact is we don’t know what is going on behind the scenes, we don’t know how much other providers are paying Telstra for access. Telstra has a history of exploiting it’s monopoly position, which we can’t ignore, so I personally think that the ACC should at least take a look. Also, as deteego pointed out, a government subsidy would go a long way to cutting prices in this area.
I remeber a friend receiving this from optus
If you or any member of your household connect to a broadband provider other then optus before your home phone service is switched to Optus direct
and optus have the gall to say telstra blocking competitors
In the name of the Almighty and all things fair please Mr O’Sullivan (and confederates) drop your devious attack on Telstra.
All are awake to your sickening plans to ride parasite on Telstra but unfortunately for you the game is up. Please Senator Conroy use your powers to advise Optus to play the game and compete fairly and firmly with opponents now that the level playing field has been created.
It is a fact that Telstra is in a good financial position to offer the Australian consumer a superior deal as the prime NBN supplier to the Australian public but the disingenuous call by Optus for Telstra to be financially hindered to assist Optus is outrageous in the extreme.
Optus is in fact Singapore Telecom. A Singapore government controlled telco. Telstra is an Australian company headquartered in Melbourne. Optus an iinet want to avoid paying for network install and then set the price they pay to access the network. That’s not reality. Telstra cannot magically absorb business cases that are loaded with huge capital cost and future risk to end up with zero advantage. What company will invest in Australia if every time they build something they have to share it for the greater good. Do large mshopping centre owners now have to share, does Toyota now have to share its car yardsand service centers with the great wall of china car company? Why can I not buy a cheap chines car with zero support network but insist the nationwide toyota dealer network supports it? The reality is Telstra, Toyota, Woolworths, Bunnings and many others dominate their industries. Often with less competition than Telstra has, Telstra doesn’t need to share everything any more than the other alpha industry leaders. If you don’t. Want to be on the Telstra network then there is wireless and mobile alternatives.
Yes… but what is overlooked is, Telstra were vested the PSTN with clear access clauses, because comms are a natural monopoly.
Large shopping centre owners have invested and built, Telstra, like NBN, was initially government funded and again like the NBN if I am not mistaken, clientele repaid the debts incurred.
Yes Telstra was privatised, BUT with these access clauses.
As for the copper being replaced by fibre in Brissy… well that’s another argument. Telstra are rightly saying, it would be silly to replace obsolete copper with more copper. Whereas the competitors (who have legal access to the copper) are saying, thay are only replacing with fibre to stop them accessing…
it.
Who is right????
Only thing I know is, this is private enterprise at it’s greedy best, all out for their own financial gain… which is yet another box ticked for the NBN, by avoiding such selfishness…!
I’m afraid I have to side with Telsta on this one.
They already had copper and were getting a return. They then go and spend (X) million to run fiber. It seems natural to me that prices will rise.
While the NBN may be willing to accept a 7% return, no private company would (or should) given the cost of borrowings and a certain amount of risk. It is unreasonable to expect Telstra to make a loss to upgrade everyone’s copper to fiber.
When I see the ~$50 surcharge (in addition to regular line rental) that I believe New Zealanders have to pay to enjoy faster speed using FTTN (fiber to the node) I can’t see Telstras charges for a more expensive and higher quality service as unreasonable given how much less they are charging then the New Zealand Model.
While no one seems to be willing to say it, it would seem to me that this a foretaste of the increase in costs that the coalitions plans for improving Australia’s broadband will entail. Private companies are not in a position where they can accept unrealistically small profits for the public good.
Something to think about when you vote in 2 years…
“While the NBN may be willing to accept a 7% return,”
Of course there is the great chasm of the unknown about that as well, I would put the 7% in the category of what they are aiming for rather than ‘accept’, time will tell if they achieve that target, I firmly think it is a total fantasy, one of many feel good figures about the NBN.
“While no one seems to be willing to say it,”
Well no one is willing to say it because what you state is untrue.
” it would seem to me that this a foretaste of the increase in costs that the coalitions plans for improving Australia’s broadband will entail. Private companies are not in a position where they can accept unrealistically small profits for the public good.”
Except the Coalition plan is not all about the equivalent of a 100% privately funded FTTH rollout like the Sth Brisbane exchange by Telstra, so your comparison is incorrect before it even gets out of the starting block.
“Something to think about when you vote in 2 years…”
Well we would if you thought that was going to happen, it is not so there is nothing to think about.
You can argue the finer points of what constitutes a monopoly all you want, but the technical questions questions remain. Why is there no multicasting? Why are the access prices so high? Why are the upload speeds so low? Removing copper and replacing it with fibre has given Telstra the ability to control the finer points of the last mile access. And we can all see it has been to detrimental effect.
The fact remains that Telstra is the only one who owns infrastructure in the region. As long as that is the case, I’d consider them to have a monopoly on home broadband. And judging by the pricing and specifications, it is pretty clear that Telstra is abusing their market position.
These aren’t technical questions, they are financial ones
Telstra is trying to recoup its losses by charging extra for the service (*gasp*)
Also there isn’t multicast because they don’t want people encroaching on their foxtel busieness
That’s not a very good reason and won’t hold up for very long, especially as other networks (NBNCo, Internode FTTH (if NBNCo get’s halted in 2013 and Hackett makes good on his promise, etc) will start offering Multicasting services. Afterall, Foxtel should be able to differentiate itself as a premium payTV provider as opposed to services like FetchTV, because it has the buying power to purchase exclusive content.
But it is still a Telstra commercial decision to offer multicasting on their network and what point in time they do it, if geographical areas around them, by that I mean the SB exchange area are offering it on the NBN I am sure Telstra will have to offer it.
I don’t expect them to turn it on tomorrow. But I do expect they will have to, or it will become profitable for them too.
That’s a very good reason, Foxtel has a monopoly on all the “good” content (regarding TV and whatnot)
And they are going to lose that monopoly if they allow cheap providers who offer crap context (comparatively) to use their infrastructure? There is profit in multi-casting remember.
Gee, that sure sounds like the stifling of competition. Maybe the ACCC should look into that.
Pretty sure if I lived in the region I’d be extending the middle finger to the big T and making do with mobile services. It’s pretty disgusting and indefencible IMHO. How some of you come on here and defend it is beyond me. Unless your on the Telstra payroll?
The ACCC has’ looked into that’ :
http://delimiter.com.au/2011/11/24/telstra-has-resolved-south-brisbane-issue-says-accc/
I would humbly suggest that Telstra opponents forget about the Telstra bludge and concentrate on the new terror for their survival which will be the entry of Australia Post into their area of business.
With the employ of Optus top marketing expert Australia Post will present formidable competition for the smaller players. Tricky really the Labor Government enters the NBN Retail via another avenue.
Sorry forgot to identify the senior Optus executive who is leaving Optus to run the Australia Post entry into NBN Retail. The person is Maha Krishnapillai.
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