National broadband provider Internode today revealed it had asked Telstra repeatedly for wholesale access to its Next G mobile and HFC cable networks, requests which the larger telco has consistently turned down.
Telstra’s Next G network was constructed starting from 2005, under then-chief executive Sol Trujillo, replacing several other previous Telstra networks, including its rural CDMA coverage. According to regular tests, it boasts the fastest speeds of any Australian mobile network, as well as the broadest coverage.
Up until recently (and unlike Optus), Telstra is not known to have expressed any interest in providing wholesale access to its mobile network, as both Trujillo and current CEO David Thodey have seen the network as providing Telstra with a competitive advantage over rivals in the largely unregulated mobile telecommunications market. However, iTNews recently reported that Telstra had started discussions with other carriers to allow wholesale access to the network.
Unlike its copper network, Telstra’s HFC cable network — which stretches throughout a number of capital cities — will continue to operate in future to provide pay TV services through Foxtel, although its $13 billion contract with NBN Co will see broadband customers on the network progressively migrated onto the National Broadband Network’s fibre infrastructure.
In a post on Whirlpool today, Internode managing director Simon Hackett said his company would ideally like access to both — the same way it currently has access to Telstra’s copper network for broadband and telephony services. ” … to date, Telstra Wholesale have turned down our repeated requests to consider any provision of wholesale service offerings via their HFC or Next G networks,” Hackett wrote. iiNet, too, has expressed an interest in wholesaling Next G.
The Internode chief’s comments came as part of an ongoing critique being levelled at Telstra by Internode and fellow ISP iiNet for the handling of its fibre infrastructure rollout in South Brisbane, where the existing copper cable is being ripped up to make way for a new hospital.
Although the first wholesale customers were connected to the fledgling fibre rollout last week, and the South Brisbane area will eventually become part of the wider NBN rollout at some point, under current planning, the ISPs object to specifics around Telstra’s pricing and services on the fibre network — for example, a lack of multi-cast ability which would facilitate IPTV being delivered.
Telstra general manager of wholesale products, Graham Bate, has described the South Brisbane rollout as “the perfect opportunity for the industry and Telstra to derive some learnings about fibre”. And with respect to the complete suite of services available over copper: “The challenge is for us to replicate in our fibre product, something which customers have implemented in their own network — something which we haven’t implemented in our own network previously,” he said this week.
There are several fascinating issues at play here.
Firstly is the dynamic between an incumbent telco (Telstra) and an upcoming challenger (Internode). On the one hand, Hackett has consistently been a critic of Telstra over the years — forcibly bringing the telco before regulators like the Australian Competition and Consumer Commission, complaining loudly and often about its pricing and access to exchanges, and generally acting like a tough challenger.
On the other hand, it looks like the executive and his team at Internode have simultaneously been asking Telstra for access to several of its crown jewels — its prized Next G network, and the HFC cable network which facilitates its lucractive Foxtel bundling deals on the other.
I’d have to say this approach is a little inconsistent.
Internode has grown very fast over the years. It isn’t short of money, and it isn’t short of an ability to gain investment — through a public listing, sale to a private equity company or other sources of capital. It could start investing in its own mobile phone network — perhaps through a partnership with one or more other telcos, as Telstra, Hutchison, Vodafone and Optus have all done — if it chose to do so. Instead, Internode’s approach appears to have been to let Telstra invest in mobile infrastructure, and then request access to it, in a similar way as it has access to its copper network.
From Telstra’s point of view, this would appear to be a little like being threatened with the steel hand in the velvet glove. In public, Hackett is a strident critic of Telstra. But behind closed doors it looks like Internode would like to benefit from a little of the Telstra mobile largesse.
The HFC network case is also fascinating. The fact that Internode wants to resell services on top of Telstra’s HFC network lends a great deal of credence to Shadow Communications Minister Malcolm Turnbull’s claim that Australia’s HFC cable (Optus also owns a similar network) could be upgraded and made to fulfil a far greater role than it currently does, in lieu of building out fibre to the home around Australia.
Now, I’m sure, in both these cases, if you questioned Hackett or his counterparts at other major non-Telstra ISPs about their somewhat inconsistent approach to dealing with Telstra, they’d say they have no choice. Telstra’s ability to invest and market power is so great, they would likely say, that there is no way to invest in substantial infrastructure — because Telstra could just overbuild it, as it did when Optus rolled out its HFC cable in the late 1990’s.
However, I’m not sure just how courageous this response would be. On the day after Apple supremo Steve Jobs retires, it is perhaps fitting that we begin to ask ourselves whether Australia’s challenger technology corporations could perhaps be a little more audacious in their vision. Sure, Telstra’s an 800 pound gorilla that it’s hard to mess with.
However, I can’t recall seeing El Jobs going cap in hand to many of the gorillas he has recently taken down … Nokia, Research in Motion, HP and the music industry, to name a few. Yes, these are tough words. But it’s a tough industry — and it’s not always enough to paint Telstra as the great Satan when you’ve got the ability to do something about it.
For those who say that’s impossible, I refer you, as Turnbull also did this week, to a little-known company called TransACT, which competes on an infrastructure basis with Telstra in Canberra and a few other cities. It’s never been impossible to directly compete with Telstra in rolling out networks … it’s just bloody hard.
Image credit: Internode