news Senior figures Paul Budde and Senator Scott Ludlam this week said they expected that the only company likely to buy a privatised National Broadband Network would be Telstra, as speculation continues to mount about a sale of Australia’s largest ever infrastructure project before it is even finished.
Last week Infrastructure Australia released what it billed as a 15-year Infrastructure Plan and associated priority list. The agency stated baldly that over the medium-term period, the Federal Government should “transfer NBN Co to private ownership”, including options for splitting the NBN company into chunks on either technological or geographical grounds. However, Infrastructure Australia did not include any rationale or evidence for why it had made the recommendation.
In the days following the release of the document, a number of key NBN commentators have come out broadly supporting IA’s recommendation, including former NBN chief technology officer Gary McLaren. The head of the ACCC, Rod Sims, also supports splitting the NBN company up and selling it off.
In comments made to the Senate earlier this week, Greens Senator and Communications Spokesperson Scott Ludlam said it was likely Telstra would buy the privatised NBN company.
“We have this proposal that we somehow privatise the network. Who is going to buy it? We all know who is going to buy it—Telstra is going to buy it,” said Ludlam, who is opposed to privatising the NBN company.
“So we will be back to the bad old days. They sold this obsolete copper network to the taxpayer and we are going to be handing this whole mess of garbage back to them to fix up.”
In a separate blog post, veteran telecommunications analyst Paul Budde said that also believed Telstra was the logical buyer of the NBN company’s infrastructure. We recommend you click here to read Budde’s entire post, entitled “Building Australia’s white elephant — cheap buy for white knight Telstra”.
“We believe that there will be only one potential buyer for the mesh/mess NBN and that will be Telstra, one of the most successful and richest national telcos in the world,” the analyst wrote.
Budde said it was his opinion that Telstra would not pay the full value of the National Broadband Network, because of the complex Multi-Technology Mix approach to rolling out the NBN that Malcolm Turnbull imposed on the project as Communications Minister.
Budde pointed out that a recent report by consulting firm PriceWaterhouseCooprs had theoretically valued the NBN at about $27 billion — far less than the cost of building the infrastructure. The NBN company has disputed the legitimacy of the PWC modelling.
“They will never pay the full price for the NBN and because of the NBN mesh it is highly unlikely that any other company will pay such a price for the infrastructure. It is even questionable if they will be willing to pay the price of around the $27 billion price tag,” wrote Budde.
“So it will end up in a fire sale and because of its wealthy and powerful position Telstra will be the white knight. It might pay a bit above the fire sale price and incorporate whatever it can use into an FTTH network that it will then proceed to build for Australia.”
The news comes as others within the Canberra political sector have also highlighted the level of political influence which Telstra enjoys with Australia’s federal politicians.
Labor Senator Sam Dastyari — who has recently engaged in a crusade against major corporations in Australia over their tax avoidance habits — has publicly warned that there is something “fundamentally wrong and rotten” with Australia’s entire political system, stating that ten major corporations — including Telstra — had killed off proper democratic processes in the capital.
“The entire political debate has become so dominated by the interests that they’re pushing, and the agenda that they’re pushing,” Dastyari reportedly said. “And [we’ve] ended up with this complete crowding out of a proper political discourse in this country because there is one sectional interest that is so much louder than every other voice out there combined.”
Will Telstra end up owning at least part of the NBN company? Well, yes, of course it will. As I wrote last week when Infrastructure Australia made the recommendation to privatise the NBN company:
“Telstra is the obvious buyer of the NBN company’s FTTx assets. I don’t think much more needs to be said about that situation.”
Will this be a good thing? Of course not — it will be dreadful. The whole point of the NBN — aside from to help get Stephen Conroy and Kevin Rudd into Government — was to structurally separate Australia’s telecommunications industry and split Telstra up so that it couldn’t continue to strangle competition in the sector. Handing Telstra huge chunks of NBN infrastructure will reverse that process.
Personally I would oppose any privatisation or sale of any part of the NBN infrastructure, at least until we’re closer to 2030 and the network has been built out with universal fibre, and its economics have been well-established.
The Greens have been a bit quiet on the NBN issue lately (ceding much of the ground to Labor), but I think Ludlam nailed it in the Senate this week when he said:
“The wholesale network is a natural monopoly. It is like the freeway network, it is like the water distribution network, it is like the electricity network. You do not want two sets of power lines running down the street as a result of trying to set up some arbitrary form of competition at the wholesale layer. You do not want that in telecommunications networks either.
You want the wholesale NBN network in public hands, where the bosses can be brought into estimates committees and cannot hide behind commercial confidentiality, where budgets are tabled, where questions can be asked and answers can be provided, and you want that at the wholesale natural monopoly layer.
You want nbn co to stay in that box and to do one thing and do it well. Then you want to let competition rip at the retail layer. I think that the market structure that this parliament decided on after exhausting late-night debates, night after night, was effectively and essentially the right one.”
I expect a huge public outcry if the Government does attempt to split up and sell off the NBN company. Right now, Australians dont’ care about some kind of theoretical market structure when it comes to telecommunications competition. They just want better broadband: And by and large they see a Government-owned NBN company as the best vehicle to deliver that.
Image credit: Telstra