Broader Horizons

The Rudd Government is making good its promise to bequeath Australia a grand project and kickstart the digital economy, writes Gerard Goggin


The glorious shift from the hustings to the hill meant, of course, that the new Labor Government was fired with the enthusiasm of connecting every business, school, house, and person to fast broadband. Broadband to the pillow almost, as Australian internet pioneer Ian Peter suggested in an industry futures event in the mid-'90s. To do so, the Government felt it should create a new network.

Of course, nothing is created out of a void. Especially when it comes to technology and most assuredly to Australian technology. Very quickly, the Government was obliged to go hand to hand with the elephant in the room.

Would Telstra tender for the right to build the new network and if so, on what terms? The way the Government had established the broadband tender exercise towards the end of 2008 was not conducive to public confidence, let alone affording Telstra extra leverage in negotiations. Bidders were asked to both tender for a broadband network, and indicate what rules they thought should apply to its operation. All of which was played out behind closed doors, judged by a committee. Hardly Government 2.0.

For Telstra, this amounted to a rather more intense phase of the endgame they had been building. Telstra's planners and managers had long considered how the next generation of networks would play out, what kind of investment they should make and when–to lay and control the architecture, with the aim of consolidating their broad and enviable customer base into the future.

Publicly they offered to build a new internet-based network on condition they had favourable terms to exploit its capacity before having to open it too soon, or too fully, to competitors. The Australian Competition and Consumer Commission (ACCC) wasn't too thrilled at this Faustian bargain. (Even if such a regulatory contract was akin to the one Telstra, Optus, and their media partners enjoyed in double-cabling city streets for pay television in the mid-to-late 1990s).

The previous Coalition government was even less amused, especially when the truculent Telstra chief executive officer, Sol Trujillo let rip. Trujillo and regulatory head Phil Burgess wasted no time asserting the corporation's shareholder interests when it came to the use of its copper-wire network for existing broadband. The conflict escalated to the point where Telstra lay down the gauntlet to the government in an audacious, if dubious, High Court constitutional challenge.

Telstra HQ was not for turning, when confronted with the Labor Government and its tender process. Unfortunately, Telstra had its broadband tender offer rejected on a technicality. In late 2008, this left Senator Conroy and his cabinet colleagues in a quandary with Telstra outside the tent. From the Government's corner came the game-changer, doing away with tendering altogether and banishing Telstra from the national broadband project.

No longer beholden to Telstra, the Government created a new behemoth–National Broadband Network Co (NBN), making it a wholesale-only venture. Finally, to the cheers of internet pundits, the network would be open access. The NBN would build and run the 100 megabits per second "historical nation-building investment". The network would be open to all comers, crossing all sectors of economy and society and ultimately embedding the internet much more deeply in the life of a nation.

The Telstra solution lasted probably for about as long as it took the ink to dry on Stephen Conroy's April press release. Ever since, though, the role of Telstra has dominated the business of detailed planning for the new network.

The bold act of conjuring up a new vision for broadcast was based on minimal public consultation and policy development. Critics carped: there were few details and the economic modelling was notional at best. The Government declared it would invest an initial $4.7 billion in the NBN. Negotiations would also begin with the Tasmanian Government to roll out network there as early as next July. Regional "backbone" blackspots would be filled with fibre-optic links between cities. Key parts of the policy frameworks would be put in place: the new telecommunications access regime and the laws governing the NBN.

By the end of October, significant progress had been made on these fronts. However, a great deal about NBN remains very murky. The spectre of Telstra haunts this monumental governmental fiat.

This might seem curious, given that Telstra, in effect, was forced to unconditionally surrender after its ignominious tender trap. Heads rolled, with a new CEO appointed, the conciliatory David Thodey, and a new board chairman too, Catherine Livingstone. Steadily and inexorably, Telstra has sought to recapture its grasp upon Australian corporate and regulatory political culture. It has kept in mind the decorous norm that it is unwise for formerly public-owned companies, still dependent in ownership and policy terms upon public entities, to wrestle a sovereign Government to the ground.

Even after the Government acknowledged that it would have to include Telstra in its new broadband project, Minister Conroy made no bones about delivering a tough regulatory framework, even if Telstra suffered severe blows to its share price and revenues. The lines of the new dispensation were clear in the draft legislation for the new access rules. Telstra will be obliged to separate its wholesale and retail arms. It will need to do this voluntarily or the legislation allows the Government to impose it on them. Telstra will be required also to treat its retail and wholesale customers the same way when it comes to price and non-price terms for services.

So far, so good. Much that is solid about the NBN, however, melts into air, when you try to figure out what the network will actually look like, what it will deliver to whom, and how.

Will the NBN actually ever be built? Some say no. However, its rollout will be suitably staggered until 2017.

Will the total investment be $43 billion? Well, it might be but others wager the cost could actually be less, especially if the NBN acquires Telstra's existing networks.

How will the NBN generate enough revenue to be profitable? Indeed, to ensure it can keep its prices low enough to attract internet customers to connect.

Where will the NBN fit into the wider media environment? How will the NBN carry television? Presumably the varieties of internet television–from You Tube and Hulu, to catch-up television to what is called IP (internet protocol) television–will flourish. What about the new digital free-to-air television infrastructure and what will the pay television providers do? How will the architecture of the network be configured to support various technical possibilities and outcomes for providers, media and user?

The fine print of the proposed new access regime helps make sense of the encouragement of Telstra to divest itself of its current pay television (hybrid fibre coaxial cable) network, and its interest in Foxtel. Unless Telstra does so, it is forbidden from gaining additional spectrum for advanced wireless broadband services, such as the much-vaunted fourth generation (4G) mobile services.

So the actual shape of the NBN is very much bound up with decisions Telstra takes. The stakes are high as the draft legislation's explanatory memorandum spells out:

Structural separation may, but does not need to, involve the creation of a new company by Telstra and the transfer of its fixed-line assets to that new company. Alternatively it may involve Telstra progressively migrating its fixed-line traffic to the NBN over an agreed period of time and under set regulatory arrangements, and sell or cease to use its fixed-line assets on an agreed basis.

As the Government makes clear, what will happen if Telstra cuts a deal with the NBN in a "negotiated outcome"? This is exactly the rub for the public.

The NBN is a moveable feast, still under construction. The problem is that the public is not having much say. Yes, some important parts of the NBN puzzle are out to public consultation, especially the policy and regulatory framework. Despite this, it is still not clear what role the public will have in the NBN's governance. It is a public-private partnership, and we have had enough recent experience of these hybrids to be wary of their accountability. Who will regulate the NBN and all the different participants in the public interest? Are our present regulators comprehensive enough, let alone equipped with the tough powers they will need?

In the even less charted waters of technology design, crucial elements are being shaped by select Governmental or industry working groups. The various peak industry bodies are in overdrive, contributing to the process. The best placed perhaps is the peak body of the telecommunications industry, the Communications Alliance, which released its vision of the network architecture in mid-October, calling for wide feedback. The in-principle desire for consultation from this section of the industry is certainly welcome. It remains to be seen, however, how the desires, needs, and expectations of users are actually registered in these influential yet formidably technical and arcane exercises.

The challenge in gaining public participation in the shaping of national broadband is only heightened when it comes to the pivotal role of Telstra. First commercialised, then privatised, Telstra still saw itself as the national carrier. What it did–creating a great mobile data network, proposing a new fibre-to-the-node broadband network, seeking windfall profits to enrich its shareholders and senior managers–was what the nation needed, and should fund.

The republic of Telstra has suffered a grievous blow to its body politic but like a government deposed, it is slowly sneaking back to the halls of power, trying to regain its credibility. What is its relationship now with the citizens who used to own it, the users who depend upon it, and the "mums and dads" who bought into it?

Apart from the discussion about the regulatory framework, what say will the public have in the negotiations among the public and private participants that will see Telstra take decisions that will have definitive implications on the form and character of this brave new world of internet? The cloistered nature of this policy exercise very much fits with the industry's desire to keep this millennial media development in its gift–and the Government's abiding orientation to keep the market happy, muddled as it may be.

The most surprising, if predictable, thing about this entire broadband adventure is that the national carrier is back centre-stage, with its private interests having an enormous bearing on our public communication future.