Telstra, Australia's largest full-service telecommunications operator, has announced that it will abandon its previously announced FTTN deployment plan due to its inability to reach an agreement with the Australian Competition and Consumer Commission (ACCC) on open access networks to competitors. Last November, Telstra announced plans to invest $8 billion to build a new IP backbone network, of which FTTN's investment is about $3 billion.
It is said that Telstra had a friendly, frank and substantive conversation with the ACCC on the FTTN construction and network opening, but the two sides ultimately did not reach a consensus on the two issues of actual construction cost and cost recovery period. . Phil Burgess, Telstra's managing director of public policy and communications, gave a detailed account of the process of negotiating with the ACCC and some of Telstra's own ideas at a subsequent press conference.
The ACCC advised Telstra to open its FTTN network to its competitors, but Telstra believes that doing so under the current conditions is meaningless to Telstra. Phil Burgess said that Telstra is not in a position to accept ACCC's advice to open access to the network, but only if Telstra should receive the corresponding policy commitments and returns. As far as the current situation is concerned, this condition is still immature. In addition, Telstra believes that the ACCC's open access network to promote fair competition has made it less meaningful for operators to “get along with each other†because competitors have already demonstrated their hostility. Phil Burgess refers to the hostile camp headed by Paul O'Sullivan, CEO of SingTel Optus, who has been opposed to Telstra's nationwide deployment of the FTTN network. Paul O'Sullivan even said that he would not hesitate to stop Telstra's FTTN construction.
In addition, Telstra and ACCC also have differences in access policy, network management, rate calculation, business description and subsidy methods, but the negotiations have made some progress as both sides made some concessions. When it comes to cost issues, both sides hold their own opinions and do not make any compromises.
The reason for this is that Telstra does not invest in high-cost areas based on ACCC-related principles, but provides services to users in suburban, rural, and remote areas based on investment demand criteria, which directly causes the two parties to differ in cost estimates. Protecting the interests of users in rural and remote areas is a long-term policy of the Australian government. As Australia's largest operator, Telstra seems to have an obligation to let these users enjoy the same high quality service as urban residents, and the price is not high. Phil Burgess believes that the government and the ACCC are used to thinking this way, but did not consider the interests of Telstra shareholders.
The cost problem is actually very simple. The construction and maintenance of communication networks are the same as power grids, oil pipelines, high-speed kilometers and railways. The longer the distance, the higher the cost; the lower the population density, the higher the cost; the more difficult the terrain, the higher the cost. Therefore, the cost of providing broadband services to remote areas is very high. Phil Burgess cited two examples. In June of this year, Telstra spent $63,000 to open a width service to a user in the Macedonian mountains. In addition, in the Kirup area of ​​southern Australia, only a few kilometers due to the need to cross the rock. Cable laying costs reach $107,000.
Indeed, providing communication services in non-urban areas requires costly costs, but the Australian government's policy on the uniform price of communications across the country makes cost recovery in these areas very difficult. For now, there are two ways to recover costs: one is unified service, and the other is government subsidies. The bottom line of the first approach is that ACCC cannot cut the wholesale price of uniform services in urban areas over and over again, because only the surplus of urban business can make up for the loss of mountain business. The ACCC also recognizes the subsidy policy, but the amount of subsidies is far from offsetting the losses incurred by Telstra in its operations in remote mountain areas.
The government and the ACCC wanting Telstra to bear the extra cost of FTTN construction must be unacceptable to Telstra because they must protect the investment of shareholders, so Telstra had to reluctantly give up the construction of FTTN. Phil Burgess expressed great regret for the outcome of the negotiations because he believes that the importance of FTTN to Telstra, the Australian telecommunications industry and the country as a whole is self-evident, and the suspension of the FTTN plan will undermine the interests of all parties. Phil Burgess said that Telstra will continue to implement its FTTN program in a variety of ways, including direct dialogue with the ACCC. He said: "As long as ACCC allows us to price services based on actual costs, we will continue to build our FTTN to avoid our A$4 billion investment and protect shareholders' interests from competitors. So, In the short term, the key is to see what the ACCC thinks, they have a 100% decision."
In fact, the FTTN event can be seen as an episode on the road to privatization of Telstra. Telstra's FTTN network began deployment in December last year and is an important part of its strategic adjustment. Therefore, in order to ensure the interests of shareholders and the long-term development of the company, Telstra is certainly not willing to give up the construction of FTTN. The announcement of giving up is only a relatively radical way for Telstra to express his views and positions to the government and the ACCC. The final result can only be that Telstra and ACCC call "Long live".
It is said that Telstra had a friendly, frank and substantive conversation with the ACCC on the FTTN construction and network opening, but the two sides ultimately did not reach a consensus on the two issues of actual construction cost and cost recovery period. . Phil Burgess, Telstra's managing director of public policy and communications, gave a detailed account of the process of negotiating with the ACCC and some of Telstra's own ideas at a subsequent press conference.
The ACCC advised Telstra to open its FTTN network to its competitors, but Telstra believes that doing so under the current conditions is meaningless to Telstra. Phil Burgess said that Telstra is not in a position to accept ACCC's advice to open access to the network, but only if Telstra should receive the corresponding policy commitments and returns. As far as the current situation is concerned, this condition is still immature. In addition, Telstra believes that the ACCC's open access network to promote fair competition has made it less meaningful for operators to “get along with each other†because competitors have already demonstrated their hostility. Phil Burgess refers to the hostile camp headed by Paul O'Sullivan, CEO of SingTel Optus, who has been opposed to Telstra's nationwide deployment of the FTTN network. Paul O'Sullivan even said that he would not hesitate to stop Telstra's FTTN construction.
In addition, Telstra and ACCC also have differences in access policy, network management, rate calculation, business description and subsidy methods, but the negotiations have made some progress as both sides made some concessions. When it comes to cost issues, both sides hold their own opinions and do not make any compromises.
The reason for this is that Telstra does not invest in high-cost areas based on ACCC-related principles, but provides services to users in suburban, rural, and remote areas based on investment demand criteria, which directly causes the two parties to differ in cost estimates. Protecting the interests of users in rural and remote areas is a long-term policy of the Australian government. As Australia's largest operator, Telstra seems to have an obligation to let these users enjoy the same high quality service as urban residents, and the price is not high. Phil Burgess believes that the government and the ACCC are used to thinking this way, but did not consider the interests of Telstra shareholders.
The cost problem is actually very simple. The construction and maintenance of communication networks are the same as power grids, oil pipelines, high-speed kilometers and railways. The longer the distance, the higher the cost; the lower the population density, the higher the cost; the more difficult the terrain, the higher the cost. Therefore, the cost of providing broadband services to remote areas is very high. Phil Burgess cited two examples. In June of this year, Telstra spent $63,000 to open a width service to a user in the Macedonian mountains. In addition, in the Kirup area of ​​southern Australia, only a few kilometers due to the need to cross the rock. Cable laying costs reach $107,000.
Indeed, providing communication services in non-urban areas requires costly costs, but the Australian government's policy on the uniform price of communications across the country makes cost recovery in these areas very difficult. For now, there are two ways to recover costs: one is unified service, and the other is government subsidies. The bottom line of the first approach is that ACCC cannot cut the wholesale price of uniform services in urban areas over and over again, because only the surplus of urban business can make up for the loss of mountain business. The ACCC also recognizes the subsidy policy, but the amount of subsidies is far from offsetting the losses incurred by Telstra in its operations in remote mountain areas.
The government and the ACCC wanting Telstra to bear the extra cost of FTTN construction must be unacceptable to Telstra because they must protect the investment of shareholders, so Telstra had to reluctantly give up the construction of FTTN. Phil Burgess expressed great regret for the outcome of the negotiations because he believes that the importance of FTTN to Telstra, the Australian telecommunications industry and the country as a whole is self-evident, and the suspension of the FTTN plan will undermine the interests of all parties. Phil Burgess said that Telstra will continue to implement its FTTN program in a variety of ways, including direct dialogue with the ACCC. He said: "As long as ACCC allows us to price services based on actual costs, we will continue to build our FTTN to avoid our A$4 billion investment and protect shareholders' interests from competitors. So, In the short term, the key is to see what the ACCC thinks, they have a 100% decision."
In fact, the FTTN event can be seen as an episode on the road to privatization of Telstra. Telstra's FTTN network began deployment in December last year and is an important part of its strategic adjustment. Therefore, in order to ensure the interests of shareholders and the long-term development of the company, Telstra is certainly not willing to give up the construction of FTTN. The announcement of giving up is only a relatively radical way for Telstra to express his views and positions to the government and the ACCC. The final result can only be that Telstra and ACCC call "Long live".
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