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Telstra role uncertain in Australia broadband plan

06 мая 2010

An independent study into the Australian government's ambitious plan to build a national high-speed Internet network has found there is a case for a commercial deal with Telstra Corp., but also said that the government could build a viable network on its own.

It also recommends the government remain the owner of the network until the roll-out is complete and competitive policy settings are in place.

The study does little to clear uncertainty hanging over Telstra, Australia's dominant telecommunications company, but does bolster the government's case to push ahead with the A$43 billion network.

It comes as Australian lawmakers are due to resume debate as soon as next week on legislation that could force Telstra to split its operations into separate retail and wholesale network divisions, potentially bar it from acquiring any new mobile spectrum, and force it to sell its half-share of Australia's dominant pay-television operator, Foxtel, if it doesn't cooperate.

The results of the study may play an important role in convincing independent Senators to back the legislation in Australia's upper house Senate, where the government doesn't have a majority.

The main conservative Liberal-National opposition has questioned the need for such an ambitious project, while minor parties have refused to back the plan before seeing the feasibility study, likening it to being asked to sign a blank check.

The national broadband network was one of Prime Minister Kevin Rudd's key promises when he was elected to office in 2007 and aims to deliver high-speed Internet access of 100 megabits per second to 90% of homes and businesses.

"Fast and affordable broadband is the only way we'll be able to compete with economies in our region like Japan, like Korea, like China," Rudd told reporters Thursday.

Amid a slump in voter support for his center-left Labor party in recent times, the network could also play a key role in reinvigorating Rudd's political fortunes ahead of an election likely to be called from mid-August onward.

"If they do it right and pull it off the ground the plan could be an election winner if not it could indeed achieve the opposite," said independent telecommunications analyst Paul Budde.

Analysts have long argued the new network's viability will hinge on the government reaching an agreement with Telstra to prevent the company from acting as a major competitor.

But the study potentially strengthens the government's hand politically in tense ongoing negotiations with Telstra by confirming it will be financially viable even without Telstra's participation.

"After months of detailed and rigorous analysis, the implementation study confirms that the government's national broadband network is achievable, viable and will transform life and business in Australia," Communications Minister Stephen Conroy said. He did note, however, that talks with Telstra are continuing.

The feasibility study, by McKinsey & Co. and KPMG, said NBN Co.--the government-owned company established to run the planned open-access network--should price to offer a "compelling proposition" to existing retail service providers, including Telstra, to migrate their customers to the new fiber network.

Entry level wholesale prices on the fiber network should be set around A$30-A$35 a month for basic broadband at speeds of 20 megabits per second plus a voice service, it found.

"This certainly is a competitive price. This will lead to a rapid penetration and that in turn will make the roll out economically viable," Budde said.

While the study was modelled on the basis that the government could build the network without Telstra and still generate a rate of return equal to the long-term bond rate of 6%-7%, it also found there is existing infrastructure that could be used to build the network "more quickly and cheaply".

That includes Telstra's vast existing infrastructure, particularly its ducts and unused backhaul infrastructure.

The study found the government's A$43 billion price tag for rolling out the network is realistic, although it is at the high-end of plausible estimates which range from A$38 billion to A$43 billion. The government's own investment is estimated to peak at A$26 billion in the seventh year of the proposed eight-year roll out.

Shares in Telstra, the country's biggest telecommunications company by revenue and subscribers, ended down 5 cents, or 1.6%, at A$3.08, outperforming the broader market which fell 2.2% but reversing an earlier spike to a three-month high of A$3.23 immediately following the feasibility study's release.

"The NBN implementation study is and always has been a matter for the government and NBN Co. We're interested in its findings and will consider them in detail," a Telstra spokesman said Thursday.

John Milroy, private client adviser at Macquarie Private Wealth, said the study is "ambiguous" in that it talks up the logic of a commercial deal with Telstra, while also saying the government could own the business itself and still get an acceptable rate of return without the involvement of Telstra.

"That's why the market rallied then fell back," Milroy said.

Other findings in the McKinsey & Co.-KPMG report included a recommendation that the fiber network be rolled out to 93% of Australia, from the government's initial goal of 90%. The rest of the country could be serviced by a mix of wireless and satellite technology, it said.

Construction of the network on the Australian mainland is expected to start later this year, with early-stage work already in progress in Tasmania state.

Источник: Total Telecom

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