Australia's great broadband disaster: after a decade of political in-fighting over the ownership of Telstra, Australia faces the prospect of being a broadband desert. The incumbent needs to get out of cable TV—but first the government has to get out of denial - Cover Story

Telecom Asia, April, 2003 by Robert Clark

The pricing and promotion are still a long way short of describing "what broadband gets, rather than the 256k up and 64k down," she says. "You have a service people don't understand [and] you have a unit in a price table which most don't understand."

And while 75% of exchanges are DSL-ready, it is not clear how many customers each of these these can support, she adds.

Still, Dennis Mullane, general manager for broadband growth at Telstra's Big Pond ISP, believes broadband is "going along very nicely", pointing to the extent of the rollout and the growth in services. He doesn't accept Australia is one of the laggards, although he believes one of the main suppressants of demand is the flatrate dial-up service.

"Dial-up Internet services are still well-appreciated," he says.

Metered broadband the barrier

Yet, says INTUG's Sutherland: "Flat rate dial-up is available in Canada but has not stopped take-up of broadband. It is also available in South Korea, though it is barely used. This strongly suggests that it is broadband pricing and not dial-up pricing that determines the speed of take-up of broadband.

"It is really metered broadband in Australia and New Zealand that seems to be the barrier."

The obvious answer to Sutherland and others is for the government to force Telstra to shuck off the cable network and the pay TV content business as well. While incumbents everywhere still dominate the local access telecom loop, there is no reason why they should also dominate the HFC access network.

Cross-platform competition is an essential ingredient in the growth of broadband, as seen in active markets such as Korea, Japan and the US. In Korea and Japan, it is DSL that has the edge, followed by cable and satellite. In the US, the cable companies hold sway over the sluggish Bell companies.

Those looking for genuine broadband competition to emerge in Australia are pinning their hopes in the inquiry by Fels' ACCC into the recent pay TV content deal between Telstra and Optus. The deal is actually the final working-out of the HFC building madness of the 1990s, where the two companies have now agreed to share premium Hollywood and sports content. Crucially, Telstra is also allowed to bundle the service with voice offerings.

The ACCC gave it interim approval late last year, but Fels has been asked to report more fully on "emerging market structures" in the telecom and pay TV industries.

Certainly, Fels doesn't appear encouraged by the industry outlook. He said in his March speech that the ACCC had concerns about Telstra's potential to dominate the future combined broadcasting and telecom markets.

But his recommendations will still have to ride the political gauntlet of a thousand lobbyists. And with an election 18 months away, will Alston and his colleagues be ready to make hard decisions that could reduce the value of Telstra stock?

Probably not. But there is an upside. The sclerotic broadband efforts of Telstra and Optus are forcing the rest of the community to bring other broadband assets into play.