Did The Aussies Vote WiMAx Out?

Telecom Policy Report, Dec 11, 2007

To most observers around the world, during the recent election in Australia, in which long-serving Conservative leader John Howard was ousted by new Prime Minister Kevin Rudd and his Labor Party, the biggest issues were things like the war in Iraq and global warming. Equally, the election was in part a battle for supremacy between fiber to the home (FTTH) and WiMAX, and in part a test of whether a new government in Australia can demolish the roadblocks to a nationwide high-speed network.

At stake is the $7 billion-$8 billion national broadband network the Australians want to build, a network that's been a major political football for years now, pitting incumbent Telstra against a host of competitors as well as against the former Howard government. The smart money in Australia believes Telstra probably is going to have just as big a battle on its hands with Rudd, unless the company changes a key point in its basic philosophy. Indeed, it looks that the only thing Telstra has in common with Rudd was its enmity for Howard but, now that Rudd's in office, the romance is over.

The first and most immediate issue is the so-called "bush broadband" initiative - more correctly called "Broadband Connect" - on which the Aussies were planning to spend $1.5 billion to bring broadband to the outback. The Howard government had strongly backed WiMAX to do much of the job. It already had awarded a $1 billion contract to Telstra's biggest rival, Optus, to begin WiMAXing the outback. Telstra, in response, rushed into court (TelecomWeb news break, Aug. 3). As of today, no work has been done - and with the election of a new government, its not clear if any work will ever begin, at least not as originally envisioned. Optus, reports have it, is "rethinking" its plan because the new Labor party is said to be far more enamored with fiber than it is with wireless.

Broadband Connect, though, pales in size compared with the nationwide network that's become a political football in Australia. As part of its platform, Labor had promised to begin work on such a network - possibly FTTH or possibly fiber to the node (FTTN) or a mix of the two within six months if elected. Indeed, the inability of the Howard government to bring Telstra to heel and to get a national broadband network rolling had been one of the very first campaign points on which Rudd based his now-victorious effort to unseat the Conservatives. But now that Labor has been elected, it has to deliver.

What the new Labor government is facing, though, is a Telstra that's steadfastly been opposed to allowing competing carriers to deliver service over any new nationwide fiber network it builds. Telstra is seen as the most financially able to build such a network but it's refused to do so unless it gets government guarantees that it won't have to open up the network. Labor, meanwhile, has been campaigning for an infrastructure based on an open network policy. Indeed, its position isn't all that different on the issue than the government it replaced.

In addition to battling the government, Telstra has been faced with the Optus-led "G9" consortium of telco companies - as the name implies, nine telcos derisively termed the "gang of nine" by Telstra loyalists - which banded together in hopes of winning government backing for building the national network (with, of course, a healthy dose of government subsidy). A network that would be open to all except, perhaps, Telstra.

So, with the elections over, the wrangling has begun anew.

With the new government barely in office, Telstra within hours was tooting its horn and suggesting that, with a government okay, it could begin work laying a new fiber network within 48 hours of getting the green light. Of course, that's not likely to happen all that fast. But it had some political commentators down under blasting Telstra for impudence, while others opined it was just trying to show the Rudd government that it was behind its broadband plan...except, most guesses go, for the open-access part.

In any case, the scenario now envisions a tender in the near future, one that includes an open-access requirement but with the rates for open access to be determined in negotiations with the Australian Competition and Consumer Commission (ACCC). If Telstra bites the bullet and accepts that it will have to do that, it's still expected to face the G9, with a counter-proposal somewhat modified from the one they put before the ACCC earlier this year (TelecomWeb news break, April 20). There's also speculation of interest from international players including Deutsche Telekom and Ericsson, among others, considering the Labor party's promising to ante up more than half the cost of such a network.

TPR's Take On The Situation

The difference between the importance broadband played in the Australian election and the minor role it's playing so far in the United States is breathtaking.

What the Aussies were so upset about, enough for it to be a top issue in their election, was an Organization for Economic Cooperation and Development (OECD) ranking of 12th in the world in broadband. That fact was enough to put the ruling party out of power (okay, unhappiness with issues such as global warming played a part, too).