08 August 2006
Sydney Morning Herald

Telstra has walked away from plans to build a $A4 billion high-speed broadband network, threatening to push Australia further behind other developed countries as an advanced information economy.
The telecommunications giant yesterday aborted plans to build a new network after long-running talks with the competition regulator collapsed because of a disagreement over prices rivals would be charged.
The failure of the talks places in jeopardy the Government’s $A24 billion sale of its remaining 51.8 per cent stake in Telstra, a final decision on which is expected as early as next week.

Almost $A1 billion was wiped from Telstra’s market value yesterday as investors reacted nervously to the decision just days before its full-year results on Thursday. The stock closed down eight cents at $A3.80 yesterday.

Australia already lags behind countries such as South Korea, the US and Japan in broadband connections and ranks 17th on Organisation for Economic Co-operation and Development tables. The Opposition spokesman on telecommunications, Stephen Conroy, warned that without a new high-speed broadband network, Australia would end up as a “broadband backwater”.

The Communications Minister, Helen Coonan, said the collapse of the talks was disappointing but the Government would not be tied to an “artificial deadline, determined by Telstra” on regulatory issues. She said Telstra’s attitude was “anti-competitive” and the company wanted to “re-monopolise” with the new network, but she dodged a question about whether the Government had confidence in the Telstra chief executive, Sol Trujillo.

Investors believe the decision not to proceed could undermine the sale of the Government’s remaining stake, dubbed “T3”. “There is no confidence out there in the stock,” said the head of Argo Investments, Rob Patterson.

The chairman of the ACCC, Graeme Samuel, said he was perplexed by Telstra’s decision because the company had publicly said it was “98 per cent of the way” to reaching a compromise. But Telstra’s regulatory chief, Phil Burgess, said the talks failed because the two parties had “clashing world views” on costs and what was a reasonable return.

He declined to comment on the impact of the breakdown in talks on T3, saying it was an issue for the Government. But he did say Telstra wanted to see T3 go ahead, including a retail sale.

The Government is now banking on a consortium of nine local telecomunications companies, including Optus, to push ahead with plans to roll out its own high-speed broadband network. Mr Samuel said uncertainty about what Telstra “may or may not do” had prevented other parties from committing to a new network, but he believed it was an “absolute certainty” the country would have a high-speed broadband network within the next two to three years.

The Internet Industry Association also warns Australia risks falling behind other developed countries if it does not adopt a coherent national approach to high-speed broadband. The body wants two-thirds of Australians to have access to broadband speeds of at least 10 megabits a second within the next four years, but warns “we have a long way to go to reach the 2010 target”.
But Senator Coonan denied development would suffer as a result of Telstra’s decision. “We’re not going to miss out on fast broadband in the immediate future. Telstra is not the only game in town,” she said, referring to the so-called “group of nine” companies.
She said the Government would decide on T3 in the next few weeks, but sources close to the sale team said it would be discussed in cabinet on Monday.