| Telstra's Splitup:Why It Matters Internationally |
| Tuesday, 15 September 2009 07:51 |
 Nearly every telecom regulator in the Western world now looks like a wimp. Splitting British Telecom in two saves the typical broadband home in the UK easily $100/year because the resulting retail competition has driven down prices. Viviane Reding at the EU, the Swedes and the Italians are considering similar. Stephen Conroy in Australia is now moving ahead. Compared to structural separation, any proposal in the U.S. or most western countries seems a weak joke. Even The Australian, a business newspaper, writes the result will be "a greater range of services at cheaper prices."
The British experience needs a closer look, however. Structural separation turns out not to be a magic bullet, and in the British case is significantly holding back the speed of the Internet. While France, Holland, Switzerland and the Eastern U.S. are getting fiber at 100 meg and more, BT is doing DSL from cabinets with a misleading press campaign to call it "fiber" and "superfast." The Internet across the BT monopoly half of the U.K. will run at 50-90% slower than in much of Europe, probably for a generation. Ed Richards has been deregulating most of BT because "competition is working" while ignoring that separation creates a strong monopoly in the network itself. That monopoly needs even stronger regulation, but Richards lacks either the understanding or the strength to do anything about it. Instead of building the fiber network universally recommended by their technical staff, BT invested elsewhere and now has lost $3B on "Global Services," Ben's misguided attempt to replicate IBM. BT's market price of a third of annual sales implies The City sees a strong risk of bankruptcy. That's a legitimate fear on any telco without wireless today, including Qwest, Bell Aliant and the U.S. regionals. Losing 5-10% of lines every year is devastating, and there's little growth in broadband to make up for it. (I expect the government will bail BT and they won't go bankrupt.) As Bill Kennard points out, we've learned the best way to understand communications over time is to look at the actual networks. Britain and now perhaps Australia will have many retail providers but an underlying monopoly across half the country that doesn't have cable. The U.S. has a duopoly, better but not close to enough competition to make regulation unnecessary. France, with effective unbundling and therefore four players, has a triple play price of 30 euros, half the U.S. rate. Extreme rural areas are typically natural monopolies. Competition is a great solution, except where it doesn't work. The key problem Ed, Jules, Mathias and the Japanese have to solve is what to do when realistically competition will be weak. I wish I had good answers. Plenty of politics to come. Telstra, like all telcos, owns a slew of politicians and the opposition has already jumped in. Malcolm Maiden has some details. "Changes discussed while the legislation was being drafted included strengthening the Australian Competition and Consumer Commission's power to set upfront terms for access to Telstra networks, adding to the ACCC's power to move against anti-competitive behaviour, clearer separation of Telstra's wholesale and retail businesses, and restrictions on Telstra's expansion into related industries, including cable television, where it is a 50 per cent shareholder in Foxtel and the owner of the hybrid fibre coaxial network that Foxtel uses." Brisbane Times |
