Fool if you think its over for Telstra in NBN saga

Posted by Tony Brown Monday, January 5th, 2009

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Anyone reading the Australian press in the wake of the government’s decision to eject Telstra from the tender process to build and operate the National Broadband Network would have concluded that the market giant had been dealt a knockout blow – the reality is actually very different.

Telstra is by far the most robust and ferociously competitive player in the Australian corporate landscape and anyone who thinks that its December 15th exclusion from the NBN tender is a truly significant blow simply has not been paying attention to how Telstra has come to dominate the local pay TV, fixed-line, broadband and mobile markets.

Telstra knew it was taking bit of a risk when it submitted its initial bid for the NBN tender with a bid to build the network only in major cities - rather than nationwide, as the government wants.

As a result of its high-wire strategy Telstra – and particularly its high-profile CEO Sol Trujillo - could not have been totally surprised when the communications minister Stephen Conroy called their bluff and kicked them out of NBN tender process, leaving three rival firms still in the running, most notably SingTel Optus and Canadian bidder Axia.

Communications minister Conroy realized he simply could not allow Telstra to get away with its attempt to commandeer the NBN tender process and had to make some attempt to assert his authority – hence the announcement of Telstra’s exclusion and the subsequent two days of saturation press telling the world that Telstra has been firmly put in its place.

However, after taking more than a year to even bring the NBN to the tender process – during which time he assessed the intricate details of Telstra’s nationwide network – Conroy knows that no nationwide NBN can be built without getting Telstra on board, the company is just too powerful and controls way too much.

Despite his political grandstanding Conroy fully understands this - and you had better believe that Trujillo understands it even better.

Telstra has kept a low-profile since being kicked out of the NBN tender process, with its chief PR flak commenting only to local press that the firm had “copped it on the chin” and adding that seeking legal redress against its exclusion was “not a priority” – all whilst pigs flew serenely past his window.

Telstra has proved time and again over the last ten years that it fights harder than anyone when backed into a corner and the problem for the government is that although it may have the morally righteous wind at its back with its determination to have a fair and open tender process for the NBN that the political winds are blowing strongly against it.

Prime Minister Kevin Rudd made the fast-tracking of the NBN a high-profile facet of his November 2007 election campaign and successfully used his focus on providing the country with a world-class ubiquitous broadband network as a key differentiator between himself and the ageing incumbent John Howard for whom broadband was never a major policy issue.

However, more than a year after Rudd’s election the NBN is still barely out of the starting blocks and given the fact that Australian federal elections are held every three years Rudd faces a fresh election in less than two years so time is running out fast to get the NBN moving.

It would be a huge political embarrassment for Labor is they arrive at the next federal election with the NBN still barely out of the starting blocks but that is precisely what will happen unless it eventually makes nice with Telstra and prevents the kind of legal impasse which will block the NBN from coming to fruition for years.

Telstra is fully aware of this and is already deploying its substantial PR resources into getting the message out there that it can build the NBN far cheaper and with way less reliance on the public purse than any of its rivals…..if only the government would give it the regulatory breaks that it wants.