Australia fiber wars

01 Aug 2006

With negotiations on Telstra's wholesale broadband access regime at a regulatory impasse, nine rival Australian telcos led by SingTel Optus have proposed a plan to build their own rival A$4 billion ($3.01 billion) fiber-optic network.
SingTel Optus has been joined by AAPT, Internode, iiNet Macquarie Telecom, PowerTel, Primus, Soul and TransAct in the plan to create a new company called SpeedReach, which would govern the new network on behalf of its owners.
Dubbed the 'G9,' the group's plans come after months of wrangling with Telstra over the fees it charges for access to its existing copper network and plans for a new fiber-optic network, which have stalled due to Telstra's battle with competition regulator the Australian Competition and Consumer Commission and become embroiled in the preparations for 'T3,' the sale of the government's remaining 51% of the company.
The G9 announced their plans as an alternative to Telstra's proposed A$3.4 billion network, which Telstra has threatened not to build if it is not allowed some price protection by the ACCC. Telstra's new management, headed by Sol Trujillo has blamed excessive regulation for dampening the company's share price and endangering the T3 sale.
The G9 claim that their proposed network, targeted at Australian metropolitan markets, would service around five million customers, a figure they claim is one million more than have access to Telstra's proposed fiber network. The plan was conditional, however, on Telstra dropping plans for its own network and becoming a customer of SpeedReach.
The G9 telcos also proposed an alternative solution where Telstra's existing copper network would be upgraded to fiber and remain under Telstra ownership but SpeedReach management.
'We believe the national benefit of fiber to the node can be significantly enhanced if the network is not exclusively owned by Telstra, but instead owned wholly or partly by players other than Telstra, be they other telcos or financial investors,' said David Tudehope, chief executive of Macquarie Telecom.
The economic viability of the plan, however, is a matter of dispute. The G9 commissioned a report by Allen Consulting that said that investors would need returns of between 8% and 10% for the network to be viable, but independent analysts claim that figure would need to be much higher, at up to 20%.
'There are so many variables and risks with an asset such as this that I think anyone putting in money to build it would need better than 15% return, pretty much guaranteed,' said one stockbroking telecoms analyst. 'But to be honest, this smacks of politicking by the smaller telcos to put some pressure on Telstra.'

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