Telstra may go to war over NBN exclusion - Ovum

Robert Clark
16 Dec 2008

Telstra is likely to fight back against the Australian government's decision to disqualify the operator from the National Broadband Network (NBN) tender process, which could lead to a 'bruising battle' with the government.

So says Ovum analyst David Kennedy, who believes Telstra has the ability to execute a range of actions which could stymie both the government and the eventual winner of the tender.

Through talks with Telstra, Kennedy has determined that the operator has yet to decide whether to challenge the decision legally - but has not ruled out that option.

But, Kennedy believes, the operator has a number of options beyond a legal challenge. '[Telstra] could refuse to buy wholesale capacity from the new operator, and use its HFC network and HSPA mobile broadband network instead,' he says.

The operator could also expand and upgrade its HFC network, or rip out the old copper in the HFC footprint, eliminating the possibility of FTTN competition, he adds. Alternatively, it could focus on upgrading its HSPA network.

It could also challenge the requirement to provide sub-loop unbundling for the FTTN operator, as well as any restrictions on expanding its network.

Telstra is likely to take such aggressive actions because 'Telstra would be fighting for its life, or at least the life it has always known,' Kennedy said. But the outcome would not be pretty.

'Telstra, the government and any alternative operator would emerge battered and bleeding,' he said. 'Let's hope it doesn't come to that.'

Australia's communications minister, senator Stephen Conroy, stood by the decision yesterday, stating that '[t]he Government's NBN process has always been bigger than Telstra.'

Conroy said there was nothing stopping Telstra from submitting a complete, compliant bid, and argued that the operator's refusal to do so was an attempt to receive special treatment.

'The Rudd Government stands ready to take the tough decisions necessary to ensure that the telecommunications sector delivers what the nation needs for its long term economic prosperity,' he added.

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