Terria bites back at Telstra’s monopolist accusations

The managing director of the Terria consortium, Michael Simmons, hit back at Telstra’s attack on comments he made yesterday regarding Terria’s desire for the government to preclude an alternative National Broadband Network (NBN), labeling it a case of the pot calling the kettle black.

Simmons told The Australian that Terria’s proposition to the government is that no party should be allowed to expand the network and operate in competition to the NBN.

Telstra’s new managing director for public policy and communications, David Quilty, was quick to respond with a press release accusing Terria of wanting to take Australia back to the last century and re-monopolise the nation’s telecommunications industry.

“While Terria crows about fairness and encouraging competition it is really the monopolist hiding in the shadows,” Quilty said in the statement, adding that Telstra was strongly committed to open access.

“I think it’s the pot calling the kettle black isn’t it?” Simmons told Computerworld in response to Quilty’s statement, pointing to the monopoly Telstra has held over Australia’s wholesale telecommunications infrastructure since privatisation.

Simmons accused the incumbent of twisting his words and seeking a monopoly position themselves through the NBN - illustrated by the regulatory wish-list it submitted to the government in which it rejected calls for separation and regulation of the NBN owner/operator - and its aggressive protection of fixed line revenues.

“The point that has been lost or missed here is that we’re saying for the network to achieve 98 percent coverage of Australia with uniform pricing, as the government requires, and with open access, means it must be by definition a monopoly - meaning the only network,” Simmons said.

“But it needs to be open access and therefore structurally separated, meaning all access seekers can access that network on equivalent terms, including Telstra. That way you achieve the national outcome; you achieve competition and you also ensure that you don’t end up with monopoly prices because you’ve got ongoing regulation... It doesn’t mean normal commercial practices don’t apply to access.”

Telstra accused Terria of “outrageous” hypocrisy for wanting to remove infrastructure competition, stating that “providing one company with a guaranteed monopoly certainly has not been introduced anywhere in the world and if it happened here, Australia would be turned into the pariah of global telecommunications”.

Simmons agreed with assertions by both Optus and the Competitive Carriers Coalition that Australia could already be considered the pariah of OECD telecommunications, because of Telstra’s monopoly over wholesale access that has driven prices up and hindered competition.

Telstra claimed Australian businesses and consumers “would be the big losers under a Terria-built NBN”. However, the CCC’s David Forman pointed out recently that currently Australian SMEs pay 40 percent above the OECD average, or the third worst in the world, for telecommunications services, while SOHOs pay 35 percent above the OECD average.

Page Break

According to Optus, poor market structure and weak regulation by the ACCC has resulted in Australians being slugged the highest broadband prices in the OECD for services significantly behind international benchmarks in terms of speed, cost and transmission technologies.

“We’ve got monopoly assets or infrastructure in Australia today, and the reason we don’t have the broadband coverage that the rest of the world has is because we’re not allowed or able to access those monopoly assets on equivalent terms,” Simmons said.

“If you look at Telstra’s recent financial results you can see in the charts they publish that they are making exorbitant profits on traditional fixed line services. They publish their own charts saying ‘look we’re making more than the rest of the world and PSTN is actually increasing here, not decreasing’, while the rest of the world is going in the opposite direction.”

A recent report by the Centre for International Economics predicted that Australian consumers would pay 15 percent more for broadband services if Telstra wins the contract to build and operate the NBN.

“Sol Trujillo did a presentation at a Merrill Lynch conference in New York [Tuesday] where he was questioned and had to defend why Telstra was making such high EBITDA margins. The rest of the world is saying ‘how come you are making such high EBITDA margins? Is that a future problem for Telstra from an investor’s perspective?’ Because it can’t go on forever, eventually competition has got to emerge because no one else in the world is making those margins.”

In response to Telstra’s accusations of Terria’s anti-competitive intentions, Simmons insists Terria’s bid is “100 percent” committed to open access competition.

He questioned Telstra’s commitment to competition as it is seeking a reduced role in regulating NBN access for the ACCC – which even by its own admission has been inadequate in maintaining effective telecommunications competition until now - and the ability to experiment and set prices based on value rather than cost.

“We have a real, viable and substantial bid, and the bottom line is it is competitive…Our position is independence of the network owner from access seekers, that way you get multiple access seekers competing and you have regulation of the ACCC to ensure the pricing for that monopoly asset doesn’t reflect its monopoly position. Our whole argument is about competition," Simmons said.

“There is something irrational and illogical about Quilty’s comments. I think it’s an indication that they feel threatened by our bid.”