Saturday, August 12, 2006

Telstra withers under the Sol

In recent weeks Telstra, and its Chief Executive, have railed against the ACCC and the Federal Government.

It is unhappy about an expected order from the ACCC to lower the prices it charges other telcos for access to its copper network. It is also unhappy about regulation of the price it wants to charge for access to its proposed FTTN (fibre-to-the-node) network.

What is FTTN? It involves fibre-optic cable being connected to a router (node) and then using existing copper wires to connect to nearby homes at very high speed. Maximum speed is about 25 Megabits/s, over short distances.

FTTN is cheaper than rolling out fibre to the home (FTTH), but media reports suggest Telstra would invest A$3 billion.

Telstra is trying to play a carrot-and-stick game with the ACCC and the Federal Government. In this game, we, the Australian people, suffer. Sol Trujillo might have been used to getting his own way at US West (a telco), but Australia has a different approach to regulation and government. For all the pressure he has exerted, he has produced the following:

  • Falling share price
  • Falling company value (down A$16 billion)
  • Falling dividend (12% less)
  • A fat A$2.5 million bonus, on top of his salary, sign-on fee and “moving” fees, giving a total of A$8.6 million.

If Telstra Chief Executive Sol Trujillo and fellow American Phil Burgess (head of Telstra’s Public Policy & Communication division) cannot work within the legal & ethical and regulatory frameworks Australia has, they should resign. If they believe that FTTN ought to be a national infrastructure project of the Federal Government, they should say so.

Attempts to bully the ACCC and the Federal Government by Telstra should not be tolerated.

The Analyst