The marriage of politics and commerce is a destructive one. This is a lesson the Labor Party should be learning as it tries to work with the telecommunications industry.
Despite Communications Minister Stephen Conroy’s promise that his broadband plan would cut through the barriers holding back a national fibre-optic network, the grand soap opera that is telecommunications policy doesn’t look as if will be ending any time soon. Bidders for the Government’s tender are required to lodge a bond by Friday and provide their full proposals by late July. But Telstra’s rivals have been claiming the carrier is not providing enough information about existing infrastructure. And the G9 consortium is pushing hard for a five-month delay in the tender process so it can get its proposal together.
There has been aggressive and highly public criticism of the tender process, the cost of the bond required to tender and the regulations that will govern this still hypothetical network.
Telstra, AAPT and Optus have even been holding talks to negotiate a broadband settlement, as if they were great world powers preparing a ceasefire agreement. After a decade of government subsidies, regulatory gamesmanship and legislative inaction, the Australian telecommunications industry has never been so highly politicised. But while the fibre-optic network debate has dominated headlines for more than a year, the real action in broadband is elsewhere.
Compared with the lumbering environment of rent seeking created by the regulations that apply to our fixed-line network, Australia’s mobile networks are a paradise of laissez-faire entrepreneurship. In the mobile sphere, there is the rapid innovation and the large-scale investment federal governments have long desired.
Optus modestly announced earlier this month that it was expanding its 3G mobile network to challenge Telstra’s Next G mobile broadband network.
Both Telstra and Optus plan to upgrade the speed of these mobile networks to 42 megabits per second – significantly faster than the fastest wired broadband available at the moment – in the next two years. Both these networks will dramatically exceed the Labor Party’s broadband promise, which it says will provide a 12Mbps internet connection. And it plans to use $4.7 billion of taxpayers’ money to do so.
This pattern of innovation and investment in mobile networks while highly regulated fixed-line networks are bogged down in politics and regulation is repeated throughout the world. In many developing nations, entrepreneurs are bypassing state-owned and corrupt monopoly carriers to build mobile networks instead.
The consequence, widespread mobile ownership, is fundamentally changing these emergent economies for the better. Small producers can easily communicate with their suppliers and customers thanks to the ubiquitous communications networks that the state-run carriers were too incompetent to provide.
The situation in developing nations and Australia is disconcertingly similar. Recall that part of the reason Telstra originally decided to build its Next G network was out of frustration with poor regulations affecting fixed-line services. But just because Australia’s mobile networks are relatively unregulated at the moment, this doesn’t mean the regulatory wolf isn’t howling at the door. The political games played earlier this year over the shutdown of Telstra’s CDMA mobile network illustrates how comfortably the Government can threaten this energetic commercial environment.
Back in the late 1990s, Telstra received $400 million from Canberra to help extend its CDMA network into otherwise uneconomical rural and regional areas. For everyone involved at the time, this seemed like a win-win deal. The government was able to claim it was providing something akin to the universal service that Telstra is compelled to provide for the home phone network. And Telstra received hundreds of millions of dollars to expand its market share. But, at the time, Telstra owned the GSM mobile service as well as CDMA.
When Telstra announced in 2007 it was going to replace both with the snazzy new Next G service, the embattled Coalition government altered the CDMA licence to require Telstra to keep it open until the new network provided equivalent coverage. The result is that the Next G network, and likely any future mobile network that Telstra would choose to replace it, is subject to an unspoken but very real universal service mandate.
Regrettably, having been vested with the power to set the terms and conditions of the spectrum licences that all mobile networks require to operate, politicians cannot resist manipulating Australia’s telecommunications for their own political purposes.
But hopefully the federal Government can draw the right lessons from the success of Australia’s mobile networks. Where politics is absent, there is innovation and investment.
If the federal Government wants Australia to have world-class broadband and mobile networks, it needs to get the politics out of the telecommunications industry.