Telstra Warns Price for Using NBN May Blow Out

TELSTRA has undermined central pillars of Labor's promises on the benefits of the National Broadband Network by warning that prices for superfast internet could be unnecessarily high under the NBN Co pricing strategy. 
 
The nation's biggest telecommunications provider is urging the competition watchdog to consider whether NBN Co should adopt an alternative pricing model to its controversial two-tariff pricing plan, under which internet service providers are charged a baseline connection fee and usage-based fees for the amount of data carried through the network. Telstra says a different model could be better for consumers.

Under the two-tariff pricing model, Telstra says, the usage charge that an internet service provider pays to NBN Co for each of its customers on the basic 12-megabit a second service could rise from $1 a month to $50 by 2025. It is expected usage charges, which form a part of a wholesale customer's monthly bill, will be passed on to retail customers.
Taking a hard line against several aspects of NBN Co's pricing strategy in a submission to the Australian Competition and Consumer Commission, Telstra also declares that, over the long term, the government's return would likely exceed the cost of its investment, that NBN Co would more than recover its costs and that wholesale prices would be "unnecessarily high".

Higher wholesale costs could result in fewer incentives for internet service providers to compete through investment, innovation and service development, Telstra says.

The warnings undermine some of Labor's main arguments for the $36 billion project. Communications Minister Stephen Conroy has insisted that the creation of the NBN as a wholesale broadband backbone would unleash new competition between retail service providers and bring on pricing pressures that would benefit consumers.
NBN Co insisted it was "confident that as a wholesale-only open access network, we're opening up competition in retail telecommunications in Australia".

Telstra's critique of NBN Co's "special-access undertaking" that outlines its price and non-price terms is all the more surprising because Telstra is set to reap $11bn under a deal with NBN Co and the government that will mean it becomes NBN Co's biggest customer, not its rival.

NBN Co has promised to freeze wholesale prices for the next five years, then increase them at only half the rate of inflation - making internet access cheaper in real terms.

Under NBN Co's plans, the maximum monthly usage charge would remain at $20 per megabit per second until mid-2017, rising to $24/Mbps by 2033.

Telstra argues that while these price increases may appear small, they will be much more acutely felt on a per-customer basis.

This is because NBN Co's business plan assumes that usage per customer will grow massively as consumers purchase higher-quality services such as internet-based television.

On that basis, the monthly usage cost a wholesale customer would pay for each "service in operation" could increase from $1 to $50 monthly by 2025. The government's corporate adviser, Greenhill Caliburn, has already warned that a consumer backlash against the usage-based pricing model is one of the key risks to NBN Co's revenue assumptions.

Internode founder Simon Hackett last night blasted Telstra as "the pot calling the kettle black", saying that it was imposing "massively more expensive" usage charges for rivals providing internet access over its copper telephone lines.

"It would seem disingenuous at best for Telstra to be arguing for NBN Co to modify their charging regime when Telstra itself are so flagrantly overcharging the industry today using the very same pricing mechanism," Mr Hackett said.

In the submission to the ACCC, Telstra bases its warning that prices could be unnecessarily high on NBN Co's claim that its weighted average costs of capital - a key influence on NBN Co's profitability and prices - should be about 8.6 per cent over the long term. This level is akin to what a private sector company would seek.

"Government has changed legislation and policy to reduce the risk faced by NBN Co, presumably including systematic or non-diversifiable risks - the same risks that continue to be faced by private firms such as Telstra," Telstra states.

It concludes that a private sector-style rate of return would be more appropriate when NBN Co is privatised.
NBN Co spokesman Andrew Sholl said last night its special-access undertaking "strikes the appropriate balance between the interests of NBN Co and its customers".

He said an independent consultant's report had backed NBN Co's approach and found that it was reasonable to set a figure that included a margin over the the long-term government bond rate.
Late yesterday, opposition communications spokesman Malcolm Turnbull said that NBN Co's undertaking "lacks the necessary concrete commitments on price or standards of service".

He called on Senator Conroy "to immediately ensure that NBN Co does not . . . avoid the scrutiny of the ACCC".

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Australia's Internet Filter Switches On In July

Four Australian internet providers, including the country's two largest, will begin voluntarily censoring the internet next month by blocking access to more than 500 websites.

Australia's plan to filter the naughtiness out of the internet has been kicking around for years but it never seemed to go anywhere because when you get right down to it, effectively censoring the whole internet is a pretty daunting technical challenge. That doesn't even take into account the fact that a significant number of people who actually use the internet are pretty vehemently opposed to the idea. But beginning in July, internet access for many Aussies will in fact be censored, not by the government but by the voluntary actions of four of the country's ISPs.

Telstra and Optus, the two largest internet providers in Australia, along with two other small outfits, confirmed that they will begin to block access to "child abuse websites" provided by the Australian Communications and Media Authority and other unnamed "international organizations" beginning next month. The filter is being put into place despite the fact that the government dropped funding for the plan in May because of "limited interest" from the industry.

"The ACMA will compile and manage a list of URLs of child abuse content that will include the appropriate subsection of the ACMA blacklist as well as child abuse URLs that are provided by reputable international organizations [to be blocked]," an ACMA rep said.

But while Donna Ashelford of the System Administrators Guild of Australia said that concerns about reduced access speeds caused by the filter are probably unwarranted, she also pointed out that the scheme won't have any meaningful impact on the distribution of child porn either.

"The effectiveness will be trivial because you're just blocking a single website address [and] a person can get around it by changing that address with one character," she said. "Child abuse material is more likely to be exchanged on peer-to-peer networks and private networks anyway and is a matter for law enforcement."

Another worry, according to the Electronic Frontier Foundation, is that there is no transparency or accountability in the creation and maintenance of the blacklist, which greatly increases the chance of legal websites being inappropriately blocked. It's not known which organizations are contributing to the list of forbidden beyond the ACMA , but the ACMA's own blacklist from 2009, revealed by Wikileaks, included the website of a Queensland-based dentist and other sites unrelated to illegal pornography. There also appears to be no appeals process for any sites mistakenly caught up in the filter.

But possibly the greatest concern is simply that it sets a precedent. Once the filters are in place and Australians have adjusted to the idea, is it much of a stretch to see them put to use blocking content the ACMA decides is "indecent" or controversial? "We've been waiting to hear details on this from the Government," said EFF board member Colin Jacobs. "It they turn out to be zealous with the type of material that is on the list then we'd want to have a discussion about ways to introduce more transparency."

.Australia Signs Deals to Expand Internet Service

Australia’s $38 billion plan to deliver high-speed Internet to more than 90 percent of its households cleared one of its last major hurdles Thursday when the government signed $12.5 billion worth of network deals with Telstra and SingTel.

The National Broadband Network, the biggest Australian infrastructure project in decades, will use Telstra’s network in a bid to knit together a country the size of Western Europe with high-speed broadband, with wireless or satellite services covering any gaps.

The National Broadband Network, also known as NBN, which is owned by the state, will pay Telstra 11 billion Australian dollars, or $11.6 billion, to hand over much of its network.

Optus, which is owned by SingTel, will receive 800 million dollars to move customers from its fiber-optic network onto the national broadband network.

The deals are a victory for a deeply unpopular Labor government, which has made the network a major plank in its program, as the vast distances and rugged terrain in Australia keep Internet speeds slow and costs high.

Some approvals still remain before the two deals can be settled, including a vote by Telstra shareholders Oct. 18 and clearance from the competition regulator for the company’s plan to split.

The deals also face a challenge from the conservative opposition, which has argued against the National Broadband Network and promised to review the project if it comes to power.

“What we want to do is get the broadband delivered, but at a lower cost, and that would involve at least in part redesigning the network,” Malcolm Turnbull, a telecommunications spokesman for the opposition, told Australian radio.

“These contracts will make that more difficult, but I don’t believe they’ll make it impossible. But there’s no question of anything being destroyed, ripped up or terminated, or anything like that,” Mr. Turnbull said.

The network will require total capital expenditure of 35.9 billion dollars and will need 40.9 billion dollars in debt and equity. The government plans to put up 27.5 billion dollars in financing, while the project will have to borrow 13.4 billion dollars from the debt markets.

The Optus chief executive, Paul O’Sullivan, said that the company looked forward to using the National Broadband Network to turbo-charge competition.

“This deal supports the NBN to create a level playing field for all telcos. Australian consumers will be the winners,” Mr. O’Sullivan said in a statement.

As for Telstra, the deal removes an uncertainty that has weighed on its shares, but a short-term rally is unlikely because of challenges in executing the deal and then adapting to the new marketplace, said Angus Gluskie of White Funds Management, an Australian wholesale investment manager.

“People will view it as a positive that they’ve got across this final step,” Mr. Gluskie said. “But it’s still an incredibly challenging environment for a telecommunications company to be in.”

Australia Offers Faster Network - Internet Australia News

A top Australian telecommunications official waded into the heated political debate over the nation's digital future Thursday, saying a government plan to invest tens of billions of dollars into a new national fiber network would offer homes and business vastly faster connection speeds than originally promised.

NBN Chief Executive Mike Quigley. right, at an event in July.
.The debate concerns plans by Australia's ruling Labor party to spend as much as 43 billion Australian dollars ($38.6 billion) to make Australia's data and mobile-phone connections among the world's fastest, transforming Australia from a relative technology backwater to high-tech modern economy. The plan has been targeted by the opposition Liberal-National coalition, which has said it would replace the plan with a less costly alternative that gives the private sector a greater role if it takes power in an Aug. 21 election.

Mike Quigley, chief executive of state-owned NBN Co., which will oversee the network buildout, said the network will now be able to offer speeds of one gigabit per second. That's 10 times faster than the previously announced top speed of 100 megabits per second, and well above the baseline 12 Mbps pledged by the opposition.

Mr. Quigley told reporters Thursday that NBN has always maintained that the network had the potential to offer faster speeds. He disputed suggestions that NBN's announcement was politically motivated.

He also told a business lunch that offering such speeds will not have any impact on the cost of building the network, which he said "certainly won't cost over A$43 billion."

The Liberal-National argues the plan amounts to a nationalization of Australia's communications infrastructure, which was privatized with the initial public offering of Telstra Corp., the country's biggest telecommunications firm, under the previous conservative administration of Prime Minister John Howard.

"It's very easy... in the midst of a very difficult election campaign for the government to pluck figures out of the air and say, look isn't this going to be fantastic, but too many people have been too disappointed for too long by this government," Mr. Abbott told reporters Thursday. "I would counsel people against taking these kinds of airy promises, airy assurances at face value."

Separately, Telstra said Thursday that its net profit for the fiscal year fell 4.7% from the year before and warned that its earnings would fall further in the current financial year, as it battles declining revenues at its fixed line business and tough competition in its mobile operations in Australia and Asia. Macquarie analysts said the guidance suggests downgrades in the order of 15% to 20% for consensus market forecasts. Its shares fell 9.5% to A$2.94.

"Today, the greatest asset that Telstra has is our customer base and we have been losing too many customers. I cannot allow it to continue," Telstra Chief Executive David Thodey told analysts. Melbourne-based Telstra said net profit for the year to June 30 fell to A$3.88 billion from A$4.07 billion a year ago.

The broadband battle has become one of the defining features of the five-week election campaign, as the coalition attempts to pitch itself as more fiscally conservative than Labor. The election result is expected to go down to the wire with Labor only narrowly ahead of the coalition according to the latest polls.

The coalition is offering a scaled-back network that relies on a mix of fiber, copper and wireless technologies. It will provide A$2.75 billion to help fund construction of a national fiber-optic backbone, with another A$750 million expected from industry.

But, unlike the governing Labor party's plan, it will stop short of reaching individual homes--which Communications Minister Stephen Conroy describes as the "single largest bottleneck" to higher speeds.

The opposition plan also includes spending A$1 billion to upgrade much slower existing copper networks and A$2 billion on wireless networks.

Mr. Quigley said Thursday wireless technologies are "physically unable" to match fiber, which will be capable of "virtually unlimited" download capacity. In urban areas, wireless also would require the construction of significantly more wireless towers to reach even the baseline speed of 12Mbps, he said.

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The internet filter is dead! Long live the filter!

In a few short sentences, Mr Hockey killed the proposal. telling the Triple J current affairs program Hack that the opposition would oppose the policy, that it was bad policy, and that it would instead revert to the Howard Government policy of giving away filter software to end-users for free.

And that we would hear more about the policy soon.

As shadow communications spokesman, Tony Smith might have preferred to unveil such a strategically important election policy himself, and been given the chance to put the policy into some kind of context.

And God help Mr Smith if the policy was not already generally known among the Coalition front bench and back bench. Because if the shadow Treasurer let slip the plan to oppose the filter before colleagues like Guy Barnett or Cory Bernardi – among others – had been fully briefed, there would have been hell to pay (and it would be Tony Smith paying it.)

Because regardless of what kind of instant hero Tony Smith might have become today among opponents of the filter – it was an idea that held considerable support on both sides of politics.

And among Liberals and Nationals, there were strong voices on both sides of the debate – many in favour of siding with the Government on mandatory filtering, and many opposed.

What Tony Smith is going to have to explain to colleagues is why he is rejecting a complaints-based policy that used a URL blacklist that Labor effectively shanghai’d from the Howard Government.

The difference is that whereas the previous Government's blacklist applied only to domestically-hosted content, the proposed mandatory ISP-level filter was to have applied to offshore content as well.

If those content standards are good enough to be applied locally, why should content imported from overseas be treated any differently is one question he might be called on to discuss by colleagues.

Mr Smith is expected to provide more detail on the policy in the next several days, and the filter issue is almost certain to get an airing at the Communications debate next Tuesday at the National Press Club, in which Stephen Conroy, Tony Smith and Greens spokesman Scott Ludlam will share a stage.

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The End of Internet as we Know it? Google-Verizon Deal Internet Australia News

For years, Internet advocates have warned of the doomsday scenario that will play out on Monday: Google and Verizon will announce a deal that the New York Times reports "could allow Verizon to speed some online content to Internet users more quickly if the content's creators are willing to pay for the privilege."

The deal marks the beginning of the end of the Internet as you know it. Since its beginnings, the Net was a level playing field that allowed all content to move at the same speed, whether it's ABC News or your uncle's video blog. That's all about to change, and the result couldn't be more bleak for the future of the Internet, for television, radio and independent voices.

How did this happen? We have a Federal Communications Commission that has been denied authority by the courts to police the activities of Internet service providers like Verizon and Comcast. All because of a bad decision by the Bush-era FCC. We have a pro-industry FCC Chairman who is terrified of making a decision, conducting back room dealmaking, and willing to sit on his hands rather than reassert his agency's authority. We have a president who promised to "take a back seat to no one on Net Neutrality" yet remains silent. We have a congress that is nearly completely captured by industry. Yes, more than half of the US congress will do pretty much whatever the phone and cable companies ask them to. Add the clout of Google, and you have near-complete control of Capitol Hill.

A non-neutral Internet means that companies like AT&T, Comcast, Verizon and Google can turn the Net into cable TV and pick winners and losers online. A problem just for Internet geeks? You wish. All video, radio, phone and other services will soon be delivered through an Internet connection. Ending Net Neutrality would end the revolutionary potential that any website can act as a television or radio network. It would spell the end of our opportunity to wrest access and distribution of media content away from the handful of massive media corporations that currently control the television and radio dial.

So the Google-Verizon deal can be summed up as this: "FCC, you have no authority over us and you're not going to do anything about it. Congress, we own you, and we'll get whatever legislation we want. And American people, you can't stop us.

This Google-Verizon deal, this industry-captured FCC, and the way this is playing out is akin to the largest banks and the largest hedge funds writing the regulatory policy on derivative trading without any oversight or input from the public, and having it rubber stamped by the SEC. It's like BP and Halliburton ironing out the rules for offshore oil drilling with no public input, and having MMS sign off.

Fortunately, while they are outnumbered, there are several powerful Net Neutrality champions on Capitol Hill, like Nancy Pelosi, Harry Reid, Henry Waxman, Jay Rockefeller, Ed Markey, Jay Inslee and many others. But they will not be able to turn this tide unless they have massive, visible support from every American who uses the Internet --- whether it's for news, email, shopping, Facebook, Twitter --- whatever. So stop what you're doing and tell them you're not letting the Internet go the way of Big Oil and Big Banks. The future of the Internet, and your access to information depends on it.

Author's note: Notice how a company can change their tune in the name of profitmaking. From Google in 2006: "Today the Internet is an information highway where anybody - no matter how large or small, how traditional or unconventional - has equal access. But the phone and cable monopolies, who control almost all Internet access, want the power to choose who gets access to high-speed lanes and whose content gets seen first and fastest. They want to build a two-tiered system and block the on-ramps for those who can't pay."

New fibre cable to link Australia and US - Internet Australia

A fibre optic cable linking Australia, New Zealand and the US is to be built for an estimated $US400 million ($A443.58 million).

The high network efficiency, 13,600km Pacific Fibre cable will be built jointly by Pacific Fibre Ltd and Asian telecommunication services provider Pacnet, both companies said in a statement on Wednesday.

The cable will land in Sydney, Auckland and Los Angeles and will be ready for service in 2013.

The companies will co-own the cable and share responsibility for the cable supply contract,operations and maintenance costs.

They said they would begin selecting a vendor to build the cable shortly.

Pacnet chief executive Bill Barney said the investment was an important part of the company's strategy to expand its subsea cable infrastructure into Australasia.

He said the cable would support Australia's proposed national broadband network (NBN).

"As Australia and New Zealand look towards deploying national broadband networks that will raise broadband penetration and access speeds, this new cable that we are building with Pacific Fibre will deliver the enhanced international connectivity that is essential to support these broadband initiatives," he said.

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