Sunday, April 23, 2006

Australian Last Mile Broadband as a Utility

Debate has been raging (as much as debates rage in Australia) about who is going to pay for the next generation of broadband network and how they are going to pay for it.  Telstra (the incumbent) has given the ultimatum that it will not build out a FTTN network without regulatory relief (translated: we want to charge monopolistic prices to competitors to access the network).  Their reasoning is the requirement to achieving a realistic return on investment.

Last week Telstra's main competitors tossed a curve ball by offering to jointly fund the build out of a FTTN network for Australia in exchange for access.  Which of course nails Telstra's ROI argument.

What I find most interesting in this debate (many do expect that the offer as proposed will get off the ground) is the airing of different methods to developing out next generation broadband networks.  The common element is the recognition that the base network is a utility.  The proposal for joint funding recognises this.

While it is debateable that joint funding will work (it may) it opens up the debate to other methods of funding.   One that needs consideration is the to place the last mile network (exchange to doorstep) into a tradeable asset trust.  The trust would own the network and service providers would purchase access from the trust.  The advantage of the trust is that it separates network provision from the service provision (a utility) and provides a level playing field for service providers.  The network asset trust would also provide a long term investment vehicle for pension and super funds.

Last mile access is a utility and the joint funding proposal is a clear indication of this fact.  Last mile access as a utility casts the net neutrality debate a completely different light and negates many of the arguments put forward by the US bells.      

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