Telstra scraps massive Australian broadband plan

high-speed broadband network after reaching animpasse with regulators over how to charge rivals for access.

Telstra Corp. Ltd. decided Monday to enddiscussions with Australian regulators over a next generationfiber-to-the-node (FTTN) wireline network slated to coverAustralia’s five major cities initially, then expand to the rest ofthe nation.

The company had aimed to ensure it was not subsidizing networkaccess by rivals, but discussions broke down because regulatorsfailed to understand the actual costs involved in building thenetwork out to rural areas of the nation, Telstra said in astatement.

“We are not going to engage in a new investment costing A$4billion that is just going to hopefully bring more revenues in onthe IP side, but hasten the depletion of revenues that wouldotherwise be used to fund services to the bush,” said Phil Burgess,head of public policy and communications at Telstra, according to atranscript of an analyst meeting held after the decision.

Telstra won’t invest in an FTTN broadband network until itscosts are recognized and regulatory practices change, the companysaid.

In a statement, the Australian Competition and Consumer Commissionsaid it was “perplexed” by Telstra’s decision to unilaterally enddiscussions, and that it had agreed in principal that Telstrashould be entitled to recover its actual costs from the investment.The regulator also said it asked the company last week to open itsFTTN plan to public scrutiny, but it did not do so.

The decision to end discussions over the next generation networkcame just a month after Telstra Chief Executive Officer SolomonTrujillo threatened the move. At the time, he said Telstra wantedto guarantee its 1.6 million shareholders they would earn acompetitive return on their investment in the company.

The decision also comes just ahead of a planned government sharesale of the company. Telstra used to be Australia’s nationalcarrier, but has been undergoing a drawn out privatization process.It is supposed to sell more than 6 billion shares to investorslater this year in a public offering valued at around A$24billion.

Australia’s FTTN, which is a kind of high-speed, fiber-opticnetwork that goes to the neighborhood but not directly to the home,is expensive because of the vast distances between cities in thenation and its relatively small population. The initial plan to setup the system in the five biggest cities would ensure the networkcovers around half of Australia’s population.