Tuesday, August 29, 2006

Telstra Solutions

Telstra is the name we have for our national telephone provider. It used to be called Telecom and probably had other names prior to that. In Australia we have a unique situation when it comes to things like telephone lines. We are so large and sparsely populated that the government has to subsidise the provision of essential services to the bush, [outback]. The city folk who make up the biggest section of our population, have by and large not worried about helping three cousins in the bush, we all understand the need for telephones, especially in remote areas.

A few years back, the government sold off just under half of Telstra, now it wants to sell the rest. This time round despite assurances re the governments safety net on prices and obligations imposed on the Telco the people are not so happy to see it remaining half get sold. So the government has had to hive off about a third of the remaining stock into a ‘super fund’ as a sort of creche for unwanted stock.

In amongst all this we have a problem, and that is we need fast internet connections to compete and be compatible with the rest of the developed world. Instead we have an old copper wire phone system that would need a few billion dollars to up grade it to fibre optic style cable. I’ve come up with a relatively simple way of achieving this. But for some unknown reason the government nor the commentators have mentioned it.

The solution is to split Telstra into two companies. One would provide retail phone/internet/mobile, etc retail sales. Just like the companies it is already competing with, but also providing cabling to. The second Telstra company would be a cable company providing [yes you guessed it] cables.

I think both could be profitable. The government could use the sale of the phone company side to help finance the cable company. The super fund, that was set up to provide retirement funds for public servants could also chip in with long term bond type loans to get the whole thing happening.

In conclusion we would no longer have the conflict we have had in the past, where the same company has had to compete and provide in the same market and also have quite strict regulations over pricing and supply. Telstra phone could truly compete with the other phone companies, and Telstra cable could make a handsome profit in providing the infrastructure. I would personally want the cable company to keep that side of the business in public ownership.