Australia's number-two telco SingTel Optus is prepared to invest $50-100 million to develop a national broadband Internet network to provide much-needed competition to Telstra, if the regulatory environment is right, CEO Paul O'Sullivan says.
O'Sullivan, in an address to today's Optus QUT Portmann Innovation Series luncheon held in Brisbane, says the company is "poised" to build a broadband network servicing residential and business customers "if the conditions are right".
He estimates an investment of $50-100 million is required to install its own technology into Telstra exchanges to enable delivery of broadband Internet. It already has installed its own digital subscriber line access multiplexers (DSLAM) in 150 exchanges nationally, thereby enabling ADSL broadband to be delivered over copper phone lines.
This would enable SingTel Optus to break Telstra's stranglehold on the "local loop" - that is, the "last mile" from the exchange to houses and business premises, he says.
O'Sullivan points out that in markets where there is competing infrastructure - inter-capital and mobile communications - Telstra's marketshare has fallen to around 50% and 45% respectively.
"In the last mile there has been an improvement, but not as much. The reason has been the lack of competing infrastructure," he says.
"[Telstra's] pricing has been set to protect its profit. Telstra has 90% marketshare and we haven't seen a lot of movement on price. In fact, they have offset losses [of marketshare] in mobiles etcetera by increasing prices [on line rentals]."
In response to Telstra's actions - including the recent move to cut its retail broadband prices, while maintaining its wholesale prices, a move which attracted a 'competition notice' from the ACCC - O'Sullivan says "that is about to change".
"The only reaction we have really is to start building our own network. We are putting our own technology into Telstra exchanges, which allows us to step around Telstra's dominance of the local loop. [This dominance] is finally under threat," he says.
"However, Telstra is pretty smart when it comes to protecting this stuff and over the past 10 weeks we have seen them trying to block this."
For SingTel Optus to commit to a national rollout of its own broadband Internet network "we need some ground rules" to make the investment stack up economically, O'Sullivan says.
"We believe the key [to promoting competition in the broadband market] is ... how Telstra behaves, and how its behaviour is regulated," he says.
This requires some specific actions from the federal government and the ACCC, O'Sullivan argues.
These include forcing Telstra to reduce its wholesale prices to get competitors' margins back to a level where they can compete; and providing protection for those companies willing to invest in their own infrastructure (ie ensuring Telstra doesn't stall or block them).
"If [the federal government and the ACCC] can [provide this protection] Optus is ready to commit to bringing the same level of competition to broadband that it has to the mobile and corporate markets," he says.
"We are poised to build broadband into homes and small businesses if the conditions are right."
Additionally, O'Sullivan says SingTel Optus also is looking at wireless broadband as an "in fill" strategy in areas where exchanges cannot be enabled to deliver ADSL.
To read about several projects under way that will deliver wireless broadband Internet services in areas of Queensland where ADSL is not widely available, see the October edition of QBR magazine, mailed to subscribers early next month. Call 1800 649 578 or email subs@pubserv.com.au to subscribe and secure your copy - as well as the official 2004 Queensland 400 magazine and the 2003/04 and 2004/05 editions of the Book of Lists.