While Helen Coonan and DCITA might be able to confidently assert that the legalities and processes behind the $958m Broadband Connect Opel funding were all above aboard, it certainly all comes across as rather opaque and cloudy to the interested outsider. Broadband Connect was conceived in the pork barrel—there was never a serious attempt to find a market solution to the regional broadband deficit—and as a result, the resulting output has the consistency of, well, lard!

The original Broadband Connect mission was quite vague—to provide broadband to underserved areas—and it was an Optus submission to DCITA in early 2006 that probably best expressed an actually workable if not necessarily superior program objective: that it should specifically fund competitive infrastructure and create a duopoly of sorts in regional Australia.

Given that this is what the Opel proposal specifically entails, its fair to say that Optus was on the money as long as 16 months ago.

Indeed, Opel’s plan is less ambitious and radical than some might have us believe.

In terms of service delivery, much of it will simply entail the delivery of a wholesale ADSL2+ service over existing Telstra infrastructure—with a percentage of opex going back to Telstra in the form of $27 Band 3 ULL charges. This is nothing more than public subsidy for the resale of an existing unbundled network, albeit with the subsidy going to the reseller and not the network loop owner! (Surely the ACCC will have to abandon the pretence that a $2.50 line sharing charge is sustainable in regional areas when Telstra’s line rental charges would be lucky to recover three quarters of costs there, at best)

Customers outside the optimal ADSL2+ zone will be offered fixed 802.16d WiMax instead, again  hardly radical given the preponderance of regional wireless in Australia. But this is a technology that Telstra claims will not work. Telstra’s claims here are overblown, but there is a central truth in its opposition to the contract award.

Why hand $958m of public money to a proposal that is instantly crimped—and made less economic—by the use of sub-optimal spectrum? ACMA, and its antecedent ACA, have been talking about opening up spectrum for this very purpose  for years now—can there be a more compelling reason to bite the bullet on spectrum reform than extracting maximum value from $958m of public funding? That said, WiMax at 5.8GHz will work.

Claims that the use of unlicensed spectrum will create significant interference issues are simply incorrect and seem based on a misunderstanding of the sheer scale of spectrum available in that band. Indeed, referring to it as 5.8 is a misnomer, it should be more accurately described as 5.4 to 5.8 as the band plan provides 375 MHz of spectrum. With WiMax operating via a 10MHz carrier, that’s some giant multi-lane highway. A wireless broadband network could typically operate in less than one-tenth of the spectrum available in the 5.8 band.

FEW INTERFERENCE ISSUES: Jason Ashton of Big Air has been using 5.8GHz spectrum in the considerably more crowded Sydney metro area for nearly five years now and he tells me he could count the number of interference incidents in that time “on one hand.” WiMax has considerably better attributes than the souped up WiFi and proprietary systems currently in use—about twice the spectral efficiency and a media access controller policy that allocates a slot to each user at the session outset without the need for them to continually re-compete for spectrum resource.

There’s also a sweet irony in Telstra’s characterisation of fixed WiMax as a soon-to-be-orphaned technology. Funnily enough, one of the major global drivers behind fixed WiMax is the type of regulatory regime that Telstra would like to see implemented in Australia. Regulators in markets such as Saudi Arabia and Malaysia have observed the messiness and difficulties of local loop unbundling policies and have instead pursued the approach of multi-modal competition—specifically pushing WiMax as an enabler of broadband competition. Indeed, consultancy Maravedis estimates that 36% of all wireless broadband deployments in the world use 802.16d.

That said, Telstra still has legitimate questions to ask of Helen Coonan when they enter court tomorrow. It seems nonsensical to tip $958m into the creation of an artificial duopoly without an accompanying refit of spectrum policy, the under-funded universal service regime and the current dog’s breakfast of regulated access prices. The regulatory regime may well play catch up on some of these outstanding issues but one is hardly filled with confidence that it will get the settings right. The $958m cuts right through a great number of the assumptions that have driven inquiry after inquiry over the past ten years. But that’s what the cut through of electoral imperatives does to policy.

POLITICS: Indeed if there is a lesson to be learned here, it is that telecommunications is inherently political but that too many of its major players simply don’t get the politics. After all, just two of Australia’s 167 carriers—Optus and Macquarie—make donations to political parties (they both donate to both sides of politics). This is absolutely astonishing for a bunch of companies that depend so much on political and regulatory dispensation for their very existence, and especially when one considers the sums devoted to sports sponsorships of dubious marketing and brand merit.

I’m not from the school of thought that sees corporate donations to political parties as sordid—indeed it’s an essential aspect to sustaining the multi-party democracy we take for granted at a time when voluntary participation and activism from lay party members is ebbing away in the face of the demands of modern life.

It is no surprise that Optus might bag a contract like Broadband Connect because it has consistently shown it can read the political wind better than other carriers. It is the only carrier—alongside Macquarie—to participate meaningfully in the political process, not just through donations but through affiliate activities such as sponsorship of the Australian Local Government Association. Politics is about access, and access gives you the information you need to second guess the political process. (I don’t count entities like the Competitive Carriers’ Coalition or T4 as meaningful vehicles of political engagement—the CCC has less resources than a typical students union, T4 is little more than an eccentric website).

Consumer and competition law of the type that sustains the business cases of many of those 167 carriers is the direct result of multi-party democracy, the only system that reliably empowers consumers with a political voice. I’m sympathetic to those losing bidders who complain that they never even got a phone call as Opel was invited back in for DCITA pow wows, but in the end it was their failure to engage in the process and understand the presentational and political requirements of the paymaster that ensured their bids wouldn’t pass muster.

Anyone who has spent more than ten minutes with a Coonan staffer will learn that she is 100% driven by how her actions play with consumers. Personally I feel that such an approach sells short the historic mission of her particular government –which is partly to create a nation of self-reliant shareholders as much as regulation-sheltered consumers. But whatever the case, Coonan is concerned with the political perceptions of consumers. It might make for messy policy and a bad look to those in the know, but it’s simply a fact that Opel understood and others didn’t.  

- Grahame Lynch

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