In thinking about Telstra’s woes, an issue that always arises is the pricing of line rentals for the copper-pair into peoples’ homes. Telstra claim to not be recovering investment costs on these (despite the fact that investments took place decades ago) and that average pricing is needed to provide rural cross subsidies. Moreover, the copper-pair from the node represents the big bottleneck to competition.
So how about this? T3 becomes a ‘real privatisation.’ The government hands ownership of each household’s copper-pair to the household and they choose who can supply services over it. If they want to give access to someone other than Telstra it is their business. It is also their responsibility to maintain it (no problems there as Telstra’s own maintenance crews are likely an outsourced operation anyway). If the G9 want to build FTTN then they don’t have to negotiate access to these either (removing an important hurdle). And if there is a rural issue, the government can fix it through explicit rather than cross subsidies. Put simply, there would be no line rental issue because the users would own the lines.
This notion is similar to one of giving phone numbers to users that Stephen King, Graeme Woodbridge and I had many years ago (click here for the paper). [Both of my co-authors currently work for the ACCC so my views here do not necessarily reflect theirs]
Moreover, it is a real privatisation. It gives the public assets to the main users rather than those who can pay. Sounds like a vote winner to me.
It sounds like a nice idea. In theory. In practice Telstra would have to be compensated for the forfeiture of one of its most valuable assets, and I’m guessing the haggling over fair compensation would be fairly intense and will swallow a fair chunk of T3.
Another issue is that Telstra has quite a bit of reserve capacity when it comes to copper pairs, to allow for second phone lines and so on. Who gets ownership of those unused lines?
And finally, what happens if you’re renting? Presumably your landlord would own the copper, so there’d have to be some supporting legislation to force them to maintain the service at a “reasonable” price – overseen by the ACCC no doubt.
Ah that is the beauty of it, Telstra claim they lose money on the copper-pair. No compensation necessary. Also, second phone lines died with ADSL. Nonetheless, I am happy to leave those with Telstra.
If you are renting, the landlord gets it. Not sure how that would be different from other landlord issues.
How does that work with the telephone exchanges? Ultimately the copper pair connects back to the exchange.
A good question, I think it depends on the technological interface. Those could always go to local councils.
My knowledge of constitutional law is limited to “The Castle”, but I’m pretty sure “fair compensation” for an asset is based on market price or book value, not whether it makes an operating profit. Those copper pairs are worth billions.
I’m also not sure whether it’s possible to maintain an individual copper pair independently of the bundle it belongs to. Freeloading will be a problem.
Ownership of the remaining (unused) pairs is an issue, since they will need to be maintained in case new connections are needed. Despite your assertion about second lines, new connections will occasionally be required due to property subdivisions, home offices, and possibly even second ADSL lines to improve bandwidth and reliability.
Interesting proposition. The dynamics are similar to those proposed by Bill St. Arnaud (Director of CANARIE a not-for-profit corporation that facilitates the development and use of next-generation research networks and the applications and services that run on them). He has for some time now been saying that we (the consumers) should own the last mile. His idea is: let’s get FTTH and pay for it like a cooperative. This way the consumer would be extending their ownership into the bottleneck facility to the point of interconnect with the service provider of choice. See one of his recent presentations at: http://www.canarie.ca/canet4/library/recent/Nortel_Townhall_June_23_2006.ppt
This is where good theory and practical reality collide. The exchange copper loop requires maintenance which effects clusters of users, this introduces an entirely new series of potential neighbourhood disputes. What would be created would be a new bureaucracy as there would need to be management of the provisioning and maintenance of the loop (How does the work on a node be divided up, who pays for preventative maintenance such as gel for pits? Who would even schedule preventative maintenance?). A whole new way for neighbours to fight with each other once boundary fence issues have been resolved.
Another complexity is termination of the copper. Telstra have the exchange infrastructure, once the copper is in the hands of the consumer Telstra can then I assume refuse to allow competitor access to its exchanges, they would also then be in the position to refuse to provide wholesale services which a large proportion of the alternate service providers rely upon; or alternatively charge the consumer for copper termination and the provider for the wholesale costs of termination and backhaul. So no provider could actually compete without local infrastructure which would be only Telstra and a very small Optus-SingTel foot print.
[...] My post on privatising the copper-pair got a solid reaction with comments ranging from the ‘let’s try it’ to the ’surely it isn’t practical.’ Well, the nay sayers have walked nicely into my trap (I think we can do the same thing even easier). Actually, their chief objection to my first proposal should have been this: we already rent and use the copper-pair, what good would it do to have us own it? [...]
[...] To begin, a little background. As readers of this blog know, I have been worrying about competition in broadband for some time. Specifically, I am concerned that if it were valuable to invest in better broadband — say, optic fibre to the home — then the problem we face is that this decision is largely in the hands of one firm — Telstra. To solve this, I have suggested, (i) breaking up Telstra, (ii) separating the cable network from the rest, (iii) privatising the copper pair; or (iv) regulating access to the copper pair more stringently. None of these seem likely and at the moment we have a strange debate between the regulator and Telstra with Telstra refusing to make more investments until it receives protection from competition. This seemed frustrating to me as we appeared to lag behind the world in broadband investment. Moreover, there was a bunch of hypocracy in the debate as Telstra when it sought access seemed to dramatically change its tune. [...]
[...] years ago I proposed that Australia could have achieved this easily by instead of selling off Telstra, by just handing back the [...]
[...] Derek Slater and Tim Wu think that customers could build their own fibre connections to the net. Here is their paper. I haven’t read it yet but as I mentioned some months ago it sounds like an excellent idea. I have had a related idea here. [...]