Broadband brinkmanship

A few media items today on the game the Government is playing against Telstra on broadband and telecommunications. In The Australian, David Uren quotes me:

Professor Gans says the government was engaged in brinkmanship with its $43bn figure.

“It did not want to present an image that it was only prepared to act if it proved cost-effective,” he says. “It was saying it was willing to spend a ridiculous amount of money to see this through.

“It was like Hernando Cortez burning his ships when he attacked the Aztecs. He didn’t do a cost-benefit analysis on the ships — it was a statement that there was no escape.

“When Telstra bought into Foxtel, it didn’t do a cost-benefit analysis. It knew that if it didn’t act, someone else would and create a competitor.”

He suspected that, as Senator Conroy suggested in his media conference this week, the actual cost is likely to be much lower.

Just a bit of clarification before others go crazy. The quotes are accurate but as with these things nuances are left out. First, I said that I understood why you might not want to do a cost-benefit analysis playing this game. But, personally, I would prefer they get done. Second, with regard to Telstra and Foxtel, I saw that investment as largely a defensive move with a unquantifiable strategic benefit. Various Telstra execs a decade ago said that and, indeed, one who talked in an MBA class of mine discussed the difficulties of putting numbers on such strategic effects. So the quote in the paper is too strong relative to what I was getting at.

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