The other day, I was chatting with MIT’s Jerry Hausman (who is a fairly regular visitor to Australia). He is a keen observer of our telco and NBN developments as a disinterested US observer (that is, he isn’t consulting for anyone here in that sector). He suggested that he and I ought to raise a few billion dollars and buy Telstra’s cable network (although not necessarily Foxtel). His reasoning was this: the NBN will be country-wide and likely to have a pricing structure that does not vary too much with geography. That means that the cable provider — already going through many localities with high Internet demand — will be able to drop prices and completely undercut the NBN (especially as it is technically able to offer equivalent speeds to the current NBN proposed specs). Remember the key here is that it would be able to grab the lion’s share of the market where the cable passes by just undercutting the NBN and being otherwise well above costs. (This notion comes neatly from an opinion piece Jerry and I wrote a few years back).

That did sound like an excellent idea. Alas, I failed to raise the necessary money and so we agreed I could just write a blog post about this plan. But it did get me thinking more carefully about the cable network and its position in the whole NBN debate. First, we know the cable network is an existing and useful asset. Second, we know the government wants Telstra to divest that asset to move forward in the sector. But here is the thing, unless that divestiture is to the NBN, the competitive threat it poses to the NBN remains. Now as the NBN is designed to be a business that means competition policy and the ACCC are pretty much required to take a look at any transaction involving the cable network and its impact on future competition. The Government is going to have a tough sell if perhaps it intends to acquire Telstra’s cable network (something I have speculated about) as it will have to justify it on the basis of efficiencies (i.e., not running a duplicated network) and also competition from the Optus cable (hey, stop laughing!). So it is not clear how that will pan out. Would be telco aspirants perhaps should start getting capital together to implement the Hausman strategy.