Tuesday, April 7, 2009

Welcome To The 21st Century

Welcome to the 21st Century. Not just the gritty reality of a world struggling with the unforeseen Global Financial Crisis, with a New Age multi ethnic United States President, and the threat of nuclear armed rogue states such as Iran and North Korea, but the 21st Century we were all promised by years of watching Star Trek and reading Arthur C. Clarke books. The brave new world of instant communications thanks to a technological revolution providing new opportunities for new and unprecedented wealth. That’s the 21st Century we’ve all been waiting for, and it has just been delivered.

The Federal Government tender process for the construction of a Broadband network was already in danger of going off the rails after Telstra essentially shot itself in the foot when the personal battle between Sol Trujillo and the Government resulted in that company being dumped form the process. Now, the whole thing is academic because the Government has decided to throw the whole process out and build the network itself. More importantly, the new network will be superior to the specifications previously laid down in the tender process, literally paving the way for a whole new telecommunications landscape.

Despite the observation by one of the tenderers that this decision is unfair because they had proposed a bid based on the specifications previously given rather than those that the government has now decided upon, the outcome delivers a positive result for almost everyone, including Telstra. That’s because the door is now open for Telstra to participate in the process rather than remain completely frozen out. At the same time, the new plan achieves a radical restructuring of the whole sector, over the next decade, which might have been impossible to achieve any other way.

One of the outcomes is that when the new network is established, Telstra will no longer have a near monopoly on network infrastructure. In effect it achieves the separation of the retail and wholesale arms of Telstra without ripping the company apart. While there are no guarantees for Telstra, the fact is that this arrangement presents opportunities, a fact which appears to be reflected by the immediate jump in the Telstra share price after the announcement. Telstra shares climbed about 3% after the news, on a day when the rest of the market has been falling.

More importantly, the commitment to construct a fibre optic network which reaches all the way to the customer, instead of just to the exchange, or the street corner, means that 21st Century communications will finally be delivered to 90% of Australians. While the home consumer will enjoy immense benefits from the vast improvement, business stands to reap great gains from access to the kind of communications capabilities that were pure science fiction just a few decades ago.

The plan has been described as the most significant nation building infrastructure program since the Sydney Harbour Bridge and the Snowy Hydro Electric Scheme combined, and even that might be an understatement. $43 Billion will be invested over eight years, creating 37 000 jobs. The initial $4.7 billion dollars will come from the Building Australia Fund, money which is already in the bank, so it does not come out of the budget bottom line. Other funds will be raised by the issue of bonds which will ultimately be financed from the returns generated by the infrastructure itself, while up to 49% of the capital will come from the private sector. When the network is completed, the 51% held by the government will then also be privatized. This is not simply expenditure, this is wealth creation.

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