Tuesday, April 7, 2009

What is wrong with a rollout?

Hey, remember that hilarious National Broadband Network bidding process? The one where Telstra submitted not a bid, but a list of requirements it needed to submit a bid? Yeah, that was pretty funny, what with all the laughing at Telstra and everything. Turns out that this morning the almighty Rudd has announced all of the private bids for the tender weren't up to scratch.

Therefore, the Ruddster decided it was high time a newly-created and Government controlled 43 Billion dollar company was given the tender for the process. The private investment in the company will be capped at 49 per cent with the government retaining control.

Sound familiar kiddies? Should be.

I seem to remember a certain time when Telstra was under government control in a former life, under the trading name of Telcom Australia. That was government-controlled, before the governmanet stake was split up in three parts in 1997,1999 and 2006. While investors took up the offer, the company then screwed the pooch big time.

Make no mistake, this failure to capture the National Broadband Network building tender was a kick in the teeth for the company, so much so that everybody's favourite yank with a moustache, Sol Trujilo, up and left with a golden handshake.

The question is, is history about to repeat itself? In my humble opinion, no.

Telstra moved to a private company in a climate which government regulation was seen as the big, bad wolf and privitization was the groovy thing to do. The market was rolling, the money was flowing and there was competition on the part of Optus tomake things interesting.

These days though, following the Freddie May and Mac crash I somehow think the attitude toward privatisation is a smidge different. The market may say that the way out of a crash is to invest and spend, but I doubt whether governments feel the same way.

Tighter regulation of companies, transparency of reporting and general belt-tightening are so in roght now. Would the government move to sell its stake in this new company? Perhaps not right away(the government will sell its stake within five years), but you can bet one thing about this company; It's going to be regulated to within an inch of its life. You thought the relationship between Telstra and the Government was tetchy, just wait until investors start to smell a whiff of government intervention in free enterprise.

Besides, will these be a market in five years for the government to sell its stake to? What's the value in a company which has a foundation built upon strict regulation, and very few investments or strategies for the future (I somehow don't think the government owned company will employ an agressive investment strategy).

Anyhow, this new company would build the National Boradband Network, which is sorely needed. You see, the broadband speed in Australia is akin to a snail taking it easy. The network would deliver speeds of about 10 Megabits to about 90 per cent of Australian homes and businesses.

That's all well and good, but I feel one question has to be asked.

You deliver high speeds but we can't see the hardcore porn sites? What kind of twisted game are you playing at Conroy?

'Till next time

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