Telstra threatens to scrap $2.2b broadband network

Telstra threatens to scrap $2.2b broadband network

The CEO of Australia's largest telco threatened to scrap a US$2.2 billion national high speed fixed line broadband network.

Telstra chief, Sol Trujillo, has threatened to scrap an $3 billion national high-speed, fixed-line broadband network.

The telco had proposed to build a next generation fiber-to-the-node (FTTN) wireline network to cover the five major cities initially, then extend it to smaller towns later. But government regulations could require it to allow its rivals to use the network free or at low rates, something the company won't stand for.

"We will not invest in FTTN unless we achieve regulatory settings that will permit Telstra's 1.6 million shareholders to earn a competitive return that they expect and they deserve," Trujillo said in a speech to the National Press Club in Canberra.

The company used to be Australia's national carrier, but has been undergoing a long privatisation process. It is supposed to sell more than 6 billion shares to investors later this year in a public offering valued at around $24 billion.

Australia's FTTN, which is a kind of high-speed, fiber-optic network that goes to the neighborhood but not directly to the home, is expensive because of the vast distances between cities in the nation and its relatively small population. The initial plan to set up the system in the five biggest cities would ensure the network covers about half of Australia's population.

"Unlike our competitors, Telstra stands ready to make these investments if the regulatory settings do not require us to give away our assets owned by our shareholders, and enable a reasonable commercial return," Trujillo said, adding that the company was serious about scrapping the FTTN plan.

"I want to be clear about something I keep on reading about -- that we're bluffing. If there's any belief in the room let me dismiss that belief," he said. Use of the network would be offered to competitors at commercial rates, he said.

He also said the company's national wireless high-speed 3G mobile network is already half built. The 3G network is slated to be in place by the first of 2007, when it will reach 98 per cent of the country's population.

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