Telstra threatens to scrap $2.2B broadband network

Australian telecom wants rivals to pay full rate to use network

The head of Australia's largest telecommunications company has threatened to scrap a $2.2 billion national high-speed, fixed-line broadband network.

Telstra Corp. Ltd. proposed building a next-generation fiber-to-the-node (FTTN) wireline network to initially cover Australia's five major cities and eventually extend to smaller towns. But government regulations could require the company to allow its rivals to use the network for free or at low rates, which Telstra said it 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," said Telstra CEO Sol Trujillo in a speech to the National Press Club in Canberra on Thursday. The company used to be Australia's national carrier, but has been undergoing a long privatization process. It is supposed to sell more than 6 billion shares to investors later this year in a public offering valued at around $17.8 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 the nation's cities and its relatively small population. The initial plan to set up the system in the five biggest cities would ensure the network covers around 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.

He added the company is 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 (third-generation) mobile network is already half built. The 3G network is scheduled to be in place by the first of 2007, when it will reach 98% of the country's population.

Copyright © 2006 IDG Communications, Inc.

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