I've only ever once briefly owned Telstra shares. I always figured that once the government didn't own any part of Telstra it would start leaning on it to cut it costs, but that while it still had a shareholding to sell it would allow Telstra to reap some monopoly benefits.

So in some ways it's no surprise that with the government now effectively out of Telstra it's decided to screw it. Even so, I'm surprised at the style of the monstering which goes beyond anything I could have imagined.

Instead of just pushing Telstra's prices down by regulating what it could charge they've effectively told it how it must structure itself under the threat of locking it out completely from new wireless spectrum that it would need to maintain profitability into the future. And it's done this so as to get access to Telstra's infrastructure so it can build it's NBN network at a reasonable (to the government) price.

I think that is outrageous, and I would think that many of the mums and dads (and brothers and sisters and superannuation funds) who invested in it would feel the same way.

This is tantamount to the government reacquiring parts of Telstra, but hardly on "just terms". Which makes me wonder whether there are some constitutional or legal avenues available to Telstra.

Not that the current board of Telstra would fight the government. While Trujillo and his amigos were far too truculent and combative, and damaged shareholder interests because of it, the current board (who the Minister referred to "charmingly" on radio this morning by their first names) look to be completely supine.

One wonders what would have happened if Telstra, rather than dragging its heels on faster broadband speeds, had rolled high speed broadband out. They might have avoided this fight altogether by neutering the idea of the NBN in the first place.

Dear Graham,

Being one of those who thought the selling off of Telstra in the first place (especially the infrastructure) was the outrageous act I am probably a little biased.

I do have sympathy for those mums and dads investors but that does dissipate a little when I hear talk of reaping “some monopoly benefits”.

I’m not sure you will get much sympathy either from non-share owning Australians who it appears will get cheaper prices, after all they went from being beneficiaries of the profits of the organisation when it was owned by us all to being treated as sheep by its American controllers.

I think the pivotal moment was when Nick Minchin(?) was told by the big institutional investors in the States that for them to be part of the float there had to be an American in charge.

I am old enough to remember when there was pride in an organisation that was helping to build Australia but to see it in recent years actively hindering instead in order to maximise profits into shareholders pockets was disheartening.

Dear Graham,
I have to agree with csteele on this one. I am a little harder in my views on investments. In that under a capitalistic environment one invests money in the full knowledge that one is being paid for the RISK.
This is simply the down side to investing.
I think it's disingenuous for conservatives to now pretend otherwise.
Monopolies are or should, be the anathema of both sides of politics. Labor because it's anti peoples interests.
Conservatives because it distorts their Religious Trilogy, Free Enterprise, Level Playing Field and the spectral presence of Market Forces aka "the silent hand".

Minchin's bleatings are simply political best face, diversionary spin.
The 'monstering' as you put is more of the same on both sides.

The real question should be for the opposition (any opposition) is what is our alternative? and/or more pragmatically how can we improve the GOVERNMENT'S ideas not simply opposition for party sake. (crass bid for power regardless of the people and their clear will.
TO PUT IN A BETTER INTERNET SERVICE.

One could ask what did the opposition think that the government was going to do create the impossible? a profitable (to encourage commercial participation) second duplicated network? that is fairies at the bottom of the garden stuff. Commonsense and consultants should have know the truth Aust can't afford two parallel networks. Therefore, something had to give. In truth the conservatives' strategists were blinded by their own ideology to reality. One is entitled to ask "What has happened to the ALTERNATIVE government?" still trying to dress the the same ole same ole in a new suit?

You little ripper, GrahamY, for opening up this one! You say:

"While Trujillo and his amigos were far too truculent and combative, and damaged shareholder interests because of it, the current board ..... look to be completely supine."

You're probably right in both statements. One of the truculent and combative acts of Telstra management, the customer reaction to which probably explains Trujillo's 'racism' spray on his departure, has been the insistence upon the outsourcing of billing and the enquiries that inevitably go with it. I, for one, am absolutely sick of having to battle with Indian accents in order to understand, and be understood, in matters relating to billing or service delivery by an Australian communications enterprise. Recently, sick of being taken for granted by Bigpond ADSL at notional delivery of 256/64 Kbps speed and 12GB of download for $60/month, I churned to another Australian provider, Internode, who were able to provide, over the same copper wire connection, a notional 512/128 Kbps speed and 10GB of download for $50/month. And I got the extra performance on the changeover, by golly!

My reward from Telstra for this (reluctant) unbundling was the invention, a few weeks after the churn, of an 'overdue' account issued in a name that was not, although similar, that of the account holder for my premises, and delivered by post. The services connected with these premises were definitely threatened with suspension if the account was not paid promptly.

The account was for email addresses which came FREE with the old dial-up service for which I had continued to pay (I think $7/month) as a backup to my ADSL connection, right up to the time of the changeover to Internode! All Telstra bills sent (by post) to the account holder had been paid promptly right up to that time. No account had ever been rendered at any time for these email addresses.

Deceitful if not downright fraudulent business practices. Forced online payment. Managerial arrogance.

Sol was losing customers, and he knew why. It was our fault. We were all racists.

I've got little sympathy for Telstra. It effectively monsters every consumer and small business owner by the fact of its size and tardiness of service to customers. On Lateline Business last night the CEO of a rival to Telstra said that Telstra's customers were waiting up to 8 weeks for service.

If the whole exercise ends up with more competition and better service for customers then I think that's a wonderful thing. The way I read it one monster is being monstered by another. Sounds to me like Telstra is getting its just desserts.

Graham, I say this as a Telstra shareholder who is losing a fair wad of cash due to the current arrangement...

About damn time.

Monopolies are detrimental to competition, they are detrimental to the consumer and in this case, it is detrimental to the development of our communications networks.

When Telstra was privatised, it should never have become an entity that controlled the infrastructure as well as a group responsible for servicing remote communities as well as competing against other telcos.

That recipe just doesn't work. Not under anything except the most bone-headed concepts of capitalism. You can't simultaneously ask them to be competitive, reasonable, provide service to unprofitable areas, provide access to their infrastructure to competitors at reasonable prices and do so with a nice PR image. It's just plain retarded and it's up there with the stupidest moves by the Howard government.

You say the Trujillo board behaved in an unreasonable manner. Frankly, they behaved in the most competitive manner. That's what companies do. It's what they're supposed to do. This idea of a wishy-washy company that doesn't play hardball seems like a crock to me.

The problem is not that Telstra has been an objectionable company. It's that it's a company, and it controls access to infrastructure that other companies need in order for this to be a proper market arrangement.

This situation needs to change and it needs some bold moves from the government. Frankly, I'm surprised the Rudd government had the ticker to do this, but I'm glad.

Graeme Samuel's take on the Telstra split

http://www.abc.net.au/news/stories/2009/09/16/2687294.htm?section=justin

I hadn't read this article before I posted, but Peter Swan puts my case pretty clearly: "Rudd playing Ned Kelly with Telstra" http://www.theaustralian.news.com.au/story/0,25197,26078850-7583,00.html.

I don't think it matters what you think of Telstra, governments are not entitled to change the rules just because they want a benefit. It's theft pure and simple. If they behave like this to a behemoth with thousands of mum and dad shareholders, and therefore some political clout, imagine how they will behave to organisations or individuals without clout.

And when it comes to monopolies or quasi-monopolies, you're better-off with them not being government-owned. Once they are government-owned the government has a financial incentive to squeeze out potential competitors. (And potential competitors includes better technologies, not just other companies). When they're not government-owned there is generally no financial benefit to a government who owns them, or whether a successful competitor comes along.

Remember how bad Telstra was when it was a government monopoly? That's where we're heading again.

I used to buy Optus products on the basis that competition would be good for Telstra, but if anything I found them to be worse. Their call centres are all overseas too, it seems. So we went back to Telstra for our office phones earlier this year. First time I've bought anything from them since Optus was allowed in.

*I’m not sure you will get much sympathy either from non-share owning Australians*

I've got news for you! There would hardly be an Australian who does
not have money in a super fund and there would hardly be a super fund
who does not have some shares in Telstra. So the Govt is screwing
the lot of you, but you are seemingly not smart enough to notice!

Graham is quite correct, its basically a scandal. First the Govt
flogs off the telco for top $, then they change the rules.
As we've seen so far, most Aussies won't even notice.

So politicians might well get away with it. Luckily for me I
have very little faith in politicians and given that Telstra's
future depends on them and their rules, I kept my interest in
Telstra at a minimal level, just enough for the divies to pay the
phone bill.

i never changed from telstra...because to leave it could jeperdise my claim,...[ongoing claim..from when this public utility was privatised

the biggest crime was giving the in ground ''pipes''away to foreign agents..that these pipes be returned is a matter of urgency...futher that the income from wholsale pipe acces..benifit the people

i feel telstra got a free ride for [8years]..that the next telco cooperative..have the franchise for 15 years[or so]...subject to the improvement of the public asset..to wit laying the system with imperrishable glass fibre to the home...

[as well as a public phone/internet acces from say phoneboxes...a quick timed free log in of a few minutes..or longer for money

Graham,

From the point of view of an honest and genuine investor you're right, it is theft. On the other hand, from the point of view of the consumer, I think it's fair to say that any shakeup that gets rid of Telstra's monopoly is a good thing. It's a classic case of one man's meat is another's poison. That's what Samuel is referring to when he talks about the mis-alignment of shareholders' interests with consumer's interests.

I'm not a shareholder at all, so I'm on the side of the consumer in this case (at least on the face of things, consumers will be better off by this decision). But I can imagine, and understand, that some Telstra investors will not like it. I hope that competition really does improve as a result of the Government's decision and is not just a false bottom in a suitcase as you suggest.

"I've got news for you! There would hardly be an Australian who does
not have money in a super fund and there would hardly be a super fund
who does not have some shares in Telstra. So the Govt is screwing
the lot of you, but you are seemingly not smart enough to notice!"

Yabby,

Don't super funds have a large portfolio of investments? At any point in time they back winners and losers on the stockmarket whose fortunes are basically in a constant state of flux. Super funds win here and lose there but basically mostly manage to come out on top. How do you know whether the Telstra decision won't make another competing/symbiotic business or industry more profitable as a result, which the super funds will jump straight onto?

You're forgetting that super funds have the advantage of not having to put all their eggs in one basket!

I am wondering if the government has left a high court trap for
itself. The blackmailing clause "Do what we want or no RF spectrum
for you" will give an out to Telstra.

I know that nominally ACMA can refuse a licence to any spectrum but it
is not likely to have ever been to a show cause hearing in the High Court.

I have Telstra ADSL with 1.2 Megabit rate.
The NBN with its 100 Megabit rate will do nothing for me or the 100s
of thousands like me, as the extra 1 millisecond I might have to wait
for a page on screen is undetectable.
The time needed is made up by my machines speed and the remote servers
machine and almost nothing in network. International connections
probably add a bit, but nothing compared to busy servers elsewhere.

Television stations will be the big gainers because they will use the
NBN for picture transmission. Kerry Stokes and company stand up !

I will never use them again they stole from me.
And in a free market economy we must hurt some for the benefit of most.
It was our dollars that made telstra the biggest and if we are to get better services cheaper too roll on Rudd.

*You're forgetting that super funds have the advantage of not having to put all their eggs in one basket!*

Rob, I'm not forgetting that at all, for if you check it out, its
super funds who have 1 trillion $ of workers savings and yes its
broadly invested in many companies, Telstra being just one of them.

A good chunk of Telstra was also handed over to the future fund,
so taxpayers will eventually wear the increased loss there.

But if you are saying that its ok for workers to write off many
billions from their nesteggs, because the Govt changed its mind and
the rules, but it won't matter as there are plenty billions left,
well so be it.

But at the end of the day, its still billions coming out of workers
nesteggs, most are just not aware of it.

RobP, you stagger me. You agree that it is theft, but argue it is OK because it enhances competition. Well, if that competition is such a good thing, wouldn't you be prepared to pay for it, rather than expect the person who owns the right you want to pre-empt to pay for it for you?

You also suggest that because superannuation funds take out insurance against bad investments by holding a basket of them, that it doesn't or might not matter to them. That is a bit like saying that because I take out insurance I shouldn't worry if someone burgles my house. It would be hard to imagine that the losses they might face in the Telstra part of their portfolio will be more than compensated for by an increase in competition which will be spread over the whole economy.

I think underlying some of the attitudes on this thread is the idea that we made a bad decision in privatising Telstra the way we did, so we should be able to unwind it without paying a penalty because the people who bought the right from us in the first place should have known we might renege. To my mind the correct approach, if we decide the original mistake was that bad, is to offer them a fair price, not just take.

The share price seems to have recovered to where it was a week ago i.e. pre announcement levels.

Is all right with the world now? Bugger what the people think as long as the market ticks off on it.

From the micro to the macro.

Yabby says:

"A good chunk of Telstra was also handed over to the future fund,
so taxpayers will eventually wear the increased loss there."

My early understanding of the Future Fund was that it was intended as a source of future benefit for ALL Australians, by way of diversified investment in much the same way as a superannuation fund would operate. It was only after the legislation for the complete sell-off of Telstra finally passed in the Senate that I understood the Future Fund to be essentially the superannuation fund of only Commonwealth parliamentarians and the Commonwealth public service.

It is also my understanding that what was handed over to the Future Fund was a substantial part of the PROCEEDS of the sale of Telstra, not a share of Telstra itself. If my understanding is correct, unless the Future Fund has subsequently re-invested to a substantial extent in Telstra, then what happens to Telstra and its shareholders as a result of this present, or any other, proposal is a matter of supreme indifference to the beneficiaries of the Future Fund, who are NOT the taxpayers at large.

Yabby is probably right in saying that taxpayers will wear the loss that this present seeming intended expropriation of Telstra will incur, but that loss to taxpayers at large will presumably occur through the government expenditure upon duplication of capability in establishing the National Broadband Network.

It is interesting that the market apparently 'thinks' that Telstra SHAREHOLDERS will not be particularly disadvantaged, if the rally in share price is in any way rationally based. What does the 'market' know that we don't? Could it be that the government intends, instead of incurring expenditure upon duplication of capabilities, to buy back from Telstra the capability that it, Telstra, already possesses but refuses to deploy? In which case Telstra shareholders AT THE TIME THIS ACTUALLY HAPPENS will be reimbursed at the expense of taxpayers at large.

'Snouts in the Trough' saved harmless?

Will these manouvres make Conroy's Gap a closed circuit?

Internet filtering for all?

Yeah well, I agree with both sides of the argument.

What has happened to the Telstra shareholders borders on fraud. Personally, I would like to see them sue the government for the money they have lost.

Fraud or not, it is absolutely necessary. The mess the libs created by selling Telstra with its monopoly intact was an complete shamozzle. Do you guys know there had had to be a single Federal court set aside for handling disputes between Telstra and the government. Out of the 100's(?) of cases that have been through there, Telstra has won 1. It behaved exactly like - well a private monopoly without restraints. It had to be fixed.

Graham,

“...You agree that it is theft, but argue it is OK because it enhances competition”

I don’t think the overall arrangement is the best it can be – far from it – but I’m seeing a positive aspect to it: ie, more competition will take the pressure off ordinary people paying their bills. When I said one man’s meat is another’s poison, I was implicitly acknowledging that there are inherent defects in the justice in the situation.

“Well, if that competition is such a good thing, wouldn't you be prepared to pay for it, rather than expect the person who owns the right you want to pre-empt to pay for it for you?”

If I could pay for it at the time, yes. But even with the obvious aberrations in the system, I believe that in the long run everyone will pay a fair price for everything they receive. All debts will be recovered. The problem is the very lumpy way in which things occur which has its basis in the diversity of viewpoints in society. There’s no way of flattening out the lumps without causing lots of other problems I suspect. The yin-yang principle rules supreme.

The best answer is, as you say, for a fair price to be paid for the asset at the outset. But there are a lot of commercial factors that can militate against such an outcome at sale time.

Yabby,

“But at the end of the day, its still billions coming out of workers nesteggs, most are just not aware of it.”

I’m sure that’s right. But, it’s not just Government decisions robbing people of their nesteggs – eg, it’s apparent that industry super funds are doing much better than non-industry funds. The difference would appear to be that retail funds are creaming management fees off their clients’ savings to the point where their clients may be $100k worse off by the time they retire compared with their industry fund counterparts. So, the erosion of superannuation is happening in more ways than one – let’s at least be clear and honest about that.

Some people feel threatened by change,
and that's understandable. It's better to
be safe then sorry - isn't it? And the old
ethos of, "We've always done it this way,"
and "If it ain't broke, why fix it?" still
seems to apply in many mindsets.
However, we have an elected Government that
seems to have the determination to carry this
country kicking and screaming into the 21st
Century and beyond - despite the old protestations
of some conservative thinkers.

We're told that"

"Legislation is going to be introduced that paves
the way for Australia's largest telco to
voluntarily separate its retail and wholesale areas."

Not everyone agrees that this is a bad thing.

"Everyday Australians are set to reap the benefits
from the potential cut-up of Telstra,"
Consumer Group Choice has declared.

"Introducing a fairer marketplace was a win for
everybody who used the telephone, watched cable TV,
or accessed the internet," Choice Policy Director
Gordon Renouf said.

"Consumers will only gain benefits from improved
productivity where there is fair competition among
telco retailers," he added.

We're told that:

" We all know that consumers have long suffered from a
lack of competition in this market.
And this will help the roll-out of the Government's
National Broadband Network."

As Australian Greens Senator, Scott Ludlam sums up:
"We see this as an opportunity to get it right
and perhaps learn from the mistakes of the past.
This sector has been held back for far too long."

So much has been done to and about Telstra that is so wrong - beginning with the first sell-off - the promise that a percentage would go towards environment, second sell-off failed to deliver to investors and failed to deliver to environment - guess I'm just repeating most of what others have pointed out.

But what I'd like an opinion on, since Telstra illustrates my conundrum so perfectly, is who is more important?

The shareholder?

or

The consumer?

And why?

Sad to see all these good people complaining but the fact is they were conned by johnny coward and ripped off by that mexican idiot. When will you people learn? Aside from the fact that they already owned Telstra the people that bought into the sell off forgot/ignored the realities of capitalism and its crashes and booms and the fact that governments change and reverse previous government policies. Telstra was never "just a normal company" and howards sell off was designed to rip off the investors so he could laud himself for paying of government debt. Caveat emptor I say.

*It is also my understanding that what was handed over to the Future Fund was a substantial part of the PROCEEDS of the sale of Telstra, not a share of Telstra itself*

Forrest, your understanding there could be wrong, for the FF was
handed a large chunk of Telstra shares, but limits were placed on
when they could flog them off. This landed up making the FF the
largest Telstra shareholder, with the board needing to consider
what David Murray thinks.

Taxpayers guarantee the pensions of Commonweealth public servants,
so if the FF is short, taxpayers will need to cough up the difference.

*Fraud or not, it is absolutely necessary.*

Ahem, rstuart, now we know what "morality" means to you :)

RobP, if the Govt sold you your house, then decided they needed
the land for Govt purposes after all, would you expect compensation
for your house, or just accept that its in Australia's interest
that voters benefit, if the Govt decides not to compensate you?

Yes, some super funds charge fees for their services, they play
by the rules. Anyone is free to move their super fund money elsewhere.
In this case, the Govt takes peoples money, then makes
up new rules as it goes along, to suit its political agenda. You
are comparing apples and oranges here.

Fact is that when Telstra was Govt owned, they screwed customers
blind. It used to cost me 9$ an hour to be on the internet,
when Mr Blount ran Telstra for the Govt. Nobody cared.

So who is going to compete with the NBN, when its a fat and lazy
Govt monopoly?

"So who is going to compete with the NBN, when its a fat and lazy Govt monopoly?"

Yabby,

Now this is the bit I don't understand. Is Telstra going to become a Government monopoly or not? My understanding of Conroy's decision is that the company would effectively be forced to split its retail and infrastructure arms only. Is that correct? In which case, Telstra is going to become two commercial companies not one. Where is the "fat and lazy Govt monopoly" in that? Someone please correct me if I'm missing something.

Yabby,

Thanks for responding re the shares v proceeds going to the Future Fund. I admit I was not sure of my ground there. Assuming that you are correct, and that the Future Fund still remains the largest Telstra shareholder, it would seem that the FF would have a vested interest in at least the sustenance of the Telstra share price until some time after the expiry of the prohibition on share disposal that was emplaced upon the FF at the time of share transfers when Telstra was 'privatised'. That is, if the FF felt that the long-term profitability prospects of Telstra were not likely to be good, and that selling its shareholding while the price was still held up would be its best course.

I share RobP's perplexity as to whether this proposed dismemberment is an expropriation of Telstra or not. I always understood that it was a condition of the 'privatisation' that the privatised Telstra was obliged to give other telcos (its competitors) access to its infrastructure on equal terms, as commercially crazy as this arrangement would appear to be. A principal jewel in Telstra's crown was its possession of an already largely existing, but undeployed, optical fibre infrastructure. How any CEO worthy of the name could have taken on the job of CEO of Telstra with any degree of integrity in the face of this requirement to share access to infrastructure without indicating at the outset of his tenure that the profitability of Telstra would inevitably be in jeopardy escapes me.

I cannot escape the feeling that the privatisation of Telstra from the outset was not necessarily so much a Howard-government-driven agenda as a trans-political-parties/ Commonwealth public service driven agenda. The theory behind the push being to flog of Telstra to a largely unsuspecting public before the foreseeable effects of new technological developments already on the horizon diminished the market value of its then-existing infrastructure assets.

Answering Fractelle's question as to who is more important: neither shareholder, consumer, nor elector; because the politico-bureaucracy's trough needs filling.

RobP said;
In which case, Telstra is going to become two commercial companies not
one. Where is the "fat and lazy Govt monopoly" in that? Someone please
correct me if I'm missing something.
end quote
Yes you have missed something.

Telstra would remain two commercial companies.
The government monopoly comment referred to the NBN company.
If the government is to retain 51% then it will be a monopoly with
the other shareholders going along for the ride.
However there was a suggestion that if Telstra put its network into
the NBN it might get 49% of the NBN shares.
It appears to be offered 49% or Telstra wants $20 billion instead.
Where the other shareholders would go I don't know.

I just wonder if the pollies offsiders have tried to value the pipes
and ducts in every street in Australia ?
I know that in my short street there was just enough room for the
Foxtel cable.

I have read what appear to be knowledgeable comment that a cost of
$40B will require around $100 to $150 per month from every address
in Australia if every address is to be served with fibre.
If this covered typical domestic phone bills, internet and perhaps
pay TV it could be a goer, but as the charges of the ISPs, phone
providers and pay tv will be on top it looks a bit dodgey to me.

This is what I think Turnbull was referring to when he asked if a
business plan had been done for the NBN.
The answer implied that FTTPremises was such a good thing it did
not need a business plan.

If the scheme becomes too expensive by the time it gets to say, 25%
or 33% installed, it may fall into Telstra's lap by default.
Telstra Network Company could offer to take it all over.

*Where is the "fat and lazy Govt monopoly" in that?*

RobP, the majority owner of the NBN will be the Govt. It will have
no competition, Conroy is seeing to that.

The joke is that Telstra could compete quite well with the NBN, it
in fact offered to build a fibre optic system, the argument came down to return on
investment and costs in rural areas. Telstra insisted that it was
a commercial operation and needed a fair return on investment.

Conroy seemingly does not want Telstra to compete with the NBN,
so has put a gun at Telstra's head. Hand over the copper system
and customers etc, or Telstra won't be able to buy any more
mobile spectrum for the growth of its mobile division.

I call that blackmail!

This is one article about it, from Business Spectator.

http://www.businessspectator.com.au/bs.nsf/Article/Invitation-of-mass-destruction-pd20090918-VZ4PJ?OpenDocument&src=ea&ir=4

Frankly I do think that Telstra are being given a raw deal. They
are meant to maintain and fix all the wires, all I get in terms
of "competition", is yet another Indian call centre trying to
flog be yet another "phone company", which seemingly is little more
then an office, no investment in infrastructure at all.

Yabby,

Here's a little bit more background from the same site. Alan Kohler's analysis of where the bungling really started which put Telstra on its current trajectory.

http://www.businessspectator.com.au/bs.nsf/Article/Trujillo-should-be-sued-pd20090917-VXTC6?OpenDocument&src=mp

In light of this analysis, I think Kohler could be right. Maybe the Telstra shareholders should be suing the Two Amigos for their less-than-impressive custodianship of the company. Then maybe they should try to get compensation for the loss in value of their shares.

Also, what hasn't been said on this thread is that Telstra shares have been slowly slipping downhill ever since the T2 tranche was put on the market. It is not a recent phenomenon. Does Howard bear some responsibility for putting Telstra on the market in the first place?

*Does Howard bear some responsibility for putting Telstra on the market in the first place?*

Rob, the problem with Govt monopolies, is that in the end, they
commonly do little but create much fat for those who work there,
bugger the consumer. The success or failure of a privatisation,
ultimately comes down to the details, of how it is set up.

I think you'll find that Libs and Labor were as keen as one another
to sell off Govt assets, so I think its pointless to try to score
blame.

I'd read Alan Kohler's analysis, I subscribe to his Eureka report.
Yup, Sol and co made some mistakes, business in America is played
differently to business in Australia, he never did understand that.

But I still don't think that this gives the Govt the right to
blackmail Telstra.

I also think that Sol did in fact do alot of good for Telstra. It
was him who had the balls to ditch the old cdma system, standardise
the technology, within a short time, due to him, my internet speed
increased tenfold, for much less cost. Given that the old Govt system
had screwed me for 9$ an hour, why should I complain about Sol?

Sol was also aware that Telstra could compete quite well with any
Govt NBN, if push came to shove and he was correct.

But of course if the Govt makes up new rules as it goes along and
uses blackmail to achieve its objectives, well that is not
normal business practise, but more like political thuggery in my
opinion.

In terms of the NBN, I would have imagined that we're looking at an item of infrastructure.

If my understanding is off, then by all means correct me, but I'd envision that the 51% stake of the NBN will essentially means that the government owns and operates this network and the various companies, such as Telstra and Optus, will pay for usage.

Ultimately, this country is too big with too few people, for us to have duplicate networks. I mean, imagine if roads were a private enterprise and we paid bus companies to ferry us around. Would we prefer a) multiple companies building multiple roads to the same location because they can't share them b) a monopoly company owning them all and screwing us royally to use them or c) the government, providing access to multiple bus companies for a certain charge?

I'd think c) would be the no-brainer option. Of course, it's entirely possible that the government will do something stupid, like enter the fray with a service provider of their own, which one day will wind up being privatised, and we'll be right back at square one... Christ I hope they're not that stupid, but with Senator Stephen "I'm going to try and censor the internet, to hell with feasibility" Conroy behind the wheel, I'm more than a little worried.

The Public Service Fat Cat description is way out of date with Telstra.

Telstra has been a Corporation and been managed on a business basis since the Hawke era, when the Australian Telecommunication Commission (Telecom) and the Austrailian Overseas Telecommunication Commission (AOTC) were merged and separated from the Commonwealth Public Service. Telstra had been operating at arms length and independent of government since that time. It paid dividends to the government.

Employees were treated no differently than those of any other large private corporation, and in fact worse than some.

Business success is a factor of management - not ownership and to suggest that a company would suddenly become more efficient based on who owns it is crazy.

As for Sol, his strategy to fight for the shareholders didn't seem to pay off as far as the share market is concerned, and his attitude that Telstra were the sole authors of Telecommunication policy won him many enemies in the Howard government.

All the sale did was to convert a public monopoly into a private one and all the pleas for separation at that time were conveniently ignored simply because the government wanted to maximise the sale price.

We have the same sort of phoney competition in Telecommunications that we see in the supermarkets and petrol stations - except that Telstra owns most of the hardware and wants to lease it to their "competitors" at commercial rates.

The British experience in separating British Telecom proved successful.

TR/TL said;
". Christ I hope they're not that stupid, "

Want to bet ?
Look we all have to understand that the politicians have no technical
knowledge and they couldn't care less about the technical ins and outs.
Their technical people tell them what they want to hear.

Telstra is the only organisation with the national workforce and
spread to do the job anyway. Sure, they could import hordes from
Singapore or elsewhere to do the job but at what cost.

I predict that Telstra will do the job as a contractor until after
the 2013 election.
At that time it will be obvious that the cost per termination will
be so high that no one will want to use it and a Liberal govt if it
wins that election will pass it to the Telstra Network Company.
If Labour wins the 2013 election the govt will subsidise it.

*Business success is a factor of management - not ownership and to suggest that a company would suddenly become more efficient based on who owns it is crazy.*

Ah Wobbles, but you forget that owners can instruct the management.
That means politics comes in to every decision, for managers want
to keep their jobs.

*We have the same sort of phoney competition in Telecommunications that we see in the supermarkets*

I'm always amazed at that perception. Yet we do in fact have competition
between supermarkets, perhaps more so then by the
large global corporations supplying them.

The problem with Telstra was that it was seen as a cash cow for
the treasury, at consumer expense. It was only political outrage
at some charges, like their internet charges, that brought about
change in the end. As the net became more popular, people like
me were pointing out to politicians that what they were commiting
was basically robbery. In real terms, communications costs have
dropped dramatically over the last 10 years or so, since Telstra
was sold.

Here's a pretty down-to-earth analysis of the situation by Peter Ryan

http://www.abc.net.au/news/stories/2009/09/18/2690516.htm

The upshot is that Telstra shareholders should not have been surprised by the inevitable structural separation of Telstra and the fluctuations in the stock price associated with the uncertainty generated by it (caveat emptor on their part) and that the actual separation may not happen until about 2018.

RobP, I read Peter Ryan's article and IMHO, he is doing little
more then what you are doing, ie making excuses for the Govt!

There are good reasons why I always kept my investment in Telstra
at little more then a nominal value, for the sake of a balanced
portfolio. I don't trust Govts to do the right thing by anyone
but themselves lol.

But Telstra involved over a million mums and dads investors,
many of them first time share buyers, who rather then splurge
it all at the pokies, had actually saved a few shillings.

Now IMHO its a great thing if everyday Australians invest in
our industries, rather then we flog it all off to overseas
investors. But these people would feel badly burned, for
it they can't trust their Govt, who can they trust?

Every prostpectus mentions all sorts of risks, that is just
standard jargon. From earthquakes to floods, nothing is
certain in this world.

That does not change the basic immorality of what is going
on here. Once again, if the Govt changed the rules and took
away the house they had sold you, what would your reaction
be?

Conroy has to play honestly and IMHO blackmail is rather
immoral.

"But Telstra involved over a million mums and dads investors, ... who rather then splurge it all at the pokies, had actually saved a few shillings."

Well, that doesn't change the concept of caveat emptor either, does it? Why not put it in the bank and earn a term deposit instead. It's much safer. The shareholders were obviously attracted by the prospect of a high return.

"But these people would feel badly burned, for if they can't trust their Govt, who can they trust?"

You're playing THAT card after consistently saying that the Government is hopeless??

"Once again, if the Govt changed the rules and took away the house they had sold you, what would your reaction be?"

That's rather emotive. Taking away one's house is a lot different to taking away one's investment. Although I admit I wouldn't like it if I was led to believe something was going to happen when it didn't. Not that that stops it happening all the time.

When a Government wants to make progress on an issue and is faced with a brick wall, what else can it do? If it does nothing, the country stalls and the power imbalance between capitalists and the rest of society widens. If it fails it will get walked all over. To win it has to do some things it would rather not - the blackmail as you call it is in proportion to the general apathy in the community. Is blackmail good? No. Does it have bad side-effects? Yes. Does it have good effects as well? Yes. Are there going to be a new set of winners and losers? Yes. Is it a vexed problem whichever way you come at it? Yes. Would it be any different if you were driving the process in Government, Yabs? No. Anyone else got some workable ideas how to fix the problem in the current paradigm without causing others? I seriously doubt it. Are there any other volunteers to fix the problem? Nope - I didn't think so. That's the reality. As you've said to me, "Get used to it".

RobP, what's this doctrine of caveat emptor that you have raised to some sort of pre-eminence in contract? Have you got any idea how much the original idea has been changed, and/or abandoned, by the courts.

Banks used to be able to enforce their documents, even though people who signed them didn't fully understand what they were signing. Caveat emptor? Nope. As some of the banks are about to rediscover with the Storm debacle, they have a duty of care and they're not allowed to rely on their "unconscionable conduct".

Same thing but in different ways applies in consumer law. Sell someone some goods that aren't "fit for the purpose" and you'll have to accept their return, or pay damages. Caveat emptor? No way.

In this case you have the vendor deliberately changing the rules on the purchaser to damage their investment because now it suits them. To me, that is unconscionable.

When I see so little opposition to it, because it seems to suit the majority, I realise how functionally dishonest Australian society has become.

But is it really a crime that only disadvantages a small segment of the community - the 5% of us who own shares in Telstra? No. Investors watch this sort of behaviour and they call it sovereign risk and demand a premium for their investments because of it. Australia is a huge debtor nation, and the last thing that the government should be doing is putting up the cost of borrowing for all of us, but that is exactly what they are doing in this instance.

It's the sort of behaviour that you would expect in kleptocracies like Russia, or Zimbabwe, but not in the land of the fair go.

Yabby said;
In real terms, communications costs have
dropped dramatically over the last 10 years or so, since Telstra
was sold.
unquote

The reason for the fall was only in part caused by the sale of Telstra.
The big factor was the change in technology.
I remember one exchange that I visited where the building had
previously been three floors of equipment.
It now had two empty floors and one corner of the third floor was
occupied by the replacement exchange.
The equipment is now much more reliable and needs almost no maintenance.
Many microwave links have been replaced with fibre optic cable.

That is what has changed the costs.

It might be that Telstra knows how much it will cost the govt to build the everywhere NBN.
It may be that $40B is way under what it will cost if Telstra is not involved.
It could get to the point where the cost will escalate to
such an extent that it will be politically nonviable to fund it.

To get fibre, while not using Telstra's fibre, to every town in
Australia will be very expensive.

That is other edge of the Minister's sword that he is wielding.

Telstra may decide to go their own way and wait for it
to drop into their lap.

However I think that because of the spectrum needs that they will
split the company, get the spectrum and then sit on their hands.

*Why not put it in the bank and earn a term deposit instead. It's much safer*

Come on Rob, you are a grown man. You know perfectly well that
between inflation and taxation not allowing for inflation, bank
deposits go backwards in real terms.

* Taking away one's house is a lot different to taking away one's investment*

Not so, your house is an investment. Plenty of grey nomads saved
their pennies to buy Telstra shares, the divies being their income
in retirement to buy food etc. This is a bunch of hard working
oldies, who did the right thing all their life, now you think its
fine that the Govt screws them.

*If it does nothing, the country stalls and the power imbalance between capitalists and the rest of society widens*

Come on Rob, those Grey Nomads are not evil capitalists. Simply
everyday people who worked hard and saved to provide for their
own retirement.

The Govt has lots of options. If they are so convinced of the NBN,
then why should they fear competition from Telstra?

Otherwise the Govt is free to return the money it took from
the public, when Telstra was flogged off. The Govt could offer
Telstra a reasonable deal, something which it has never done.
The Govt could renegotiate a deal with the new CEO.

Frankly, most of the so called competition is hardly competition,
prepared to invest in infrastructure. More like some dill hiring
Indian call centres to drive people nuts with yet more calls to
flog em a phone, all on the back of Telstra.

As Graham points out, this is third world stuff, expected in
maybe Venezuela and other banana republics, certainly not in
a first world economy.

In terms of political credibility, it makes Australia look very
stupid indeed and when we go borrowing even more money cap in hand
overseas, they will take note.

Yabby,
"owners can instruct the management". When was the last time that shareholders made business decisions in a private company? All they seem to vote on is Board remuneration matters.

The arrangement we have with supermarkets is more like a cartel than free and open competition and petrol prices seem to rise and fall in unison with barely any significant difference between them.

As somebody who has been employed in the telecommunication network construction and design areas for the last 36 years, I can say that Bazz is spot on when he says that the driving force behind privatisation and cost has been technology. Privatisation was inconceivable while technological costs were high and the "tyranny of distance" was another limiting factor. A crossbar trunk exchange used to take up an area of about a third of a football field and was limited to a maximum of 4000 lines in and 4000 lines out. Now an IP softswitch is about as big as a couple of refrigerators and has vastly more capacity and enough bandwidth to switch video calls. Telstra has a couple of thousand exchanges but Optus only needs a couple in each capital city and most so-called competitors are only resellers of the same network. During the Telecom era, most subscribers were cross-subsidised by large corprate customers and users of the Sydney-Melbourne coax cable and only a few metropolitan exchanges made what could be called "a profit". As these cost went down, the urge for privatisation increased.

Sol's furure plan would likely have been to ditch all his non-profitable rural customers (as he did in his previous company) or ask for even bigger taxpayer subsidies to meet his USO obligations - a cost that used to be borne by Telstra entirely.

*When was the last time that shareholders made business decisions in a private company?*

Wobbles, you are confusing mums and dads with institutions here.
No CEO would go ahead without institutional support on most issues,
he would soon be out of a job. But those things are not voted on,
that is what "institutional briefings" are for.

*The arrangement we have with supermarkets is more like a cartel*

Nonsense, the tv stations love to play that one up, but being
public companies, we know the figures. Coles lands up with around
3c in the Dollar as profit, Woolies around 5c, due to more efficient
logistics. They would lose more then that through spoilage and
pilfering.

But check out their large suppliers, global companies like Nestle,
Unilever, Kraft, Simplot, who manufacture multiple brands. I
once heard that Nescafe was Nestle's highest margin earner, with
something like 40%. It seems that these guys have higher margins
in Australia then in other parts of the world, but they dictate the
terms, Coles and Woolies get the blame. When Aldi tried to import
cheaper Nescafe from Indonesia, all hell broke loose.

IGA has 8000 independant retailers operating, but they find it hard
to compete, as its an extra cost in the supply chain to have another
wholesaler like Metcash make a profit too.

Yes, equipment costs are lower, but there is more to a telco then
equipment in exchanges. Those lines cost money to maintain, wages
go up every year, Telstra to its credit has always ploughed more
money into infrastructure. But once a line is established, unlike
power companies, they don't need to burn coal to feed the lines.

If I sit on my phone all day or only make a couple of calls,
costs are pretty similar. That was my point, when Telstra was
charging 9$ an hour for internet access, going back 13 years.

People won't use the thing and pay them anything, if they charge
too much, which is what the old Govt run Telstra was doing,
as it screwed the consumer for every Dollar.

I saw an interview this morning on the Insiders, with Martin
Ferguson. It seems that the Govt has a philosophical problem
with Telstra having a 90% share of the profits from telecommunications.

Given that Telstra have made 90% of the investments in infrastructure,
why shouldn't they? When the Govt charged 45Billion $ for Telstra,
it sold that infrastructure. Analysts value the copper wire network
at around 15-20 billion$. The Govt now essentially wants that
for its own purposes, why does it not buy it back at its value?

Using the threat of no new spectrum for its mobile network, if Telstra
does not hand over the copper network, remains blackmail in my
opinion.

Why should profits from telecommunications not go to those who
have invested in infrastructure? Why should it go to fly by night
resellers, who frankly do little but annoy us with marketing calls
from India?

Martin Ferguson tried to use the banks as a comparison. Well the
banks have put tens of billions of $ on the table, they deserve
a return on capital risked, as does anyone else. That is not the
case in telecommunications, where few but Telstra are risking
their investments. In telecommunications, everyone wants Telstra
to risk its capital, they simply ride on the Telstra's back to
make handsome profits. Philosophically this is little more
then a joke and I think Ferguson is wrong.

Graham,

Thanks for your civil response.

OK, there are two different things that are happening here that are at cross purposes. On the one hand, you’re saying that people who have just followed the rules are being disadvantaged unfairly. Fair enough. On the other, I think that Telstra’s one-sided market domination can only be stopped and corrected by a similar one-sided domination of it where it is brought to heel and forced (over time) to play a new game in the ICT sector. These two waves have smashed into one another and have left some turbulence in their wake.

The caveat emptor (“buyer beware”) idea I was talking about is simply about the individual making his own decision to put his money wherever he likes. I wasn’t trying to elevate it to any sort of contractual pre-eminence.

>>Same thing but in different ways applies in consumer law. Sell someone some goods that aren't "fit for the purpose" and you'll have to accept their return, or pay damages. Caveat emptor? No way.

In this case you have the vendor deliberately changing the rules on the purchaser to damage their investment because now it suits them. To me, that is unconscionable.<<

I believe the technical term for this is “moving the goalposts”. The glibness with which I say this should illustrate how ubiquitous the principle has become in modern society. I can’t disagree with what you say – but it also illustrates the lumpiness or piecemeal nature I talked about earlier. A “hard-and-fast” principle which is followed religiously in one area of human commercial relations, is totally ignored, or completely unthought of, in another! This is one aspect on which government policy should surely be brought to bear to embed decency into all commercial dealings, big and small.

Yabby,

“You know perfectly well that between inflation and taxation not allowing for inflation, bank deposits go backwards in real terms.”

That’s debatable. Investment returns go up and down. What do you mean, “go backwards in real terms”. Are you talking about short-term or long-term trends? About a year ago the banks’ headline term deposit rates were up to 8.5%. That’s pretty darn good. It’s only now, since the financial crash, that they have come down to about 4-6% depending on the length of the term. You get less return for more security … that’s an accepted fact of life in any sort of investment gamble. Ask any respected professional in the field.

As a postscript to this discussion, I saw Lindsay Tanner on TV this morning saying that the introduction of broadband is very likely to throw up a lot of opportunities, many of which have not even been thought of yet and that Telstra was still in a very good position to capitalise on that. I don’t know if that’s a socialist ruse or not, or misguided optimism, but I am fully expecting that it will happen and, in fact, be capitalised on when the Liberals next get into Government.

As a general principle, where’s the justice in merely handing over your cash and receiving a dividend for doing nothing of substance to enhance the productivity and hence profitability of a company. I realise that, in reality, many shareholders are people who are already, or have been, in business and who are probably getting their just reward for years of having the fruits of their work skimmed by bigger players in the financial sector. So for them, they are just getting even. And to them, fair enough.

But are the ordinary grey nomads in quite the same league? I suppose you could say they are getting their taxes back that the Government has skimmed off them over the years.

I endorse the comments here that productivity in a telecommunications company is currently technologically-driven. I work in a place where we deal with bigger and bigger electronic data sets. Productivity is wholly dependent on bigger disk storage, faster transmission speeds, faster computers and more intelligent design of data and metadata files for easy harvesting and processing by computer programs. It’s the way all serious data businesses must go.

What tends to happen is that there is a small core of technical experts who design and implement the systems which are rolled out over time. This is followed by the bulk of staff in an enterprise who learn how those systems work and then exploit them to achieve a certain aim or quality of product. The real enablers are the core of technical experts who make everything that follows possible.

*As a general principle, where’s the justice in merely handing over your cash and receiving a dividend for doing nothing of substance to enhance the productivity and hence profitability of a company.*

Ok, lets sort this out first. As a general principle, if you were
going to rent out your house, would you rent it out for free, or
charge rent for them using the infrastructure provided by you, for
them to live in and benefit?

*Are you talking about short-term or long-term trends? About a year ago the banks’ headline term deposit rates were up to 8.5%. That’s pretty darn good*

I'm talking about long term averages. Headline deposit rates are
commonly a way of sucking in people. They usually apply for a very
short period of time, as was this case.

Over time, you are talking 5-7%, with inflation running at 4-5%.
Pay 40% tax on you marginal income and you are going backwards.

For this very reason, so many Australians negative gear a house.
They are fully aware that the Govt is robbing them, by not allowing
for inflation, as their money in the bank deflates in value, year
after year. If you put 100$ in a bank, 100 years ago, in real terms
you would be left with 3$ of purchasing power.

Yes, I am sure that new applications will generate some new income
for Telstra, as they keep investing. So it should, as otherwise why
bother to invest. That is not the point. The point is that the
Govt flogged the infrastructure to investors for 45 billion$ and
now wants a large share of it back. They have 25$ billion in cash
in the future fund, they are free to buy it back, not try to obtain
it for next to nothing, using blackmail, by inventing new rules
as they go along. That is third world stuff.

"Ok, lets sort this out first. As a general principle, if you were going to rent out your house, would you rent it out for free, or charge rent for them using the infrastructure provided by you, for them to live in and benefit?"

I would not rent it out for free, especially to strangers. It would be different if I was to ask someone to house-sit for me. However, there is a difference between your house and a monetary investment. You've generally put work into your house and the amenities you provide to the renters have generally come after your labours.

"Headline deposit rates are commonly a way of sucking in people. They usually apply for a very short period of time, as was this case."

Not true. The length of time a particular deal is on offer can be short but once you've signed up for a particular rate, the bank is obliged to pay you at that rate even though that particular term/rate combination may have ceased to be available in the meantime.

Also, headline rates constantly chop and change in terms of the investment duration they apply to. (This is designed to wrongfoot investors who just want to leave their money in the bank forever without bothering to mother their investment. The way around that is to check out the rates sheet they provide and reinvest under the term with the best rate that suits you.) But the headline rate generally changes slowly over time. For example, the headline rate at the moment is about 4-4.5%. It's likely it will be similar in a year's time, although it will likely apply to a different term (or terms) of investment.

The future fund sold 1/3 of its Telstra shares a few weeks ago:

http://www.smh.com.au/business/future-fund-telstra-share-sale-inquiry-call-20090916-fqne.html

I guess it was just a coincidence.

*However, there is a difference between your house and a monetary investment. You've generally put work into your house and the amenities you provide to the renters have generally come after your labours.*

Hang on, hang on RobP. Because you seemingly have never done real
work to save for an investment, you think that others don't?

Think again!

One of my employees at the time of the first Telstra float was in
fact an 18 year old farm girl, whose dad had taught her it was
her responsibility to provide for her future. She did without the
latest CDs, clothes and make up, and bought shares, with the sweat
of her brow. Today, as a mother of a few kids, she benefits, as she
should. There are many like her, who live quietly, don't blow
their money on gambling and other vices and save, invest the proceeds.

You seemingly see nothing wrong with the Govt taking their money
for an asset it sells, but now, with a change of ideology, its going
to virtually nationalise the asset without fair compensation to those
small investors who did work so hard. Frankly that stinks and is
third world stuff, I don't blame those people for being really pissed
off.

*The length of time a particular deal is on offer can be short but once you've signed up for a particular rate, the bank is obliged to pay you at that rate even though that particular term/rate combination may have ceased to be available in the meantime.*

Well of course, I know that, I follow the rates. Fact is that banks
are not silly, they employ economists and they never offered 8.5%
for 5 year terms, but maybe 6 month or 1 year terms at most.
They put a huge amount of thought into drawing up those interest
rate deals and its to their benefit, not to the benefit of the
customer! The point is, none of this changes the fact that money
in the bank over time, loses real value, due to a combination of
inflation and taxation.

Another example of the long-term folly of some types of full privatisation.

While all the pundits were lapping up then-Senator Alston's spin comparing Australia to Botswana in being "the only counries with a full Government owned Telco" he neglected to mention that almost all other Governments retained a controlling interest in their Telcos and Australia is now only one of a few with a fully private telecommunications network.

So we can't be a competitor and also a regulator? It worked OK for the Commonweath Bank and Qantas for many years. It didn't stop the ASX regulator from floating itself on the sharemarket either.

Likewise, how will Sydney ever get a second International Airport without Government finance? The current monopoly owners certainly won't be interested in investing.

I can't wait to see what will happen with water and electricity when they are completely taken over.

After that, why not the National Highway network or even the Armed Forces?

As a Telstra shareholder I also say let the country's future come first.

Over the last week I've read nearly every political article over Telstra as I wanted to try and get a better understanding over where all parties sat. The reason for this is that we've just soft launched a free new political site www.megaphone.net.au and this weeks question is on the telstra split. We created the site out of despair in that my staff had no idea about what was happening in fed politics or what party they were most aligned to. To be honest I'm pretty new to blogging and find the material here really thorough. My bigger concern is for the 90% of the population that just doesn't care or know how to care. Hope our site can get more people interested in politics and maybe more people can start contributing here that wouldn't normally be heard.

Rache, the question is not if privatisation is a good or a bad thing,
that is a separate question and can be debated at length.

Conroy clearly thinks his numbers won't work without the Telstra
ducts, or with Telstra as a competitor in the marketplace.

That should not give him the right to expropriate assets using
blackmail.

If the Govt wants to own those assets, they are free to buy them
back, the money ripped off mums and dads is still sitting in cash
in the future fund.

It is no different to the Govt selling you a block of its land,
then years later deciding it needs that land for the common good.
If they did it without compensation there would be an uproar.

So the question is about Govt expropriation of assets, that it once
sold and the morality and credibility involved with that.

“You seemingly see nothing wrong with the Govt taking their money for an asset it sells, but now, with a change of ideology, its going to virtually nationalise the asset without fair compensation to those small investors who did work so hard.”

Yabby,

For someone who doesn’t know me, you seem to think you have a lot of insight into me. Now I’ve said things like “one man’s meat is another’s poison” on this thread. I am acknowledging there are people who are getting the sharp end of the stick. I come from an ordinary family myself and I know how structurally marginalised people are and how difficult some people’s lives can be. I suspect you are the one who doesn’t really understand this but is using the odd person you’ve met as an example to get the outcome you are after yourself.

As bad as it is for some individuals – and I know they and their circumstances are real – the government has to make some tough calls from time to time. If it ends up with the betterment of society overall, it’s a good call. Even better is if they can identify the people who are going to be unfairly made worse off and provide them with an adequate form of compensation.

My personal view is that anyone who is on a low income with low savings is silly to put their money on the market. And anyone who advises them to is equally silly. I’ve always had an innate sense that putting money in the market is risky. A person on a low income with low savings is always going to be safer putting their money into the bank – as the saying goes, at least you can “bank on” getting exactly what you signed up for. Investing in the market is just a sophisticated form of gambling where the people who do best are generally those with good knowledge, lots of options and lots of money to start with. Maybe you should do your employees a favour and tell them that.

Yabby,
What's "immoral" about making a strategic decision for the future prosperity of the nation or would it be more moral to do nothing and just hope for the best?

Perhaps we should ask China or Singapore to come and build it for us instead.

Any alternate suggestions?

What's the difference between doing this with taxpayers money or using it to guarantee Bank deposits for example?

The Future Fund (which exists mainly to fund the future superannuation of politicians) has already bailed out of much of it's Telstra holdings.

I notice that the initial share price drop has recovered quite well in the meantime.

*The Future Fund (which exists mainly to fund the future superannuation of politicians) has already bailed out of much of it's Telstra holdings.*

The future fund also sits on 25 billion $ of cash, much of the
original money taken from investors, selling them the copper network
and its ducts. Forget the exchanges, that ducting has huge value
and is what Conroy is after, for he knows the cost of building
it from scratch. There is no reason that the future fund can't
buy back that copper network as an investment, with cash on hand.

*Any alternate suggestions?*

Lots of alternate suggestions. Telstra were quite prepared to build
a fibre network, they already have a large chunk wired up with fibre.
But they want to know that they will get a return on their future
investment, which is fair enough. Nobody is going to commit billions
of more $, if for ideological reasons, the Govt thinks that profits
should go to people who don't invest in infrasructure, like the
many fly by night resellers who want to make a quick quid from all
of this and drive us nuts with their marketing calls from India.

*What's the difference between doing this with taxpayers money or using it to guarantee Bank deposits for example?*

That is like comparing apples and cabbages, but that is another
story. The point is that if the Govt want to do this, then they
should not expropriate assets from people who bought them in good
faith, but pay market value for them, the same as it would do,
if it expropriated your house.

The copper network and its ducts have a value, the Govt sold it,
now it wants it back. It should pay for it. Why do you have a
problem with that?

One of the ironies of the government's coercion of Telstra is that it should make the cap and trade system more expensive. What a lot of the posts on this thread ignore is that if governments behave capriciously towards private investors it increases what they have to pay private investors in return for their investment to compensate for the risk.

If Rudd ever gets the ETS through it will confer rights on private investors which they will then trade. These rights are created out of thin air, but in other respects aren't that much different to the property rights conferred on the purchasers of shares in Telstra. Which means that, if a future government were to behave like this one, if the cost of the system becomes too politically onerous, they might just take the precedent and change the rules so as to damage the value of the rights.

That is likely to happen somewhere around 2020 when the whole system falls into a hole because of the failure of society to find and implement an alternative to a carbon-based energy system. Might even be earlier, but from memory that's when the real reductions are supposed to cut in.

Actually GrahamY these two subjects come together quite substantially.
The governments policy of increasing electricity costs depends on
the so called Intelligent Grid enabling price control and load shedding.
I am referring to the local grid not the national grid.
There have been a number of abortive attempts to use power line data
at 200mbit speeds to enable control of the grid, but with the NBN to
be at every premises in Australia that almost certainly will be done
via the internet fibre cable.

The electricity network will be one of the major users of the NBN and
or Telstra's node to the copper.
However the actual number of bytes transmitted will be quite small.