'Dark fibre' hinders growth, keeps broadband costs high
- 23 July, 1999 12:01
Telecomms specialists are supporting claims by a US expert that unused cable infrastructure or "dark fibre" controlled by Australia's largest telcos is hindering growth of a competitive market here.
Much of the broadband cabling systems in which Telstra and Cable & Wireless Optus have invested hundreds of millions of dollars remain dark, according to Dr Allan Mendelowitz.
By not making that capacity available, major telcos can maintain higher price points for existing broadband services. However, that might not prove the best course of action for an economy looking to the future, according to Mendelowitz.
A specialist on international competitiveness and telecomms policies, Mendelowitz is a vice president of independent Washington think tank Economics Strategy Institute.
He pointed out that competition in the US has forced a faster rollout of universal broadband services than in Australia. Cable penetration rates for US households are running at 66 per cent compared to 16 per cent in Australia.
Mendelowitz suggested the federal government's partial privatisation of Telstra has left it facing a potential conflict of interest.
Protecting the value of Telstra's cable infrastructure investment is good for its shareholders but may stifle the competitive market in broadband services needed for the overall good of the economy, Mendelowitz said.
His concerns were echoed by Geoff Johnson, research director for market analysts Gartner Group. In the US, corporate customers currently can lease 45Mbit lines from third-tier service providers at rates first-tier carriers are charging for 1.5Mbit connections, Johnson said.
"The issue is whether market rates Australian telecommunications customers are paying are globally competitive with that, and the answer is no."
Telstra and C&W Optus control "more dark fibre than they can shake a stick at", Johnson said.
Lighting up that fibre fast enough to stay ahead of exploding Internet traffic was an administrative and logistics task.
However, the real problem with bringing dark fibre onstream is that Telstra's product managers don't want to cannabalise their existing products, Johnson said. Adding huge amounts of broadband capacity would threaten price structures for existing products like ISDN, which Telstra in particular has shown its willingess to defend. Until that thinking is changed, the ability of the domestic telecomms industry to achieve global price competitiveness will be limited, Johnson argued.