Tasmania to push Telstra out in future contracts

State Premier, David Bartlett, is eager to see Telstra lose its monopoly over the island state's broadband market

Telstra may not be on the Tasmanian Government's list of possible Internet service providers when its contract with the telco ends next year according to state premier, David Bartlett.

Instead, Bartlett said the government plans to go to market in an effort to undercut Telstra through using other service providers.

"We'll be progressively looking to other providers that can provide cheaper, faster and more innovative sets of services that our government businesses need," he told Computerworld Australia. "We recognise that our purchasing power as a government can drive more competition by ensuring we don't spend all of our money with Telstra.

"What we want to see is real competition and, just in the investments we've already made and the commencement of the NBN rollout, we're already seeing that."

As part of boosting competition - and in protest over Telstra's monopoly on Tasmanian broadband - the Tasmanian government progressively built its own state-wide backhaul.

A former Telecom employee, Bartlett led the charge for the optic fibre roll-out across the island since 2004, nationalising existing dark fibre from state government-owned utility providers Hydro Tasmania and Aurora Energy. The combination of the BassLink interconnector between Tasmania and the mainland, and the expansive optic fibre network controlled by Aurora Energy has given Tasmania a competitive backhaul network over which service providers can choose to deliver services instead of through Telstra.

"We recognised that the privatisation of Telstra and the deregulation of the telecoms markets in Australia had not benefited Tasmania," he said. "We knew we had to break the Telstra monopoly, so the state government started to invest in that ourselves."

The competition has seen Telstra cut its backhaul costs by up to 80 per cent for data flow in some cases.

The three-year, $31.8 million Networking Tasmania II contract between the state government and service providers Telstra, BBW and Aurora Energy, was originally slated to expire in March, but was extended by the government. The contract covers data communications, Internet and related services for all state government departments as well as government-funded institutions, and places Telstra as the primary supplier.

However, the state government has repeatedly expressed concern over the price of leasing backhaul from Telstra, both for its departments and potential competitors.

In a 2008 submission to the Regional Telecommunications Independent Review Committee, the Tasmanian Government outlined key problems in the nature of the island state's broadband market, particularly around Telstra's monopoly on consumers and the "commercial disincentives that many retail service providers find hard to overcome when considering establishing within the Tasmanian market". At the time, Telstra hosted 205 telephone exchanges in the state, but only three were equipped with non-Telstra DSLAM equipment.

Service provider Internode pointed out its own difficulties in operating in Tasmania at the same time, suspending sales of ADSL and ADSL2+ services for seven months in 2008 in protest over expensive backhaul pricing from Telstra. However, since those services were resumed, Internode has ramped up availability of its own ADSL2+ DSLAMs in Tasmania, with nine exchanges supported in total, and also resells services through Telstra's own equipment.

Bartlett was certain Tasmania would see better pricing models and more innovation once the contract wrapped up.

While it is unlikely the Tasmanian Government will look to internalise its Internet services through the carrier options provided under the National Broadband Network (NBN) Implementation Study, Bartlett said he was expecting to fully transition to the government-owned backhaul network through service providers.

Computerworld Australia has already confirmed the backhaul will help to service the stage 2 NBN locations when they are made available, but the rest of the network may follow suit when the fibre-to-the-home (FTTH) network is fully operational in Tasmania in 2014.

The first Australian NBN services will go live at stage 1 NBN trial sites in July.

According to Bartlett, the FTTH services will be available for 85 to 90 per cent of homes in Tasmania - a match for fibre availability in Japan - making it the "most connected place on the planet."

However, Bartlett was unsure about take-up rates, admitting the state's population was traditionally slow in adopting new technologies and specifically the Internet.

"But in the latest ABS statistics we've leap-frogged other states, and that has a lot to do with the new competition in the market and costs being driven down," he said.

"It might not happen in terms of household take-up rates in the first year or two or three years, but we're talking about three decades of economic development that will come out of this."

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