TLS 0.29% $3.40 telstra corporation limited.

halt due to this?

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    Article in the Australian today.

    Bombshell for $5bn Telstra plan
    Michael Sainsbury
    December 14, 2005
    TELSTRA'S plans for a residential fibre broadband network worth up to $5 billion will be thrown into doubt today when the federal Government rejects its call for special legislation to protect the investment.

    Communications Minister Helen Coonan is expected to outline why the Government believes the existing framework, which is based around the Trade Practices Act, is sufficient for Telstra to proceed with its planned investment. But the minister will still have no answer for Telstra on its plea for the Government to overturn a ruling by the competition regulator on prices for its rivals to access its raw copper wires.

    The issue did not make this week's cabinet agenda. Now the only chance for a decision before next February is a special meeting of the Government's senior leadership team with Senator Coonan to be held in Sydney on Monday.

    Telstra wants an average price of $30 per month for access to the so-called unbundled local loop (ULL) - the copper wire between an exchange and a customer's premises - instead of four geographic bands now under consideration by the Australian Competition and Consumer Commission.

    But Senator Coonan is understood to have recommended to her colleagues to stick with the status quo.

    Both rulings are critical to Telstra's future performance, as they underpin the assumptions of the telco's strategic blueprint unveiled last month.

    Telstra has been conducting an increasingly aggressive campaign to have the ACCC ruling overturned as well as getting a regulatory holiday, also known as a safe harbour, for its planned fibre network.

    A defeat on both would force a radical overhaul of future investment plans and earnings prospects by Telstra chief executive Sol Trujillo, analysts said.

    Section 11C of the Trade Practices Act was set up to offer protection for new network investments by enabling owners to set prices up front rather than have them set by the competition regulator. But Telstra believes the experience of Foxtel (25 per cent owned by The Australian's publisher News Corp) has shown that the provision does not offer it investment protection.

    Foxtel wanted to use the section to protect its $600 million investment in upgrading its network to digital technology, only to have it overturned by the Australian Competition Tribunal, a decision now being appealed once more by the pay-TV operator.

    In an address at Deutsche Bank in Sydney this morning, Senator Coonan is also expected to outline the network services that will be the subject of the so-called operational separation regime that was part of the Telstra sale legislation. She would also outline three "instruments" of operational separation, sources close to the minister said.

    The Government is expected to add two new services to the existing voice and data services covered in the legislation: backhaul and wholesale DSL.

    Backhaul is the voice and data transmission service that runs from Telstra exchanges back to its core network. While rivals such as Optus and Powertel have backhaul connection to some exchanges, many only have Telstra connection, raising concerns that the company may use its monopoly position to squeeze wholesale customers for higher prices. Wholesale DSL is the copper-based, high-speed internet service that Telstra's rivals re-sell to their customers.

    A further decision by the ACCC on Telstra's ULL pricing is understood to be now with chairman Graeme Samuel and an announcement imminent.

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