Understandably a decision to grant relief from access regulation to what is already Australia's largest and most powerful telco is somewhat unpalatable. And while the government is being lobbied hard not to do so, it is equally being lobbied hard by Telstra and by others on the dangers of any delay in a large scale rollout of FTTN.

Most notable is Alcatel whose COO Mike Quigley (an Australian and long time executive of Alcatel Australia) had the ear of communications minister Helen Coonan last week.

He told journalists afterwards that his key message to the minister had been the importance for Australia of homes and businesses getting access to higher bandwidth broadband than currently available if Australia is not to fall behind the rest of the world, with serious consequence for the economy as a whole.

The minister and her department might be of the view that rolling out a FTTN network fairly soon is in Telstra's best interests and, if they call its bluff and refuse it an access holiday for its FTTN rollout, Telstra will go ahead anyway.

Well the other message Quigley brought was that US experience suggests otherwise. In the US the incumbent telcos lobbied hard and were successful in getting exactly the relief that Telstra seeks. But it took years, and despite being under much greater pressure from a well-established cable industry than Telstra they held off large scale deployment of fibre in their access networks until getting their sought after relief from access regulations.

Telstra meanwhile is in the difficult position of trying to re-assure shareholders that the decline in its traditional business will soon be compensated for by new broadband-delivered services, while refusing to commit to any timetable for the significant upgrade in broadband bandwidth that a FTTN network would bring.

Last week's press briefing on the company's half-year results was a classic case of mixed-messages. CEO Sol Trujillo reminded journalists that, at the company's strategy briefing in December, "you heard me say that broadband is at the centre of our strategy and at the centre of our future, whether it be in terms of our fixed line business or our wireless business."

When asked about the outlook for the telecommunications industry he said: "the kind of the big growth engine going forward is obviously broadband...broadband will become in the next five years, like mobiles were to us eight or ten years ago. It becomes more and more part of our life and not only part of our life in terms of daily life but it becomes a tool for many things that we do and it becomes a tool in many different kinds of ways segment by segment by segment. So that's going to be a growth engine."

I asked Trujillo how Telstra's vision of a broadband-driven future might be compromised if it did not go ahead with its fibre to the node rollout but was instead constrained by what was achievable with its present DSL technology.

Immediately this vision of broadband receded: "...surveys still show today [broadband being used] mostly for doing email and some browsing and some other kind of other basic functions."

(That is not what the level of peer-to-peer traffic on broadband networks would suggest.)

Trujillo then went on to remind me that the official status of the FTTN project is that it is merely 'on hold', and indeed that is correct.

Telstra wrote to the ASX on 21 December to put on record its widely reported stance on rolling out FTTN. "Telstra has previously indicated that regulations that will protect investment risk assumed by shareholders are necessary for Telstra to proceed with some parts of the Next Generation Network program (NGN) particularly fibre to the node as announced at the 15 November 2005 strategy briefing. Telstra confirms that the 'fibre-to-the-node" component of the NGN remains on hold and vendors have been notified accordingly."

Telstra would like us to believe that FTTN is 'on-hold' pending its sought-after regulatory relief, but if you read the ASX letter carefully it doesn't actually say that.

However Telstra clearly does not see any competitive pressure on it to rollout FTTN. Trujillo continued: "So there's no player that's going to 'get ahead of us' because of the unique regulatory structure that exists in Australia where one company builds a network and then everybody rides on it. So we will have probably some mitigation in growth in terms of as we think about the long-term and I think that's a real issue."

It's not the access regulations that prevent anyone else rolling out fibre to the node, it's all the other hurdles: fibre backhaul, access to ducts and the fact that Telstra still owns most of the customers any such network would serve. So, it's a stand-off between Telstra and the Government  and it's hard to see any way forward.

Ovum's David Kennedy summed it up neatly, commenting on Telstra's half year result. "The next year is shaping up as a high-risk game of chicken. The Government wants new investment in next-generation networks, but doesn't want to sacrifice the competitive framework. Telstra also wants the investment to boost its capability, but doesn't want to surrender its advantages of scale and scope to its competitors through a regulated access regime. Someone is going to lose unless a compromise can be reached. And so far, no-one is offering any ideas."

I agree, except on one point. If the present deadlock continues we are all going to lose.