Aust govt to separate Telstra

Robert Clark
15 Sep 2009

Telstra will be structurally separated under reforms announced today by the Australian government.

Communications minister Senator Stephen Conroy today unveiled new measures which he said would tackle the carrier’s “high level of integration” and simplify the competition regime.

He said Telstra was one of the world’s most highly integrated telcos, operating fixed-line copper, cable access and mobile networks. It also owns 50% of the country’s biggest cable TV operator, Foxtel.

“The reforms address the structure of the telecommunications market and provide

Telstra with the flexibility to choose its future path,” Conroy said.

“It is the Government’s clear desire for Telstra to structurally separate, on a voluntary

and cooperative basis.”

However, if Telstra chose not to separate, “the legislation provides for the

Government to impose a strong functional separation framework on Telstra.”

The bill would require that Telstra conduct its network operations and wholesale functions at arm’s length and that it offers equal terms to its retail and wholesale customers.

It would also be prevented from acquiring additional mobile broadband spectrum while it remains vertically integrated and owned both a cable network and an interest in Foxtel.

The announcement of the package comes as the government is negotiating with Telstra over the terms of its participation in the next-gen broadband network (NBN) program, which could require as much as A$43 billion ($37 billion) in investment.

Four months ago it floated a proposal of providing entry into the NBN program in return for Telstra tipping in its access networks.

The negotiations appear stalled, however, and today’s announcement could be well be Conroy’s attempt to move the talks forward, as well as provide some salve to Telstra in easing the rules imposed on the incumbent.

Conroy acknowledged that the existing telecom competition rules “have been widely criticized as being cumbersome, open to gaming and abuse, and provide

insufficient certainty for investment.”

He said since the current Telecommunications Act took effect in 1997 more than 150

telecommunications access disputes had been filed, compared to only three access disputes in airports and energy sectors.

Telstra has not yet responded to the Conroy announcement, but it has long resisted efforts by the current and previous governments to separate its wholesale and retail arms.

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