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 €25 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 have stalled, however, and today’s announcement appears to be an attempt to move the talks forward, as well as provide some salve to Telstra in easing the existing restraints on the incumbent.
Telstra, which has long resisted efforts by the current and previous governments to separate its wholesale and retail arms, said it was “disappointed” with the proposal.
CEO David Thodey said many aspects of the package were “unnecessary and need never be implemented if a mutually acceptable outcome can be reached on the National Broadband Network.”
However, in a departure from the approach of his combative predecessor Sol Trujillo, he said Telstra supported the Government's NBN vision and was “willing to discuss options around separation.”
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 access disputes had been filed in the telecom sector, compared to only three access disputes in the airports and energy sectors.
Telstra’s biggest rival, SingTel Optus, which has been strongly lobbying for separation for more than five years, embraced the proposed framework.
“The Federal Government today made an important step in reforming the telecommunications sector with its proposed changes to the regulatory regime. It is a landmark decision that has the potential to change the entire telecommunications landscape forever, resulting in considerable benefits for all Australians,” said CEO Paul O’Sullivan.