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Optus makes pitch for Telstra break-up
Optus has added its voice to the chorus calling for the structural separation of Telstra, outlining four key regulatory changes it considers necessary for the success of the Government's $43 billion national broadband network.

By Mitchell Bingemann
The Australian (WSJ)
Monday, May 18, 2009

On April 7 the Government announced that the original NBN would be terminated and replaced with a state-owned enterprise to build a $43 billion fibre-to-the-home network.

Amid concern that Telstra would be able to use its market power to hinder the successful rollout of the NBN, Communications Minister Stephen Conroy called for submissions on a range of new regulations.

Now, with the June 3 submissions deadline weeks away, Optus has revealed a range of regulatory changes that it believes must be enforced by the Government.

In its 60-plus page proposal, Optus says four pillars of regulatory reform are needed: the structural separation of Telstra, more effective powers for the competition watchdog, equal network access, and cost-based pricing for all participants.

"We are very pleased that the Government has recognised that the current system has failed consumers, but if the Government thinks that the model that best serves customers is the one that has been highlighted for the NBN, then it should be implemented now," Optus regulatory affairs general manager Andrew Sheridan said.

Regulatory reform could set a level playing field for all access seekers only if Telstra was structurally separated, Mr Sheridan said.

Senator Conroy's discussion paper canvassed the prospect of "functionally separating" Telstra's network operations from its other divisions, but Optus is calling for stricter measures.

Under Optus's structural separation model, existing Telstra shareholders would exchange their Telstra shares for two new shares -- one in a Telstra Retail company and one in a Telstra Access company.

Telstra Access and Telstra Retail would each have its own board and management teams and would be run independently.

"Telstra's two divisions would be run separately so it wouldn't have the same incentives as it does now to discriminate. In fact it would have very strong incentives to try and maximise usage of the NBN," Mr Sheridan said.

For Optus, separation is only one part of the equation. It also argues there should be a legal obligation to treat all access-seekers equally -- to supply all NBN participants with the same service on the same terms.

Optus said the Australian Competition and Consumer Commission should be granted greater powers to set access terms and conditions.

Optus is calling for the ACCC to be given upfront price-setting powers, to remove merits review and limit scope for judicial review of ACCC decisions.

"We need to end this negotiate-arbitrate nonsense because it really only benefits Telstra and the legal fraternity," Mr Sheridan said.

"If you can get separation in place, with strong equivalence and strong oversight powers for the ACCC, then everything else should fall into place."

But for regulatory changes to have the most successful long-term effect, Optus says, legislative change must be enacted before the end of the year.

"We need to try and deliver the best outcomes for consumers today," Mr Sheridan said.

"We shouldn't be waiting 10 years. We recognise that the current arrangements need to improve, and that means we need to take the hard and bold decisions today to implement the type of arrangement that will be best practise in the long term.

"The prospect of a successful NBN will be much greater if you have a vibrantly competitive industry with a number of stable, well-funded competitors rather than a market structure that continues to be dominated by one gorilla.",25197,25502815-15306,00.html