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