Conroy "asks" Telstra to break up

The Minister for Broadband, Communications and the Digital Economy, Senator Stephen Conroy has asked Telstra to break apart its wholesale and retail operations.

In a seismic policy shift, The Minister for Broadband, Communications and the Digital Economy, Senator Stephen Conroy today said “It is the Government’s clear desire for Telstra to structurally separate, on a voluntary and cooperative basis.”

Positioning the move as micro-economic reform, Conroy said the breakup is necessary because "The existing telecommunications anti-competitive conduct and access regimes have been widely criticised as being cumbersome, open to gaming and abuse, and provide insufficient certainty for investment."

The government will legislate the strutural separation. An announement issued by the Minister this morning says :

"The legislation will allow Telstra to voluntarily submit an enforceable undertaking to the Australian Competition and Consumer Commission to structurally separate. The Minister can provide guidance to the ACCC on the matters it would take into account when considering whether to accept the structural separation undertaking.

If Telstra chooses not to structurally separate, the legislation provides for the Government to impose a strong functional separation framework on Telstra. This Bill proposes implementing a functional separation regime by altering the Telecommunications Act 1997 to require that:

  • Telstra conduct its network operations and wholesale functions at arm’s length from the rest of Telstra;
  • Telstra provides equivalent price and non-price terms to its retail business and non-Telstra wholesale customers; and
  • this equivalence of treatment is made transparent to the regulator and competitors via strong internal governance structures."

The Minister also stated that "Telstra will be prevented from acquiring additional spectrum for advanced wireless broadband while it:

  • remains vertically integrated; and
  • owns a hybrid fibre coaxial cable network; and
  • maintains its interest in Foxtel."

Other propsed regulatoin will impose tougher universal service obligations for the carrier, introduce new methods to make it harder for payphones to be removed from service and mandate certai levels of customer service.

WE SAY

Senator Conroy is saying what many Australians have been thinking for some time and this bold move will therefore be welcomed by many.

But let's not forget that Telstra's rivals are not non-profit organisations. Much competitive posturing has positioned other carriers as white knights, clearly a false position.

While this move will almost certainly mean a more level playing field in this vital sector, the law of unintended consequences will play a part and we expect further reform will be necessary as the consequences of a devolved Telstra become apparent.

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