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VIRTUALISATION BT's separation advocate to advise Australian Government on functional separation of Telstra
VIRTUALISATION BT's separation advocate to advise Australian Government on functional separation of Telstra | BT's separation advocate to advise Australian Government on functional separation of Telstra |
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| by Stuart Corner | |
| Friday, 24 July 2009 | |
  
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McCarthy-Ward was described by The Age as "having supervised the structural separation of [BT]." However BT was functionally not structurally separated (all parts remain one corporate entity with one board and one set of shareholders) and structural separation is not, publicly at least on the Australian Government's agenda. The Government's discussion paper on future regulation listed two separation options on which views were sought. "Option 1 -strengthening the current operational separation regime that applies to Telstra," and "A stronger form of separation, such as a functional separation regime similar to those introduced in the United Kingdom and New Zealand, and being considered as a regulatory remedy within the European Union." There was no mention of "legal" or "structural" separation. However this did not stop Optus devoting its submission entirely to the promotion of structural separation of Telstra. McCarthy-Ward has already been involved in the separation debate in Australia. On 4 March he gave evidence to the Senate Select Committee looking into the NBN, at the suggestion of BT. He told the committee "I am giving evidence...because I have had four years experience of developing and implementing the UK's process of functional separation, and BT considered it might be helpful to you to have direct access to somebody with that experience." He added: "Our experience of operating [the functional separation regime at BT] contained a number of learnings. It was far from straightforward, very complex at times and quite costly, but the results appear to be that the UK market is functioning well in a competitive sense, that BT itself has not been hampered or harmed in its own performance, and that competition is operating on a much fairer and more equitable basis, so the consumer and the end user appear to be benefiting as well." Later, he said: "Our retail business has increased its profitability steadily throughout the period of time since the undertakings were signed. There are costs that have been incurred, but if I look at the picture in overall terms those costs have been absorbed alongside a continually improving overall performance. It is worth saying that one of the reasons that performance has improved was that the corollary of building a very robust and satisfactory wholesale regime was that our regulator felt able to deregulate retail prices, and from that flowed some advantages to our retail business in terms of the flexibility and freedom that they had in pricing." McCarthy-Ward said that, in no sense was he "proposing...that the regulatory solutions of the UK are somehow directly applicable in the Australian market." However some of his comments seem particularly germane to the current situation in Australia, regardless of the relevance or otherwise of the UK's separation regime. BT initiated the functional separation regime in response to pressure from the regulator, Ofcom. McCarthy-Ward explained: "The choice that we had was a referral [to the UK's Competition Commission] that could have led to structural separation or might not, but only after two to three years of protracted uncertainty, or crafting a solution that would avoid that. Our decision was to craft such a solution." And said that the success of the venture had depended very much on visionary leadership at both BT and Ofcom. In response to a comment from committee member senator Ludlum, "I am trying to visualise that process occurring in Australia and it all seems kind of remote," McCarthy-Ward said: "A lot depended on the positions that both the leadership of Ofcom and the leadership of BT were taking at the time. We had a very visionary director-general in Ofcom in Stephen Carter and we had a very visionary CEO at BT in terms of Ben Verwaayen. Ben Verwaayen was very keen to put an end to what he saw as years of endless squabbling with the industry and the regulator and was willing to make a bold step to try to craft a solution that would defuse that environment. Had he not been of that frame of mind we would never have got there."
This article first appeared in ExchangeDaily, iTWire's daily newsletter for telecommunications professionals. Register here for your free trial.
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