Telstra faces structural separation: Government ultimatum

Stuart Corner
Tuesday, 15 September 2009 07:48

IT Industry - Strategy

Telstra has been given an ultimatum by the government: either cease to be both an owner of and service provider on the PSTN or face forced functional separation, divestiture of its HFC and Foxtel assets and limitations on spectrum acquisition.

These measures are only one part of a package of legislation unveiled today by communication minister Stephen Conroy that, if implemented, will usher in the biggest change to Australian telecommunications since full market liberalisation in 1997.

The other parts are radical streamlining of the access and anti-competitive conduct provisions of the Trade Practices Act and strengthening existing consumer protection provisions in telecommunications legislation.

The minister appears to have wholeheartedly embraced the views of the ACCC and most of the industry, except Telstra, in numerous public statements and submissions to government enquiries in recent months highlighting what they believe is wrong with the current regime.

Telstra has been given a number of options: structurally separate or face forced functional separation, limitations on broadband wireless spectrum acquisition and forced divestiture of HFC and Foxtel. If it chooses an acceptable form of structural separation the minister may waive either or both of the requirements for divestiture, but Telstra would still face limiting on broadband spectrum acquistion.

The third way is structural separation and divestiture of HFC and Foxtel, in which case Telstra would be free to acquire spectrum and able to continue its other business operations much as it does today. However the legislation also proposes significant changes to the access and competition regimes that are likely to have an unfavourable impact on Telstra. These will be dealt with in a separate iTWire story to be posted and linked to this one shortly.

According to the Information memorandum for the proposed legislation, the Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2009, Telstra will have two choices to structurally separate: create a new company and transfer its fixed-line assets to that company, or progressively migrate its fixed-line traffic to the NBN over an agreed period of time and under set regulatory arrangements, and in parallel selling or scrapping its existing fixed line assets.

CONTINUED