Euphoric welcome for new telecoms legislation

Stuart Corner
Tuesday, 15 September 2009 13:02

IT Industry - Strategy

The Australian Greens' spokesperson on communications, senator Scott Ludlam, said: "For years the telecommunications industry has been demanding the government regulate Telstra and bite the bullet on separation of wholesale and retail services. We insist that Telstra, the NBNCo or any other telco never be allowed to own public infrastructure and simultaneously compete with retail providers. This situation has stunted telco growth in Australia and it must not be allowed to happen again."

According to iiNet CEO, Michael Malone, "The big winner from these reforms is the Australian consumer who will be able to gain access to fast, affordable and competitive broadband services. [The legislation] should provide greater certainty for the telecommunications industry and encourage investment, innovation and jobs."

Ovum research director, David Kennedy greeted the announcement with some reservations. "Separation takes time to accomplish, because separation requires IT systems to be redesigned or even duplicated. While the Government will seek agreement by year's end, a separation process might take two years to fully execute."
 
He noted that separation had only been accomplished in two other markets, the UK and New Zealand, so global experience is limited. "There is no doubt that separation creates a more level playing field and a more dynamic market. However, it also increases static costs, and there are suggestions it reduces investment incentives. It remains to be seen where the long term balance lies."

He also suggested that the package of reforms "presents an opportunity to articulate a transition strategy to the NBN. This is the perfect time to vend Telstra's copper access network into the NBN Co, providing an immediate wholesale revenue stream for the NBN Co. This would also reconfigure the NBN Co's task: rather than building a FTTH network from scratch in competition with Telstra, its task would be to upgrade copper to FTTH. This would allow Australia to avoid a lose/lose competitive battle between the NBN Co and Telstra's copper network." This option, however, is largely dependent on how Telstra chooses to respond to the proposed reforms.

Kennedy added: "One unknown is whether Telstra cable will be caught up in the separation scheme, and whether Telstra will be required to provide regulated access to its upgraded 100Mbps cable network. This is crucial to the business case for Telstra's national cable upgrade programme." (To date Telstra has given no indication of plans ot upgrade its HFC network anywhere other than in Melbourne)."