Telstra separation unnecessary for competition: Ovum analyst

Stan Beer
Tuesday, 07 December 2010 11:43

IT Policy - Government Tech Policy

Structural separation of Telstra will not affect broadband competition in Australia and is unlikely to change the market dynamic. This is the view of a senior analyst at global telecommunications research consultancy Ovum.

The Federal Government successfully pushed legislation paving the way for the structural separation of Telstra through Parliament in November after many months of haggling with the dominant telco and its political opponents.

According to Ovum research director David Kennedy, "Telstra has been steadily losing market share in broadband for a long time, proving that its competitors have all the access they need to compete with Telstra and generate customer benefit. It is unlikely that this restructure will change this market dynamic much."

Kennedy says that structural separation is a radical step that is almost unprecedented globally.

In the UK and New Zealand, incumbents have been required to functionally separate - reorganise themselves into business units operating at arms' length. But they have not transferred ownership of their assets, which is what structural separation requires.

"Of course, the rollout of the NBN will ultimately ensure that the last-mile network is owned and operated by a separate entity, the NBN Co.  But in the meantime, Telstra will be required to restructure itself to ensure it treats its own retail operations exactly like it treats its wholesale customers," says Kennedy.

According to Kennedy, based on the UK and New Zealand experience, the most likely outcome is a three-way split between Telstra's last-mile infrastructure business, Telstra's wholesale business, and Telstra retail.

"The devil in the detail will be the relationships between these three units. Telstra's competitors will be looking for the strictest possible separation, meaning that Telstra retail would need to purchase access from Telstra Wholesale on the same terms as other wholesale customers. Telstra's competitors will want Telstra to sell off its last-mile copper network to create a fully independent company," Kennedy says.

"Will this really affect competition in the market? Perhaps, but not a great deal."