Telstra to separate wholesale and retail operations

Stuart Corner
Saturday, 24 June 2006 03:44

IT Policy - Regulation

The minister for communications, information technology and the arts, Senator Helen Coonan, has approved Telstra's operational separation plan which aims to ensure transparency and equivalence in the supply of services to Telstra's wholesale customers and to Telstra's own retail operations.

She claimed that the framework went "well beyond accounting separation in providing for organisational separation, strategies for the delivery of high quality wholesale services, internal contracts for the delivery of designated services and a robust compliance framework."

The operational separation framework comprises the plan, detailed strategy documents and price equivalence arrangements. Telstra's operational separation strategies have already been released together with the plan while the price equivalence framework will be finalised and released on 30 June 2006. All these documents are, or will be available from Telstra Wholesale's web site.

Telstra said implementation of the plan would commence immediately. Group managing director of Telstra Wholesale, Kate McKenzie, said "All Telstra staff will now receive information on Operational Separation and be required to complete compulsory on-line training programs."

Telstra's director of risk management and assurance, Andrew Dix, has been appointed director of equivalence under the Plan. He will oversee its implementation and report on compliance to groups including the ACCC and the Department of Communications.

Coonan said that, although the plan has been approved, she had "emphasised to Telstra that the implementation of operational separation is not yet complete...Telstra is now required to implement the strategies for service quality, information equivalence, information security and customer responsiveness, which relate to Telstra's wholesale services generally, and notional internal contracts, key performance indicators and the price equivalence framework, which relate to designated services."

The plan as approved is a second draft which the minister said "has considerably improved from the initial draft released in February. The first draft plan did not contain enough detail or commitments, such as how Telstra would implement 'organisational separation' or what role the wholesale business unit would have."

The initial draft was branded "a disgrace" by the CCC, a body representing Telstra's major competitors.

Coonan said that, "after considering the feedback from stakeholders during the consultation period and after lengthy discussions with the Australian Competition and Consumer Commission (ACCC) and my Department, Telstra has submitted a significantly improved plan that provides sufficient detail and the necessary commitments to ensure meaningful operational separation can be implemented."

Telstra is now required to have separate staff and separate premises for the Telstra wholesale and Telstra retail business units. Anyone who works for Telstra retail unit can no longer work for the wholesale unit.

"Notional internal contracts and key performance indicators will also be utilised to demonstrate equivalence in relation to the operational quality of designated services," Coonan said.

"Internal wholesale prices will be used as a key input in assessing whether Telstra is pricing fairly at the retail level compared with the prices it charges its wholesale customers.

"Before making a price change to a retail equivalent of a designated service, Telstra will use a retail pricing tool to determine whether the ACCC would be likely to have concerns about price squeezing or other competition concerns under the Trade Practices Act."