More trouble for Telstra's separation plans: CCC slams rebates proposal

Stuart Corner
Monday, 14 November 2011 13:25

IT Policy - Regulation

The Competitive Carriers' Coalition has fired another salvo at Telstra's plans for structural separation, branding Telstra's proposal for rebates if its wholesale services fail to meet specified performance levels as "[failing] to meet even the basic criteria which would be expected of a standard, commercially negotiated arrangement."

Telstra has spelt out in a structural separation undertaking how - during the transition to the NBN and beyond - it will continue to serve wholesale customers dependent on its network infrastructure. Approval of this plan by the ACCC is an essential prerequisite to Telstra's participation in the NBN under the terms of its definitive agreement, approved by shareholders at Telstra's AGM last month.

Prior the AGM Telstra told shareholders it did not expect any changes required by the ACCC would have a material impact  and after the agreement was approved by shareholders representing over 99 percent of Telstra stock, Telstra said they would have a chance to vote again on any material changes.

It was evident then that there was strong opposition to the terms of the SSU and at the end of last month Telstra moved to address these by announcing plans for an industry forum and releasing a discussion paper canvassing the possibility of substantial changes to the undertaking to address industry's and the ACCC's concerns.

The CCC has already been one of the most strident critics of the SSU: it had made three submissions to the ACCC prior to the latest that deals specifically with the CCC's concerns regarding the proposed rebate scheme.

In this latest submission, the CCC says: "Telstra has proposed an imbalanced and 'supplier friendly' [service rebate] regime, which does not come close to achieving even the minimum standards expected in a commercially negotiated agreement. Such a regime could never seriously be put forward by a supplier which faced genuine competition, and no customer would agree to such a regime."

It says that Telstra should have regard to the service level regimes that apply in related industries where suppliers face genuine competition. "For example, it has been noted that IT supply and outsourcing agreements commonly now impose service levels of in excess of 99.9 percent."

It is also concerned that a service provider signing up to scheme as proposed would be required to waive its rights to any other avenue of redress. For example, they should forego their right to take Telstra to court.

The CCC concludes that the sort of rebate regime it proposes would not be unique. "Service level regimes have been imposed in similar circumstances overseas and we note in particular the functional separation of British telecommunications provider, BT. The service level regime which has been agreed to by BT provides a useful comparative reference in considering the regime proposed by Telstra."