Australian comms minister canvasses structural separation

Stuart Corner
Tuesday, 06 May 2008 18:46

Opinion and Analysis

Australia's communications minister, senator Stephen Conroy, has said that he would consider a structural separation of Telstra along the lines of separation regimes introduced in Singapore, the UK and New Zealand in order to ensure a competitive market in the provision of future broadband services.

While the government has always said that it would consider regulatory and legislative changes to ensure that the builder of a future broadband access network would not enjoy any competitive advantage in the provision of services delivered over it, Conroy's remarks - made in a speech to The Sydney Institute - are the clearest indication to date that it would consider such far reaching changes.

The government has issued a request for proposals to build the national broadband network and has invited proponents to put forward structural measures or models to address the Government's objectives of competition and an open access regime.

Telstra presently operates under an operational separation regime designed to achieve the same ends as structural separation but it is widely regarded as ineffective. Conroy told the audience at the Sydney Institute that the government shared this vie: "Labor [in opposition] opposed the current operational separation regime that applies to Telstra because we regarded it as ineffective.

He added: "Now in Government, we have not changed our view. We are prepared to carefully look at structural arrangements similar to those adopted in countries such as UK, NZ and Singapore. The regulatory arrangements and structures around the National Broadband Network are a central consideration in this process. This is why I have also called separately for submissions on what the future regulatory settings should look like."

The news will no doubt be welcome to all those who have been calling for such change, but if the government were to accept proposals for a separation regime akin to that in any of the countries mentioned, the challenges of implementing it would be enormous.

Responses to the RFP that require a significant change to the regulations will have to presented simultaneous with the recommended changes and with no certainty as to exactly what the new order post separation will look like. Before it called for tenders for the network the government should have the ground rules for structural separation set even if structural separation had not been fully implemented.

Not only is it running both processes in parallel, it is doing so in a ridiculously compressed timeframe. The RFP was issued on 11 April, responses are required by 25 July and the expert panel set up to review these has just eight weeks to make its recommendations to government which intends to award the contract by October 2008. Any initiative for a UK/Singapore/NZ style separation would not even have got off the ground in that time frame.

Meanwhile Optus CEO, Paul O'Sullivan has called for a five month extension to the tender process and for an assurance from the federal Government that there would be a 'structural separation' between ownership and service provision on the new network (which falls short of structural separation on the scale introduced in Singapore, the UK and New Zealand.

He has threatened to boycott the process, which would leave the G9 consortium dead in the water. And Telstra chairman, Donald McGauchie, has said Telstra would pull out of the tender process if it was forced to formally separate its wholesale and retail arms.

No doubt there will be more posturing and brinkmanship from both sides. Conroy will have a very difficult job steering a course between the two to a successful out. It would be embarrassing in the extreme for the government if nobody turned up for its $4.7b national broadband network party.