Just what do you mean by structural separation?

Stuart Corner
Thursday, 12 June 2008 14:05

Opinion and Analysis

Calls for 'structural separation' are reaching a pitch matched only by Telstra's condemnation of the concept, but most of the competing rhetoric glosses over exactly what form of structural separation might be on the agenda, and, absent any real world examples, invokes operational separation to bolster its arguments.

At its most extreme, a structural separation of Telstra would see it split up into multiple, totally separate entities with separate shareholdings, separate boards, premises, staff and assets. One might own all the network infrastructure, or perhaps the mobile network might be separate entity, as might the owner of the HFC network.

The main game, however would be ensuring that the owner of 'natural monopoly' infrastructure had no involvement in delivering services carried on that network to end users of any kind: it would deal only with wholesalers who may or may not sell direct to end users.

Such an undertaking would take years and be fraught with difficulty and controversy. Nothing on this scale has been attempted since the break up of the old AT&T in the mid 1980s when networks and the services they carried were much simpler. Furthermore, that break-up was done primarily on geographic lines: seven "Baby Bells" were created to offer local services but were barred from offering long distance and international services and the rump of AT&T was barred from offering local services.

Neither of the contemporary 'flagship' separations - BT and Telecom NZ - have been game to attempt a corporate fission: both entities remain intact with the same shareholding and the same board of directors responsible for governance in accordance with the respective legislation governing corporate entities. They are in fact examples of operational separation, albeit much more robust than the current operational separation imposed on Telstra.

Not that full blown structural separation has not been seriously contemplated in Australia. In December 2002  communications minister Richard Alston ordered the House of Representatives Standing Committee on Communications, Information Technology and the Arts to "inquire into and report on the economic and social impact of structurally separating Telstra's core network from its other businesses and reducing the Commonwealth's current shareholding in Telstra's non-network businesses".
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