Optus court victory strengthens case for Telstra separation

By Stuart Corner
Sunday, 03 May 2009 11:09

Opinion and Analysis

Telstra has been found guilty of misusing information available within its network, as a provider of wholesale services to Optus, by passing this information to its retail arm for marketing and competitive analysis purposes. The outcome will significantly strengthen the case for structurally separating Telstra Wholesale and Retail so as to remove the incentive and the opportunity for similar conduct in the future.

The court case has been running for nine years and the judgement concerns, specifically, Telstra's conduct between the years 1993 to 2000. Optus alleged, and the court found, that, at least in the period 1993 to 2000, its confidential long distance traffic information was provided by Telstra Wholesale to Telstra Retail and then used to prepare 'Market Share' Reports marked 'Top Secret' which formed the basis of marketing and advertising attacks in the long distance call market to lure Optus customers back to Telstra and gain market share.

According to Optus the information in question was enormously valuable to Telstra's marketers and went to the highest levels of the organisation. Maha Krishnapillai, Optus director of government and corporate affairs, told iTWire "Telstra were able to see, in real time, the impact of Optus' marketing and promotional activities on network traffic. And to marketing people, such information is like gold."

He added that much of the detail of the case remains confidential, and that the publicly available judgement represents only a portion of the full judgement, which he claimed contained much damning evidence against Telstra. "What I can tell you is that market reports based on confidential Optus information went to the highest levels in Telstra: to Frank Blount [managing director] to Doug Campbell [deputy MD of Telstra] and to the Telstra board."

In his judgement Justice Edmonds said: ".... it is clear from at least December 1997, from which time carriers other than Optus were using Telstra's network, that Telstra used traffic information of Optus, not only in calculating the total aggregate of traffic that travelled over its network, but in identifying directly the quantity of Optus' traffic that travelled over its network independently of the traffic of other carriers that travelled over Telstra's network and that of Telstra itself."

To illustrate this he cited, and reproduced in his judgement, the STD & IDD Market Share Report – prepared by Telstra Business & Government for the week ending December 6, 1997. It contained a graph showing, month by month Optus IDD call volumes and revealed that the gathering and presentation of detailed information such as this on Optus and other carriers was systematic and routine.
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