Optus court victory strengthens case for Telstra separation

Stuart Corner
Sunday, 03 May 2009 12:09

Opinion and Analysis

For example, it stated: "In this week's market share report you will notice significant reductions in Telstra's reported market shares for STD (down to 78.8 percent) and IDD (down to 63.1 percent).This week's decline in reported market share is a direct result of the upgrading of the market share reporting system such that the total market now includes all other carriers rather than being restricted to Optus."

Optus said that, "now that legal liability has been established, Optus will seek to establish the extent of Telstra's breaches of the access agreement and will be seeking damages." The extent of the damage caused to Optus could be enormous and near impossible to calculate.

Telstra's illegal activity took place from the early years of Optus when it was starting from a base of zero and struggling to build its business and wrest market share from the incumbent with only a five year 'duopoly window' before the market was thrown open to all comers by the 1997 legislation. The effects of any market advantage gained by its much more powerful competitor which significantly slowed that growth rate could clearly have had an enormous long term impact on Optus.

As competition on Telstra ramped up throughout the nineties from other telcos using Telstra's network - from 1991 any telco could offer fixed telephone services on their own switches so long as they used transmission infrastructure from Telstra (or Optus) - anecdotal claims that information on competitors' business operations and traffic found its way from Telstra Wholesale to Telstra Retail were legion, but never proven, and never challenged in court.

The fact that it has taken nine years of concerted legal action by the number two carrier shows how difficult such conduct is to prove: few of Telstra's competitors other than Optus would be able to mount and sustain such a challenge.

Telstra is now subject to an operation separation regime supposedly to curtail opportunities for such misuse of confidential information, but it does nothing to reduce the incentives since all units are part of the same entity, and ACCC chairman Graeme Samuel is not impressed with it

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