Optus court victory strengthens case for Telstra separation

Stuart Corner
Sunday, 03 May 2009 11:09

Opinion and Analysis

Asked by senator Kate Lundy in a Senate Estimates hearing last year: "In the ACCC's view is the current operational separation regime that applies to Telstra an effective mechanism for promoting equivalency between Telstra and its competitors?" Samuel replied: "The short answer is probably no."

He said the ACCC "continue[s] to receive complaints of conduct that suggest that the objective of equivalence, which was the objective of the regime, is not being achieved. According to Samuel, "There have been some instances of conduct since the regime's inception which, while it is not clear they breach the operational separation plan, do not promote the objective of equivalence which was the fundamental objective of the plan in the first place. In relation to the other objective of transparency, there is some additional reporting that the regime provides. However, this has been of limited benefit and is at a highly aggregated level."

He described the regime as "fundamentally unduly complex," saying that "a lot of discretion is left to Telstra. There are limited self-regulatory mechanisms and unduly convoluted processes to implement any corrective action if a problem is identified."

At around the same time, writing in The Telecommunications Journal of Australia, Tony Warren, Telstra's executive director of public affairs, claimed that "There are now firm, enforceable and audited rules and processes in place to ensure the confidentiality of wholesale customer data, the separation of wholesale and retail business units," and asked: "Why do you need structural separation when operational separation already provides volumes of information and transparency around pricing and equivalence of service? There is no systemic discrimination between wholesale and retail that would necessitate structural separation."

In the light of this judgement - and remember it revealed that this was not ad hoc activity by relatively low level executives but a systematic campaign carried out with full knowledge of top level executives and the board -it will be extremely difficult for Telstra to convince the government that anything short of full structural separation will prevent a repeat occurrence, or make it any easier for such to be proven.