Structural separation: on the cards or not?

Stuart Corner
Thursday, 04 June 2009 14:23

Opinion and Analysis

It's rare to see a shadow minister coming out to support the shadowed and claiming to speak for the same, but with calls for the structural separation of Telstra growing louder that's exactly what shadow communications minister Nick Minchin has done, in a press release headed: "Structural separation of Telstra not supported by Labor or the Coalition." Minchin said it was clear that neither the Rudd Government nor the Coalition was advocating the structural separation of Telstra. "While the options of either functional or further operational separation within Telstra have been canvassed in the Government's discussion paper, any decisions regarding structural separation should be left to the Telstra board and its 1.6 million shareholders."

To support his claim that Labor is not in favour of structural separation Minchin provide an extract from the Senate Estimates Hansard in which he grilled Conroy on the question and where Conroy said that this was option was not canvassed in the regulatory reform discussion paper, adding: "I have certainly never advocated structural separation."

The regulatory discussion paper was certainly seized on as by many in the industry as canvassing structural separation of Telstra. This may have been wishful thinking on their part but Minchin's, and Conroy's comments prompted me to revisit the paper and see exactly what it 'canvasses'.

Certainly there was nothing in the paper in favour of maintaining the status quo - operational separation of Telstra - and trying to solve the problems purely with revised regulation. "A dominant theme arising from the regulatory submissions [to the first NBN plan] was that the accounting and operational separation regimes have not promoted genuine equivalence of access for access seekers in the Australian telecommunications industry," it said. "In practice, despite extensive monitoring and reporting requirements on Telstra, it is extremely difficult to verify that this approach delivers genuine equivalence.... Maintaining the current separation arrangements will not deal with the issues concerning Telstra's use of its vertical integration."

The paper then goes on to say: "In light of this, there are a number of options the Government is considering. Figure 2 shows a number of possible separation models in order of increasing strength of the equivalence arrangements," and sure enough at the top of the pile in figure 2 is full structural separation and underneath it legal separation, which the paper explains "refers to the situation where appropriate parts of the company are made into separate legal entities, but ownership by the same owner is still allowed."

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