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Tuesday, 30 August 2011 16:51

ACCC set to reject Telstra's separation and migration plans


The ACCC has started its public consultation of Telstra's structural separation undertaking and migration plan saying it believes significant changes must be made to the undertaking to make it acceptable.

Telstra submitted the undertaking on 29 July and the draft migration plan on 24 August. The separation undertaking details how Telstra plans to cease supplying fixed-line voice and broadband services over its copper and HFC networks and to use the NBN instead.

The ACCC is now in an unenviable position. It would not be an exaggeration to say that the future of the NBN hangs on the ACCC accepting the undertaking, because it is an essential prerequisite to the Definitive Agreement between Telstra, the Government and NBN CO detailing Telstra's participation in the NBN and which Telstra is planning to put to shareholders for approval at its AGM on 18 October.

Having commenced the public consultation period it has a mandatory 28 days to complete it. It must then prepare and publish a draft decision on whether to accept or reject the undertaking, accept submissions and then publish its final decision.

The Competitive Carrier's Coalition (CCC) was quick to lay the blame for the current situation at the door of Telstra. A CCC spokesperson said: "The ACCC's response today highlights Telstra's failure to consult with competitors and discuss how it plans to meet the Government's requirements, and how it plans to improve the way it treats those same competitors'¦Telstra's failure to provide a reasonable undertaking has placed the ACCC in a difficult position. The Commission's statutory 28 days consultation period has commenced, even though it is clear that the present undertaking cannot be acceptable.
"This raises the question: what opportunity will there be for the public to comment on the REAL undertaking when it is finally presented to the ACCC?"
The spokesman added: "Telstra must accept that as a consequence of its poor management of the process to develop the first version of its undertaking, it cannot now meet its deadline to present its plans to its shareholders in October. Telstra should not expect the regulatory process to be compromised to accommodate its own failure."

He called on Telstra to "now do the right thing and ask the ACCC to suspend the present undertaking while it does the necessary work with access seekers to make the fundamental changes needed to bring its undertaking up to the appropriate standard."


The spokesman added: "Some aspects of its undertakings are so inadequate as to be provocative. For example, Telstra proposes so called 'guaranteed rebates' for failures in its wholesale systems. However, these rebates are designed to provide no real compensation to competitors and no penalty to Telstra.

"If, for example, the automatic service connection system that allows competitors to sign up new customers failed for a whole month, a competitor that connects 1000 end users a month would only be entitled to a rebate of $12! If anything, this level of rebate would create an incentive for Telstra to turn off the ordering systems, rather than an incentive to try to better serve competitors."

ACCC chairman Rod Sims said. "While the ACCC will move as quickly as possible towards a resolution, the preliminary view is that the structural separation undertaking that has been provided does not address legislative requirements'¦ The ACCC's main area of concern'¦relates to the adequacy of Telstra's proposed interim equivalence and transparency measures.

"The ACCC's initial view is that there needs to be a clear and enforceable commitment to an 'equivalence of outcomes' that enables wholesale customers and Telstra's retail businesses to gain access to key input services of equivalent quality and functionality."

"In addition, the ACCC is seeking clarification on the mechanisms that would ensure the proposed equivalence and transparency measures remain fit for purpose for the duration of the interim period. Further, the ACCC has serious concerns about arrangements between Telstra and NBN Co that include the parties' ability to vary the arrangements without further scrutiny by the ACCC."

He added "Telstra's undertaking'¦does not yet include a compliance plan for Telstra's primary commitment to be structurally separated from 2018. [However] this is a matter which is readily correctable by Telstra."

Other aspects that the ACCC says, "militate against acceptance of the structural separation undertaking" include:
"The provisions against Telstra promoting wireless services as substitutable for NBN Co's fibre services and the limitation on Telstra's ability to provide HFC services to new channel providers.

The ACCC has yet to receive and review submissions to its discussion paper but says it "anticipates that Telstra will need to consider the ACCC's concerns before submitting a revised structural separation undertaking that is capable of acceptance by the ACCC."

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