Telstra break-up long overdue, says Optus

Telstra has been accused of charging unfair fees

In a bid to curb Telstra Corp’s long-standing dominance, the Australian government plans to force the once state-owned monopoly to split up its retail and wholesale businesses, a move which rival Optus describes as being ‘long overdue’.

Under the draft legislation unveiled yesterday, Telstra will be barred from buying new licences for wireless broadband services if it does not fall in line, according to Australia’s Communications Minister Stephen Conroy.

If enforced, the curb would cut Telstra out of a fast-growing market segment that could eclipse the size of Australia’s fixed-line Internet segment.

With high-speed broadband connectivity being confined mainly to the cities, wireless Internet technology is widely seen as the key to linking up the rest of the country.

‘The government’s strategy on separation is to make Telstra an offer it cannot refuse. Separate yourself, or have separation done for you,’ according to technology research firm Ovum.

Telstra, which has long opposed a break-up, deemed the government proposal as ‘unnecessary’ and said it was disappointed with the result, a view not shared by Singapore Telecommunications’ Australian unit Optus.

‘The Federal Government today made an important step in reforming the telecommunications sector. It is now up to the parliament, Telstra and the rest of the industry to ensure this long overdue reform becomes a reality,’ Optus CEO Paul O’Sullivan said in a statement.

The new government legislation comes amid growing calls for a Telstra split in some government quarters, as well as among the country’s competition regulator and other local telecommunications players.

With its ownership of extensive telecommunications infrastructure, Telstra has constantly been accused of charging unfair fees and delaying access to its network nodes.

Mr Conroy was previously quoted as saying that Telstra’s current structure is a ‘complete joke’ that is stalling the country’s plans to build a pervasive, high- speed broadband network.

Telstra was barred from taking part in the tender for this project last year. However, other bidders also returned empty handed as authorities eventually decided to take on the task themselves.

To comply with the proposed government mandate, Telstra may have to divest its fixed-line business or move some services to the new government network. The key is to make Telstra ‘structurally separate’, Mr Conroy said.

‘The measures in this legislation will finally correct the mistakes of the past. The government will require the functional separation of Telstra unless it decides to voluntarily structurally separate,’ he said in a Reuters report

‘However, separation takes time to accomplish, because separation requires IT systems to be redesigned or even duplicated. While the government will seek agreement by year’s end, a separation process might take two years to fully execute,’ Ovum cautioned.

In Singapore, a similar requirement has been applied to the ongoing Next- Gen NBN (National Broadband Network) project.

Under the Singapore model, the company in charge of building the new network will need to be ‘structurally separate’ from the firm that is managing the fibre-optic broadband highway.

The Singapore authorities believe the separation clause will curb unfair practices and spark competition in the market for providing high-speed Internet services.