The federal government will have to rely on the support of the entire Senate crossbench if it wants parliament to approve its plan to restructure Telstra before the end of the year.
The Nationals, who are likely to support a form of structural separation of the giant telco, want a vote on Labor legislation deferred until early 2010.
Their Senate leader, Barnaby Joyce, says his party will side with the Liberals even though he thinks Telstra's wholesale and retail arms should be separated.
He wants any restructure to retain the universal service obligation which currently requires Telstra to ensure all Australians have reasonable access on an equitable basis to the standard telephone service and payphones.
We oppose the government cynically and contemptibly using the parliament to hold a bloody great bazooka at the head of Telstra
Senator Nick Minchin
"Regional Australia has to be protected," Senator Joyce told ABC Radio on Tuesday.
To push its legislation through the upper house the government will need the support of all seven balance-of-power senators.
But there is a fundamental difference between The Nationals and their coalition partner — the Liberal Party remains completely opposed to the legislation.
Opposition communications spokesman Nick Minchin said the Rudd government needed Telstra to prop up its $43 billion national broadband network plan, and was using the legislation to force the company to the negotiating table.
"What we're opposed to is the use of the force of law to require the break-up of a major Australian company owned by 1.4 million shareholders," Senator Minchin told ABC Television.
Telstra's future in terms of whether it separates or not should be a matter for the company and its shareholders, he said.
"We oppose the government cynically and contemptibly using the parliament to hold a bloody great bazooka at the head of Telstra to force them to the table."
Minchin said that the government was treating the telco's 1.4 million shareholders "frankly, with utter contempt".
The Australian Greens are unlikely to support the deferral of a Senate vote.
"A delay would be a mistake," the party's communications spokesman Senator Scott Ludlum told reporters, adding that the Greens were ready to debate the legislation.
"I think a delay, as the coalition is proposing, only increases the chance that Telstra will come to a deal with the (Communications) Minister (Stephen Conroy) over the Christmas break," he said.
To do that would cut parliament "entirely out of the loop" from the debate.
Senator Joyce said he believed Telstra was already moving to voluntarily restructure itself, and delaying a vote would help the telco arrive more quickly to that position.
Yesterday Minister for Communications Stephen Conroy has released two key documents related to the first National Broadband Network (NBN) tending process, in an attempt to clear the way for the Senate to debate the NBN Bills.
The chickens are coming home to roost for the Rudd Government.
They have tried every trick in the book to browbeat Telstra into submission and destroy Telstra as an opponent to their proposed monopoly NBNCo.
With Telstra holding out and Labor getting desperate the only solution for Conroy may be to offer Telstra a fair price Telstra assets.
If not, Telstra must reject the blackmail and fight a furious battle by alerting the Australian people to the despicable actions taken against an Australian company.