The coalition has described Federal Government plans to break up Telstra as among the most draconian pieces of legislation ever put before federal parliament.
Labor wants the telco giant's wholesale and retail businesses separated — either voluntarily or by force — to create a more competitive market before rolling out the National Broadband Network (NBN).
Queensland Liberal senator Ian Macdonald said the government was appropriating property belonging to a private company without offering compensation.
"This piece of legislation ... is one of the most draconian and unAustralian pieces of legislation that this parliament has ever seen," Senator Macdonald told the chamber.
The $43 billion national broadband network was a commercial lemon, and the government saw Telstra as a threat.
"We then come along with the bully boy tactics and we say to Telstra, 'Look we want you to give us your network, for you to get out of the wholesale area so that we won't have any competition'," Senator Macdonald said.
Communications Minister Stephen Conroy and the government were effectively holding a gun to the heads of Telstra's shareholders, Senator Macdonald said.
If Telstra doesn't agree to separate the government will bar it from bidding on lucrative wireless spectrum and force it to divest its interest in Foxtel.
But Labor senator Anne McEwen said Telstra's high level of market concentration was hampering competition, and causing Australia to lag behind other countries on the availability, price and quality of telecommunication services.
"In owning the fixed-line copper network as well as the largest cable network, and holding a majority share of the nation's mobile phone network, the government believes Telstra has disproportionately high levels of ownership," she said.
New Zealand and the United Kingdom had successfully used functional separation legislation to break up telco monopolies, Senator McEwen said.
Debate will continue this week on the Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2009.
Conroy has today accused Opposition leader Tony Abbott of leaning on Nationals senators to have them vote against the legislation. He said three Nationals senators — Barnaby Joyce, Fiona Nash and John Williams — have previously expressed support for restructure of the telecommunications sector.
"Yet in the last few days ... they have been leant on by Tony Abbott and the Liberals who are again dictating the line to the National party," he told ABC Television.
The Australian Greens and Independent senator Nick Xenophon had indicated support for the legislation, subject to the government agreeing to a number of amendments, Senator Conroy said.