Telstra split-up: Complete industry response

update The telecommunications industry seems to be wreathed in euphoric mist after today's announcement which looks to lead to Telstra's separation, but there are still voices of caution to be heard.

What Telstra does in a sense is kind of irrelevant to us. Whichever way, the days of Telstra's vertical market power are over.

CCC executive director David Forman

The Federal Government announced today that if Telstra did not voluntarily structurally separate, a new telecommunications reform package would permit the government to impose an oppressive functional separation framework on it. Telstra said it was disappointed but willing to cooperate.

Matt Healy, national executive, regulatory and government for Macquarie Telecom described the atmosphere at the press conference as "buoyant". Optus regulatory affairs general manager Andrew Sheridan from Optus agreed to a joke that he along with the rest of the carrier's staff were dancing on roofs.

Yet it was Communications Minister Stephen Conroy who was the cat getting the cream. "It was clearly a buoyant and optimistic minister," Competitive Carriers' Coalition executive director David Forman said. "A minister who was of the conviction that what he was announcing was historic."

"This is game changing legislation. It's a stronger version if anything of the UK arrangements," Forman said. It struck to the heart of the problem, he believed: that the Australian Competition and Consumer Commission couldn't bring access disputes to a conclusion.

"The focus has to be on consumer interest and competition," iiNet's chief regulatory officer Dalby said. "That looks to me to be the likely outcome of these reforms."

Applause also came from across the Tasman. "Operational separation has already delivered demonstrable benefits in New Zealand including significantly increased investment and more competitive choice for customers," Telecom NZ CEO Dr Paul Reynolds said in a statement.

Reynolds did, however, admit that his pleasure with the decision was not entirely altruistic. "For some time we have been seeking a level playing field where our Australian business, AAPT, enjoys the same equal access to customers in Australia as Telstra already receives in New Zealand," he said.

The industry felt it had Telstra where it wanted it. "It can choose to structurally separate and be part of the future or stay in the path and be subject to regulation," Healy said, backed up by a statement from AAPT CEO Paul Broad.

"What Telstra does in a sense is kind of irrelevant to us," Forman said. "Whichever way, the days of Telstra's vertical market power are over."

It's not a done deal yet, though. The legislation needs to go through parliament. "I'm expecting that there'll be a fair bit of discussion," Dalby said.

Ed Husic
(Credit: CEPU)

Discussion was something there has not been enough of up to this point despite the call for submissions on legislative reform, according to Ed Husic, national president of the union representing the most Telstra employees, the Communications, Electrical and Plumbing Union.

"We are concerned about the amount of consultation the government has made before making this announcement," he said. "It hasn't been widespread."

Husic said he was concerned about the thousands of people who work for Telstra. He said it's been hard to gain knowledge by examining other countries as Australia's market model and geography are different to the UK and New Zealand whose telecommunications incumbents have also undergone separation.

The risk with separation was that revenue streams would "go all over the place", he said, which could have unpleasant effects. "It doesn't take too much convincing for Telstra to cut jobs. It would certainly accelerate decisions on what they want to do about jobs and conditions," he said.

Husic wasn't convinced either that the government has been getting entirely impartial advice from industry on the separation issue.

"A lot of the interested parties who have been calling for separation are doing so with a vested viewpoint," he said. "That's not the way to make policy"

The policy needed to be based on whether or not Australia would see a benefit, either by getting faster broadband or cheaper prices, and not the interests of powerful stakeholders. It also needed to take jobs and conditions of Telstra employees into account, Husic said.

"We would expect government to be a lot more open in discussions," he said. "Stakeholders who make the largest noise shouldn't be the ones making the policy."

Internode managing director Simon Hackett believed the reforms couldn't come quickly enough. "It looks to be very close to what the industry has wished for, and it will, we hope, address the long standing deep inequities in the current regulatory regime that allow Telstra to 'game' that regime (and to date, they have 'gamed' it and usually won — with consumers having been the losers)," he said.

Hackett thought the announcement didn't leave Telstra with many options, with only its past behaviour to blame for that fact. "There is not much wiggle room in the announcements for Telstra. At a deep level, the current management team must now face the challenge of reaping the outcomes sown by the previous Telstra management team."

As for Telstra's shareholders, Hackett was convinced that separation would be beneficial to them since it would force the "halves" of the business to be as effective as they could be.

"Today the share price of Telstra reflects the average of a long run utility business added to a vertical value-added services business," he said. "Separating them allows the value of the value-added services business to increase, and allows the utility business to concentrate on doing a great job of being that utility business."