Telstra's SSU still not equal: competitors

Telstra's competitors have called for the competition regulator to again reject the telco's structural separation undertaking (SSU) unless concerns about ensuring equivalent services are addressed.

The Australian Competition and Consumer Commission (ACCC) rejected Telstra's first attempt of the document, which sets out how Telstra's wholesale business will function in the interim 10-year period as the National Broadband Network (NBN) rolls out across the country. Telstra resubmitted the undertaking in December.

The $11 billion deal between NBN Co and Telstra cannot go ahead until the ACCC accepts this undertaking.

Despite the introduction of an "overarching equivalence obligation" (OEO) designed to ensure that Telstra's wholesale arm treats its competitors the same as Telstra's retail arm — created on the back of industry and ACCC feedback — the obligation is limited and will be ineffective, according to AAPT.

"[It] is ineffective because it has limited application due to the many number of exemptions and limitations and the complexity of implementation," AAPT said in its submission.

"Enforcement mechanisms are also ineffective because they are comprised of convoluted, multi-stage, bureaucratic processes which offer too many 'outs' for Telstra before the benefit of any corrective action can even be gained. Even where consequences can flow to Telstra, the magnitude of these are severely limited by the drafting of the revised SSU as to have little or no impact on Telstra's behaviour."

This was echoed in Herbert Geer's submission on behalf of internet service providers (ISPs) Internode, iiNet and Adam Internet. The law firm noted that much of the equivalence obligations set out in the SSU were equivalent in name only, and there were a number of caveats that would allow Telstra to get out of equivalence obligations.

"For example, tying the overarching commitment to equivalence to specific 'Comparable Retail Services' could allow Telstra to avoid the overarching commitment to equivalence by introducing new retail services, which are more favourable to Telstra Retail than the 'Comparable Retail Services'," Herbert Geer said. "In this situation Telstra would not be in breach of the overarching commitment to equivalence because it would still be providing wholesale services that are equivalent to the Comparable Retail Services."

Optus welcomed Telstra's inclusion of the equivalence obligation, but said that there was a "significant drafting flaw" in how it compares services offered to retail competitors and Telstra's retail arm.

"The test ... does not impose an acceptable equivalence standard on Telstra as it is a different and lesser standard than required. It does not make sense as a comparison. The drafting flaw raises uncertainty about how to identify and prove if the overarching equivalence obligation has been breached," Optus said.

"Optus submits that the OEO remains ineffective as its scope is unclear and it is questionable how it can be applied to be enforced against Telstra."

According to Macquarie Telecom, the revised SSU still gives Telstra too much discretion to avoid meeting equivalence obligations.

"The compliance and enforcement mechanisms to rectify possible breaches by Telstra of the overarching commitment to equivalence outcomes are not effective because they provide Telstra with excessive discretion and, like the operational separation regime, feature a convoluted, multi-stage, bureaucratic process to implement any corrective action," Macquarie Telecom said.

"Specifically, Macquarie remains concerned that, in almost all instances, Telstra is entitled to propose and implement its own solutions to any transparency or equivalence issues. Further, Telstra is not subject to any retrospective penalties. Such a regime, like the operational separation regime before it, does not adequately address Telstra's incentive and ability to discriminate against its competitors."

Herbert Geer also welcomed the possibility of the ACCC re-regulating wholesale ADSL, but said that the SSU should only be accepted if the ACCC decides to regulate and set the prices for wholesale ADSL.

Despite the problems Telstra's rivals have with the revised undertaking, the telcos believe that these issues can be ironed out in the current consultation process.

Submissions on Telstra's revised SSU closed on Friday.