Monday, September 14, 2009

Australian Government Proposes Break-up of Telstra

The Australian government proposed fundamental reforms to structurally separate Telstra on "a voluntary and cooperative basis."

The Minister for Broadband, Communications and the Digital Economy, Senator Stephen Conroy stated that the reforms were aimed at boosting competition and said it is "possible to achieve a win-win outcome in the interests of Telstra, its shareholders and, more broadly, all Australians."

Specifically, the proposed legislation will allow Telstra to voluntarily submit an enforceable undertaking to the Australian Competition and Consumer Commission to structurally separate. If Telstra chooses not to structurally separate, the legislation provides for the Government to impose a strong functional separation framework on Telstra.

This bill proposes implementing a functional separation regime by altering the Telecommunications Act 1997 to require that:

  • Telstra conduct its network operations and wholesale functions at arm's length from the rest of Telstra;

  • Telstra provides equivalent price and non-price terms to its retail business and non-Telstra wholesale customers; and

  • this equivalence of treatment is made transparent to the regulator and competitors via strong internal governance structures.

As a inducement, Telstra will be prevented from acquiring additional spectrum for advanced wireless broadband while it:
  • remains vertically integrated; and

  • owns a hybrid fibre coaxial cable network; and

  • maintains its interest in Foxtel.
  • In April, the Australian government rejected all five bids for the next generation national broadband network and instead announced plans to build the A$43 billion (US$30.7 billion) FTTP network itself. Under the Rudd Government's new national broadband network every house, school and business in Australia will get access to affordable fast broadband. The plan calls for the government to set-up a new entity that would install fiber connections to ninety percent of Australian homes and businesses over an eight year period. The network will deliver wholesale services of 100 Mbps or better. Locations outside the fiber footprint would be served by high-speed (12 Mbps) wireless connections. Private investors could take a minority stake in the project and after five years the government would sell its majority stake. The Government's investment in the company will be funded through the Building Australia Fund and the issuance of Aussie Infrastructure Bonds (AIBs), which will provide an opportunity for households and institutions to invest in the national broadband network. Australia's Prime Minister Kevin Rudd described the initiative as the largest infrastructure project ever undertaken by the Australian government.

See also