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Telstra to be split
Michael Sainsbury
AUGUST 17, 2005
http://australianit.news.com.au/articles/0,7204,16286365^15306^^nbv^,00.html
Slashdot discussion: http://it.slashdot.org/it/05/08/17/0217208.shtml?tid=215&tid=218
TELSTRA will be split in two in an effort to boost competition in the $30 billion telecommunications industry as part of a package of reforms ahead of its full privatisation.
The package, believed to have been approved by cabinet last night, will force a furious Telstra to create distinct network and retail divisions, with separate premises and management but under the same company structure.
If the measures are passed by the Coalition partyroom as early as today, legislation to sell Telstra could go before parliament next month.
That would allow the Government to sell its 51.8per cent stake in Telstra before the end of next year.
The concept of splitting Telstra into separate divisions - so-called operational separation - has been promoted as a means of reducing Telstra's dominance since deregulation of the telecoms market started in the mid-1990s.
Under the Government's proposed changes, Telstra's wholesale division, which runs its copper, cable and mobile networks, would be separated from its retail division.
The wholesale division would have to sell services - namely access to networks - to the retail division on the same terms it sells services to Telstra's competitors. Those companies then on-sell services to their own customers.
The terms would be available to regulators, ensuring Telstra was not hurting competition by charging competitors too much.
Some details of the split are yet to be finalised but it has the strong backing of the Australian Competition and Consumer Commission, which has for years been pushing a more comprehensive separation plan that could have broken Telstra in separate companies.
Included in the regulatory changes, designed to assuage community concerns about the power of a fully privatised Telstra, are a range of "non-price" elements such as fault repair times, billing times and access to telephone exchanges.
They are part of broader package of checks and balances on a privatised Telstra presented to cabinet by Communications Minister Helen Coonan.
There is also $3.2 billion in new funding for regional telecommunications.
But Telstra's new management team, led by American Sol Trujillo, has been angered by the reforms, which some analysts believe will carve billions off the value of the company. They promised a public campaign in an attempt to mobilise its shareholders and customers against the package.
Such a move would put it on a collision course with its biggest shareholder, the Government.
Telstra has already attempted to turn up the heat on the Government, threatening to halt investment in new technologies, after its last-ditch proposal of a $5.7 billion plan to "hotwire" the country - requiring a government handout of $2.6 billion and reduction in regulations - failed to win favour.
"Telstra needs to tell the whole truth on what the consequences of toxic regulation will be for its customers and for regional parity and services," Telstra regulatory, public policy and communications chief Phil Burgess told The Australian.
Dr Burgess said the company would be in "close contact with our biggest stakeholders - shareowners and businesses - whose productivity improvements will rest on new broadband services".
If the Government is drawn into a publicity fight with Telstra, it will commit to a second expensive advertising campaign. The Government has already promised to counter a union campaign over its struggling industrial relations changes.
The Australian
Telstra to be split
Michael Sainsbury
AUGUST 17, 2005
http://australianit.news.com.au/articles/0,7204,16286365^15306^^nbv^,00.html
Slashdot discussion: http://it.slashdot.org/it/05/08/17/0217208.shtml?tid=215&tid=218
TELSTRA will be split in two in an effort to boost competition in the $30 billion telecommunications industry as part of a package of reforms ahead of its full privatisation.
The package, believed to have been approved by cabinet last night, will force a furious Telstra to create distinct network and retail divisions, with separate premises and management but under the same company structure.
If the measures are passed by the Coalition partyroom as early as today, legislation to sell Telstra could go before parliament next month.
That would allow the Government to sell its 51.8per cent stake in Telstra before the end of next year.
The concept of splitting Telstra into separate divisions - so-called operational separation - has been promoted as a means of reducing Telstra's dominance since deregulation of the telecoms market started in the mid-1990s.
Under the Government's proposed changes, Telstra's wholesale division, which runs its copper, cable and mobile networks, would be separated from its retail division.
The wholesale division would have to sell services - namely access to networks - to the retail division on the same terms it sells services to Telstra's competitors. Those companies then on-sell services to their own customers.
The terms would be available to regulators, ensuring Telstra was not hurting competition by charging competitors too much.
Some details of the split are yet to be finalised but it has the strong backing of the Australian Competition and Consumer Commission, which has for years been pushing a more comprehensive separation plan that could have broken Telstra in separate companies.
Included in the regulatory changes, designed to assuage community concerns about the power of a fully privatised Telstra, are a range of "non-price" elements such as fault repair times, billing times and access to telephone exchanges.
They are part of broader package of checks and balances on a privatised Telstra presented to cabinet by Communications Minister Helen Coonan.
There is also $3.2 billion in new funding for regional telecommunications.
But Telstra's new management team, led by American Sol Trujillo, has been angered by the reforms, which some analysts believe will carve billions off the value of the company. They promised a public campaign in an attempt to mobilise its shareholders and customers against the package.
Such a move would put it on a collision course with its biggest shareholder, the Government.
Telstra has already attempted to turn up the heat on the Government, threatening to halt investment in new technologies, after its last-ditch proposal of a $5.7 billion plan to "hotwire" the country - requiring a government handout of $2.6 billion and reduction in regulations - failed to win favour.
"Telstra needs to tell the whole truth on what the consequences of toxic regulation will be for its customers and for regional parity and services," Telstra regulatory, public policy and communications chief Phil Burgess told The Australian.
Dr Burgess said the company would be in "close contact with our biggest stakeholders - shareowners and businesses - whose productivity improvements will rest on new broadband services".
If the Government is drawn into a publicity fight with Telstra, it will commit to a second expensive advertising campaign. The Government has already promised to counter a union campaign over its struggling industrial relations changes.
The Australian
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