Telstra rejects opposition calls for separation as “totally irresponsible”

Telstra responded swiftly to the Shadow Communications Minister’s call for structural separation of the National Broadband Network builder, calling Bruce Billson’s comments “totally irresponsible” in a statement released yesterday afternoon.

Telstra’s newly appointed director of public policy and communications, David Quilty, said anyone calling for the NBN to be separated is calling for Telstra to be separated, because the NBN is “essentially a major upgrade to part of Telstra’s existing network”.

At the 2008 Australian Telecommunications Summit held in Sydney yesterday, Billson indicated that the opposition supported the view held by the majority of the nation’s telco players and industry groups that the NBN builder must undergo some form of separation.

“The opposition has made it clear that if $4.7 billion of taxpayers' money is to be utilized, then we need commensurate public policy gains. We’re not about imposing new burdens on taxpayers, shareholders, or corporations; we’re about saying if you want the money there are strings attached,” Billson said in his presentation.

“And we believe that achieving effective structural separation has to be one of those things, because the natural monopoly that will be produced requires that kind of clarity.”

Quilty responded by reiterating Telstra’s stance that if further separation is required, it will not build the NBN.

“Overseas experience has already proven that separation does not work. It increases costs, reduces efficiencies, limits future innovation and, most importantly, kills off investment,” Quilty said, amid debate over whether foreign experience has proven separation to be unworkable or not.

“He [Sol Trujillo] is genuinely proud, and understandably proud, that they have been able to maintain profitability because of the poor market structure and poor regulation we’ve had in Australia Maha Krishnapillai

Quilty stated that separating Telstra would mean breaking the telco up into “unworkable pieces”.

"Telstra is puzzled by Mr Billson's reported comments, given that this [Wednesday] morning the Office of the Leader of the Opposition confirmed that structural separation of Telstra is explicitly not Coalition policy.

"It would be totally irresponsible for Mr Billson to suggest that Telstra should be further separated, given that the Coalition sold shares to 1.4 million shareholders - who paid billions of dollars to the government as part of the T3 process only a few months ago. Telstra is not and will not be a political play thing."

Billson responded with a media release issued this morning, stating that while he appreciates Quilty is new to his role, his comments suggest he has either been poorly briefed by his colleagues or Telstra wasn't paying attention to the opposition's policies.

"The opposition repeats that it seeks to impose no new burden on Telstra or its shareholders, but if Telstra puts its hand out for $4.7 billion of taxpayer money...commensurate public policy gains are required," he said.

"Ironically, the speech Mr Quilty has reacted to, called for greater dialogue and openness about the broadband choices Australia faces and how little attention is being paid to the national and consumer interests under Labor's vague, troubled and stalled NBN tender process."

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Despite Telstra's claims that it has the nation's interests at heart regarding the NBN, Optus, iiNet, the Competitive Carriers Coalition and the Centre for International Economics are just a few of the incumbent's opponents who have accused Telstra of stifling innovation and competition in Australian fixed line broadband services.

Currently, Australians suffer the highest broadband prices in OECD countries, with the average price per MB once data caps have been exceeded some five times higher than anywhere else.

Also presenting at the summit, Optus’ director of government and corporate affairs, Maha Krishnapillai, said Telstra was the only incumbent to maintain a ratio of higher wholesale profits over retail profits once competition laws had been introduced to ensure previously state-owned infrastructure providers offered equal access to competitors.

“Telstra as we’ve highlighted in various speeches in the last little while is the international gold medalist in terms of profit earnings across the entire developed world. Sol [Trujillo] last week, to quote him, said ‘we’ve sustained both broadband market share gains and Average-Revenue-Per-User growth, a feat virtually unheard of among incumbents around the globe’,” Krishnapillai said.

“He [Sol Trujillo] is genuinely proud, and understandably proud, that they have been able to maintain profitability because of the poor market structure and poor regulation we’ve had in Australia, and the end outcome is we have the highest broadband prices in the OECD, or close to the highest.”

Billson suggested Telstra’s reticence towards separation stems from its understandable position of wanting to maintain the current monopoly it holds over Australia’s telecommunications infrastructure, in order to continue and maximize shareholder returns.

He advocated a more collaborative approach between advocates and opponents of separation, arguing that the largest public infrastructure investment in Australia’s history must be considered in the context of the entire nation’s interest, not just the shareholders of the eventual network builder.

Copyright © 2008 IDG Communications, Inc.

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