Telstra manager deems separation "wasteful"
- 07 December, 2009 12:54
- Comments (9)
Telstra has branded functional separation of its wholesale and retail businesses as “wasteful” and claims it could cost customers up to $1 billion.
In September, the Federal Government proposed telecommunication industry reforms legislation which would require Australia’s biggest telco to either voluntarily enter into a structural separation of its wholesale and retail arms, or have some form of functional separation be forced upon it. Telstra has since rejected the bill in its current form and is engaged in discussions with the Government to come to an alternative conclusion.
Speaking at Ovum’s Telecommunications Regulatory Reforms Forum 2009 conference in Sydney, Telstra public policy and communications managing director, David Quilty, painted a grim picture should the Government resort to the default option. As an example, he highlighted the shortcomings of the functional separation imposed on the UK’s incumbent telco, British Telecom (BT).
BT was required to overhaul its IT systems which, according to Quilty, incurred significant cost and caused major disruptions to retail and wholesale services. Telstra estimates separation would cost the company between $500 million- $1 billion to revamp its existing IT systems, which will have to be absorbed by its customer base.
“There is no indication [by the Government] that no IT system change is needed... functional separation would require new systems to be [broken apart] and effectively rebuilt,” he said. “In the UK, retail customer levels fell after functional separation with BT was implemented because it had to rebuild system from ground up.”
With the National Broadband Network (NBN) set to be systematically rolled out within the next eight years, Quilty saw separation as an unnecessary disturbance to the industry and telco customers.
“My question overall is why should we do this at this point of time? The industry is actually moving out of the legacy environment. The NBN will provide a structurally separated, wholesale-only access network beginning as early as next year to be rolled out over the next eight years,” he claimed.
“But why at the same time, when the NBN is being built, would one burden an entire industry with a hugely disruptive functional separation that will be rendered obsolete by the time it is finished? It is a wasteful and backwards-looking process.”
Quilty said Telstra was in negotiations with the Government and the NBNco to settle on a mode of structural separation that would satisfy the company’s requirements. These include fair financial consideration should Telstra’s assets be transferred to the NBNco, a locked-in agreement that cannot be altered or appended at ministerial or ACCC description, and the right to continue access to wireless spectrums to develop next-generation products.
The telecommunications reforms legislation is expected to be debated in Parliament in February 2010.
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Comments
Roddy
Separation woes for Telstra...
Oh are we all surprised that the Telstra spokesperson speaks out against separation...
It is to be noted that with $billions wiped off Telstra value during the Sol years, with $billions wasted and poured down the drain with their failed Telstra re-orgs and new systems, with these massive wastages all caused by Telstra seeking to cement their monopoly position, with an abysmal customer and technical service levels that cost Australians $billion per annum already, it is a cheap escape from this archaic companies policies and inertia...
It is also interesting that he asks "why at this point of time..?"
Well good sir, it is *tip of the iceberg* time for you.
Quibly can only see the tip of the iceberg, *Titanic Telstra* ripped the guts out of our telco industry long ago with their practices, as they never bothered with what was happenning under the surface...
Anonymous
Ok, on with the Job
The ramblings and emotional comments are going to continue.
The cat is out of the bacg, let's get on with it and separate this two headed beast once and for all.
Oh and any arguments about costs involved - correct. There are costs involved in the separation, just as their are costs involved in continuing with the same old.
Anonymous
Now is the time
It is true that IT systems will need to be split.
There will be some cost but it doesn't need to cost $1 billion as claimed (yet another spurious claim by Telstra).
The split could be as simple as cloning their existing billing system and then "turning off" retail in one copy and "turning off" wholesale in the other.
It might also be that no new system needs to be built at all and there is close to zero cost in splitting Telstra. If the NBN picks up the wholesale division then Telstra retail continues to use the systems they are using. There is no additional charge for the wholesale side because the NBN needs to build billing and management systems anyway. The NBN would simply spec the Telstra infrastructure into the new systems it is building.
Why the fuss? In reality it is delays that make things costly. If the details of the split are created quickly then it is possible to plan the infrastructure changes into normal operational expense.
Anonymous
Haha - Pay me
Haha, give me half that - make it 500Mill and I'll go do the job myself.
Anonymous
Didn't Telstra ALREADY waste $1 bil investing in Asia years ago?
So, what did Telstra do when it had $1 billion to invest, eg, in its monopoly era...? Invested it in Asia, from all reports. (An old story... years ago now.)
What's come of those investments?
IMO, the the article should read: "Telstra can MAKE it cost $1 billion" to split it up.
Just another example of Telstra's incompetence & inefficiency.
People have been criticizing Telstra for years, unheeded.
Wise Telstra CEO's would have (had they been awake) lead the dinoaurs back onto the Right Way, but none were in that role.
Now, we need to say: "Split, and make it cost far less!"
If they can't do that... then... I'd pull the plug on them.
---
Heard on the past weekend's Saturday Extra (still available as a podcast from ABC's Radio National):
The Laws of Norway require the de-registration of any company, that fails to achieve & maintain about 50% women on its board.
We need a new law that a communications company achieves and maintains a greater-than, say, 30% share of the Aussie telecoms market must shink or risk similar de-registration.
(Maybe if the Telstra board had ~50% women on it, over the life of this dinosaur, we would have had more humane & cost-effective operations & pricing.
Just a conjecture, not a claim...)
Anonymous
Customers that pay!
It will be the customer that pays, not Telstra, me. I don't get billed by Telstra for anything directly. And I cant see why SPs would be further slugged. So as a customer, I say "bring it on".
Anonymous
You are a customer
Think you missed the point, cause if your supplier uses the Telstra copper to supply your service (such as over Unconditioned Local Loop or Spectrum Sharing) then you to are a customer who would be paying for the cost of the separation. Only those supplied directly by a non-Telstra network would not be impacted.
Sydney George
Time To Tell The Truth.
Telstra opponents have for years dreamed up ways to demonise Telstra for their own financial benefit. Their lies, disingenuous disparagement and cunning agenda is being revealed to the Australian people.
With $43 billion on offer Australians will see the snouts into the trough in a big way and Telstra opponents are experts at this game. They do not want competition, in fact they call for Telstra to be removed as a competitor.
What will that champion of competition, the ACCC say when the NBNCo hopes to remove Telstra as a competitor which would, of course, make the NBNCo a monopoly supplier? Australian taxpayers must fear a NBN white elephant flop.
Anonymous
Yet again they game the system...
So once again, when Telstra is gaming the system and selling retail products BELOW their cost prices at wholesale, we're supposed to believe their current separation is actually working!?
What a joke.
Bring on proper functional or structural separation. Clearly it's the only way to make Telstra play fair, and not only stop ripping off Austalians for telecommunications, but also fairly allow others to compete without anti-competitive and ILLEGAL behaviour undermining their businesses.
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