Industry welcomes Telstra break-up

A wave of jubilation has swept across the ICT industry following news of Telstra’s possible separation under the Federal Government’s proposed telecommunications reforms.

The cornerstone of the proposal is an ultimatum to Telstra: Either voluntarily split up its wholesale and retail arms; or the Government will impose a strong functional separation framework on the company. The Australian Competition and Consumer Commission (ACCC) will also be granted additional powers to oversee the break-up if Telstra chooses to submit.

If it doesn’t, Telstra will be disqualified from acquiring additional wireless broadband spectrums unless it separates or forsakes its hybrid fibre coaxial (HFC) cable network, which is capable of 100Mbps transfer speeds, and its interest in Foxtel. The company will also be required to meet new minimum performance benchmarks under the Universal Service Obligation (USO) dictated by broadband minister, Senator Stephen Conroy, with fines of up to $10 million if it fails.

Telstra has expressed disappointment over the decision but is willing to cooperate with the Government. Meanwhile, the channel looks set to reap the rewards if separation does go ahead. Telecommunications reseller and Telstra partner, Telcoinabox, expressed frustrations over the telco’s current wholesale model and saw the legislation as a step towards giving the reseller market a fair go.

“Under the current model, resellers are required to wear the costs of acquisition, service set-up, support and billing for these services. Despite this, resellers are not in a position to provide the products and services at the same retail price while at the same time make a fair margin,” Telcoinabox managing director, Damian Kay, said in a statement.

While Telcoinabox’s two-year contract with Telstra will not be affected, Kay predicted value-added services such as fax duet and calling number display would become more accessible to resellers on fair margins under the proposed rules of separation. Fellow Telstra partner, Express Data, also insisted separation would not impact its relationship.

Express Data managing director, Ross Cochrane, was confident Telstra would make the right decision for its channel partners.

“It won’t change much because I think they [the retail business] will still want to use the channel to get to the market. I would assume they will continue with the channel model the way they have today,” he said. “I still think Telstra will want to be represented in a very broad cross section of the market and the channel can facilitate that.”

Whatever direction Telstra takes, the activities surrounding separation, and especially its impact on the National Broadband Network (NBN), were driving awareness in the telco and IT space, Cochrane said. “This is a great thing as there will be a lot of money invested in technology to make Australia

competitive,” he said. “From that, there will be a lot of opportunities for the channel, which has the skills to help people get the most out of a network infrastructure.”

Given separation could level the telco playing field, Telstra’s long-suffering rivals have banded together and embraced the legislation with open arms. Optus branded it a landmark decision that had the potential to radically change the telco industry.

“Government has made its intentions clear. It is now up to parliament, Telstra and the rest of the industry to ensure this long overdue reform becomes reality,” Optus CEO, Paul O’Sullivan, stated.

While still pouring over the legislative details, iiNet managing director, Michael Malone, said forcing Telstra to split and streamlining wholesale regulations would encourage competition and ultimately benefit customers.

Industry groups have also lauded the regulatory reforms. The Australian Information Industry Association (AIIA) said the announcement provided an avenue for Telstra to remain engaged and competitive in the digital economy and the NBN.

“AIIA anticipates that all areas of the digital marketplace will benefit significantly from Telstra’s experience, influence and active involvement under the revised regulations,” the group stated.

The Australian Telecommunications User Group (ATUG) shared the same sentiments and praised the legislation’s ability to strengthen competition in the telecommunications sector. It claimed it would lead to better choice and innovation in the new NBN era.

The bill is set to be debated in Parliament in the coming weeks.

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