Internode MD: “Flawed” Telstra separation puts pressure on government and regulator over NBN progress

An 'inadequate' structural separation undertaking separation submitted by Telstra can be interpreted as a form of blackmail, according to Simon Hackett

Internode's Simon Hackett

Internode's Simon Hackett

The Government and the Australian Competition and Consumers Commission (ACCC) have been put in a difficult spot over the National Broadband Network (NBN) thanks to shortcomings of Telstra's structural separation undertaking (SSU), according to Internode managing director, Simon Hackett.

Hackett outlined his thoughts on the future of the NBN and highlighted several key concerns at the Communications Day Summit in Melbourne.

One of those concerns relates to the SSU submitted by Telstra in August. The SSU was intended by the Government as a tool to structurally or functionally separate Telstra in order to quell the telco's dominance in the industry.

Telstra is required to structurally separate its wholesale and retail arms or have some form of separation forced upon it by the Government as part of the telecommunications bill passed last year. The SSU details how the telco plans to undergo separation. It imposes conditions and is subject to ACCC approval.

A month after the SSU was submitted in August, the ACCC raised concerns over 'inadequacies' of the document, including what the regulator considered to be a lack of commitment from Telstra to offer its wholesale customers the same services - a incumbent issue due to Telstra's vertically integrated nature. The concern was echoed by other telcos, including Optus, iiNet, Internode and Adam Internet.

The ACCC said in a discussion paper that it could not accept the SSU. But the progress of the NBN relies greatly on the approval of the SSU by the regulator. To compound the issue, Telstra is due to hold its Annual General Meeting where shareholders will vote on the $11 billion deal between Telstra and NBN Co - which by necessity takes in the SSU.

“The SSU is not actually an approved document yet,” Hackett said. “Initial reaction of the regulator and industry was very clear – in legal terms – [as to] why it is not yet compliant.”

Regardless, Telstra shareholders will have to vote on it; because that is all they can vote for, Hackett said.

“This puts pressure on the [ACCC] because if the shareholder vote passes then the regulator will be the last barrier to the NBN existing,” he said.

If the ACCC does not approve the SSU in its current form, there could be lengthy delays for the NBN since the new submission must again be subjected to shareholder approval. Hackett estimates the process could take from six to nine months.

“I don't think the current government really wants the network to wait another six to nine months because it's already behind,” he said. “There is a form of high-stakes poker going on here.

“For me this is actually an interesting sort of blackmail.”

The tactic, according to Hackett, relies on the ACCC's priority to look out for the long-term interest of end-users. The question comes down to the importance of the NBN in the eyes of the regulator in terms its benefit to consumers.

“Is the NBN existing at all worth more or less than Telstra being able to re-monopolise the copper terrain while we all wait for the NBN?” Hackett asked. “Is it better to have the NBN in a decimated competitive environment than to not have the NBN at all?”

NBN Co has offered Telstra $11 billion to decommission its copper network and migrate customers onto the NBN, but the telco still retains ownership of the copper. Hackett believes NBN Co should have spent the $11 billion buying the assets to prevent Telstra gaining the upper hand in the future.

He also took the opportunity to reaffirm his stance against plans to implement 121 points of interconnect (PoIs) for the NBN, suggesting it is not too late to go back to the original plan of 14 PoIs.

The Communications Day Summit in Melbourne continues.

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2 Comments

Rod

1

The government/ACCC should prepare their minimum set of requirements for the SSU. It should not be left up to Telstra to say what they will do. They should be told. Take it or leave it. Telstra can have their copper network but they will not get access to the NBN until they agree to proper separation.

It is obvious they want their cake ($11B) and want NBNs as well. Not blaming them, it is just what I'd expect. It is up to the government to get it right this time around and not squander again the chance they had the first time when they privatised Telecom Australia/Telstra.

All players need ready access to the NBN and having 121 points of interconnect makes it very expensive for the medium sized players to compete. I hope they review the decision and allow smaller players to have fewer interconnects points. It doesn't have to all one way, why not have flexibilty and allow some players to use 121 POIs and others 14?

Tom Brown

2

Telstra have a deadline but in the meantime they will try to get through with as little seperation as they can and this is just testing the waters.

The ACCC are well aware of Telstras methodology and I am sure will not be railroaded.

The government is allowing Telstra to come up with their own proposal and that is good policy rather than making what may otherwise be damaging demands.

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