Analysts and industry groups see Telstra’s senate plea against structural separation as a power play and claim the real action will happen in private negotiations.
The claims follow Telstra’s submission to a Senate inquiry into the Government’s proposed Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2009 and its speech to the same inquiry made on October 13.
According to Competitive Carriers’ Coalition executive director, David Forman, Telstra’s arguments against the Government’s plan to structurally separate its wholesale and retail businesses are old and wrong.
“There is no veracity in its arguments against functional or structural separation. In fact, these are the same arguments they’ve been running for years,” Forman said.
He also said Telstra’s argument that rural and regional customers would be badly affected by the move was best disproved by history.
“If you look at what has happened in the last 20 years, the consumers that have suffered the worst service and the highest prices are those in regional Australia and the reason for that is they have the least access to competition,” Forman said.
“If you separated Telstra’s wholesale business from the retail business, at least those consumers would have access to a level playing field and other companies would be able to come in and compete for their services.”
Forman’s response to Telstra’s argument that the proposed legislation is backed by incorrect information and that Australia’s level of competition is high was particularly scathing.
“Everybody knows that competition in Australia is absolutely dire. You only need to look at the independent statistic on the OECD to see how poorly served we are. So Telstra’s basic premise falls down and the entire construct of their argument collapses with it,” he said.
Ovum research director, David Kennedy, labelled the Telstra submission a ploy to buy time and added tension to behind-the-scenes talks between the Government and the telco.
“I don’t think it should be taken as reflecting the state of discussions between Telstra and the Government at all,” Kennedy said. “It was never our expectation that we would see anything new from the submission. The reason is Telstra is still engaged in negotiations with the Government and any concession they might be making they’ll be making in return for concession with the Government.”
Forman agreed back-room negotiation and the failure of the legislation was Telstra’s main objective, but said such a move would hurt the market.
“Telstra will have its bargaining position strengthened if the legislation doesn’t go through, and clearly that’s what it’s all about,” Forman said. “The negotiating value in the bill not being there strengthens its position in relation to the Government.”
Even a separated Telstra would have enough teeth to compete against the Government plans for a National Broadband Network (NBN), Kennedy insisted.
“What it would mean is instead of having an agreed timetable for the movement of traffic away from Telstra’s old copper and cable networks to the NBN, we’d have a competitive situation where the NBN would have to fight for every customer,” he claimed.
“It means it’s much slower to build up the NBN’s customer base, so it’ll be making losses for a longer period, and secondly it means they’ll have to spend marketing money to get every customer and that will increase their losses.”
However, Kennedy said the Government still had carrots to offer Telstra in exchange for its cooperation.
“On Telstra’s side, if the negotiation breaks down, the Government will go ahead and impose a separation on them and of course the Government would not be in a charitable mood at that point. The separation would most likely be a disruptive one,” he said.
“There are very good reasons for both sides to come to some kind of resolution and I think it’s more likely than not they will.”