Optus today submitted its response to the Federal Government's discussion paper 'Regulatory Reform for the 21st Century' in which it called for the structural separation of Telstra.

In its submission, Optus argues that the separation of Telstra is the best solution to deliver tangible improvements in broadband service, availability and pricing for consumers and businesses in the transition period before the National Broadband Network is operational. It will achieve this by promoting effective and sustainable competition in Australia’s fixed line telecommunications market, something which is not possible under the current regulatory regime.

Maha Krishnapillai, Optus' Director of Government and Corporate Affairs, said, "Twelve years after the telecommunications market was opened up to competition, Telstra continues to dominate the fixed line market, taking over 70 per cent of fixed line revenues and an even greater share of the fixed line profit pool."

In its submission, Optus asserts that Australian consumers are the biggest losers when it comes to Telstra's market dominance.

The OECD recently stated that Australia had the third highest broadband pricing behind Mexico and the Slovak Republic and remains in the bottom half for overall broadband penetration.

Similarly, in fixed line voice services, Australia has the third highest prices for small and medium sized business and the tenth highest prices for residential fixed line services out of thirty OECD countries.

"At the heart of the problem lies the vertical integration of Telstra, an oversight of the 1997 Telecommunications Act which we argue needs to be rectified if we are ever to have true competition in the Australian fixed line market.

"Since Telstra competes with its wholesale customers in the retail market it has no incentive to treat those customers fairly. In fact it routinely discriminates against those customers.

"It is able to do this because of an ineffective regulatory regime, a regime which Telstra has manipulated and abused in its quest to undermine competition and continue its stranglehold on the Australian consumer," Mr Krishnapillai said.

With respect to the Government's proposed National Broadband Network, Optus argues that radical reform of the current telecommunications market structure is vital to the NBN's success.

"We wholeheartedly support the Government's blueprint for the NBN and applaud the Government for recognising the need to address the flaws in the current market structure by ensuring the NBN will be operated as a wholesale only, open access network that is subject to strong ACCC oversight," Mr Krishnapillai said.

"However, if the market structure that will best serve competition on the NBN is one in which vertical integration is removed so that no conflicts of interest can arise, then this is the structure we should be seeking to replicate today, not in eight years time.

"It is our view that the NBN's success will be dependent upon the health of competition over the next eight years as the industry begins to migrate a substantial number of customers across to the new broadband network. However, by not reforming the sector today we run the very great risk of building a broadband network which will effectively only have one major customer, a customer with little or no incentive to access services on that network.

"This review provides us with a real opportunity to right the wrongs of the past 12 years by fundamentally reforming the regulatory regime to ensure a better outcome for consumers and ultimately the success of the National Broadband Network. We cannot afford to get this wrong," Mr Krishnapillai said.

A copy of Optus' submission to the discussion paper, 'Regulatory Reform in the 21st Century' is available to media on request.

Media contact:
Elizabeth Greene
Optus Corporate Affairs
Tel: (02) 8082 7850