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Structural separation to break Telstra tyranny
25 Jun 2008

Optus has lodged its comprehensive response to the Federal Government's request for submissions on regulatory issues associated with the National Broadband Network (NBN). The structural separation of Telstra is at the heart of the Optus submission and it includes a detailed proposal as to how this might be implemented in practice.

Maha Krishnapillai, Director of Government and Corporate Affairs at Optus said "The structural separation of Telstra and the upgrade of regulatory settings will finally break the multi-year cycle of Telstra litigating and undermining competition by creating fear, uncertainty and delay."

The Optus submission introduction states: 'The focus of this submission is deliberately directed at the reforms that would need to be made to the regulatory framework should Telstra be chosen to construct and operate the NBN. That is, it consciously contemplates the "worst case scenario" for competition.

Optus makes no apologies for this approach. It reflects our overriding concern that the new regulatory regime must be robust enough to withstand the serious threat to competition posed by an NBN operator which is also the dominant provider of retail voice and broadband services to consumers.

It also reflects our belief that fundamental reform to the regulation of fixed line services is required regardless of whoever builds the NBN - a position which is consistent with the emerging trend in many other jurisdictions.'

"We have a once in a generation opportunity to get the regulatory settings right to encourage a vibrant and competitive broadband market and to deliver the Government’s bold visions for this infrastructure," Mr Krishnapillai said.

"We must make fundamental reforms now to ensure there is no repeat of the industry structure mistakes of the past. Structural separation must be at the core of any regulatory reform; this is why we have set out a blue print in our submission as to how structural separation of Telstra might operate in practice.

"With its dominant market position, Telstra has held both the telecommunications industry and the Australian economy to ransom for decades. It has made no secret of its desire to use the NBN to raise prices for consumers and increase its profits, already high by international standards to world record levels. If the Government takes bold steps then competition will be enhanced ensuring Australians receive the lowest possible prices, the best possible service and the greatest degree of innovation," Mr Krishnapillai said.

The Optus submission also states that whilst structural separation will deal with the issue of market power and anti-competitive behaviour, regulation will still be required to deal with access and pricing issues.

"The NBN will be a monopoly infrastructure and as such it will need to be tightly regulated by the ACCC. However, with structural separation this regulation is likely to act more as a safety net with less day to day interference by the ACCC in the operation of the NBN," Mr Krishnapillai said.

Regulatory arrangements should be future-proofed by ensuring that the proposed model would also apply to any migration by the owner of the NBN to a Fibre to the Home solution, including for current green-field builds by the owner of the NBN.

The Optus submission contains reports from three independent experts Dr Chris Doyle, CEG and a joint report by Dr Tom Hird and Professor Bruce Grundy.

Media contact:
Melissa Favero
Optus Corporate Affairs
Tel: (02) 8082 7850