Telstra: A call for separation is a call for no NBN

Telstra insists it will build an open, competitive NBN, without any form of separation.

Telstra has again dismissed calls for structural or functional separation of the National Broadband Network builder, stating that a call for separation is a call for no NBN.

Presenting at the 2008 Australian Telecommunications Summit, Telstra’s GM for regulatory affairs, Dr Tony Warren, said his company was committed to building an open access NBN that would encourage competition and innovation.

Warren rebutted the claims of Shadow Communications Minister Bruce Billson, Optus, Terria and others who have called for structural separation of the NBN builder, claiming that enforcing separation would hinder investment and competition.

“The experience from around the world and in other Australian industries is that separation stalls investment. If you don’t want investment, if you are on the gravy train of cheap ULL prices, of course you don’t want an NBN," he said.

“So what do you do; you try and drag it out, stall it and throw up furphies like separation. In fact you might even get separation if you’re really lucky and then guess what – you definitely won’t get an NBN. Let’s not pretend in any other way that a call for separation is a call for no NBN.”

Warren stated that only a handful of the OECD’s thirty countries have introduced separation in the telco space, and dismissed the two examples most often touted by supporters of separation – the UK and New Zealand – as global laggards in investment.

“There is no substantial FttN investment going on in either the UK or NZ…these are laggards, these are not investment champions. Indeed there is emerging access seeker complaints about the UK model – the very people this was meant to help are claiming in fact that in some cases it's making things worse.”

Warren pointed to the National Gas Code and the separation of above-rail and below-rail infrastructure as two local examples where structural separation had failed to engender innovation and investment.

“The National Gas Code here in Australia has seen no new gas pipelines built since it was put in place, and this is the poster child that people talk about for structural separation…it’s been an unmitigated failure in terms of investment…[and] separation of above and below-rail [infrastructure] was abandoned in NSW after serious accidents, and it’s been completely unwound in the UK.

“My god, if you can’t coordinate investment across something as technologically simple and stable as rail track and rolling stock, how do you think you can do it in telecoms? [the call for structural separation] is just an amazing statement, and only a statement that I think can come from a lack of coherent analysis of these issues,” he said.

Warren insisted that Telstra has gone and will go into the NBN bidding process with an open access model, because the incumbent acknowledges that there will need to be competition over the NBN in order for it to provide adequate rates of return on investment.

“But where regulation remains necessary we need a paradigm shift. Around the world people are understanding that if you are going to need regulation you need to lock it in for a long time. You need to give investors certainty…on what the regulatory bargain will be, I think that is fundamental.”

Warren contrasted the role of OFCOM in the UK, which acknowledged that a potential investor must have as much regulatory certainty about the future of the market as possible, with the ACCC, who he believes is administering outdated regulation.

He argued that Australia’s current telecommunications regulation regime was set up to deal with the telco environment of 15 years ago where the problem it was trying to solve was reducing the OPEX of formally state-owned infrastructure, not stimulating CAPEX.

“There are common challenges of reinvesting national infrastructure across rail, energy and communication. These challenges are fundamentally different to those that we faced when we designed the current regulatory tools 15 or so years ago…the bottom line is these are yesterday’s tools trying to solve yesterday’s problems.

“What we need to do is rebuild regulation from first principles; facilities-based competition where possible, and it is possible in Australia as long as we get the regulatory incentives right, and where regulation remains necessary -- and it does remain necessary in places -- then competitive returns with a certain regulatory framework are essential.”

In response to a question from Optus' head of government affairs, Maha Krishnapillai, over exactly what Telstra’s definition of open access meant, Warren responded that it meant the incumbent’s competitors would have access to services on exactly the same basis as itself.

“The bottom line is we have a proposal on the table that is clearly an open access proposal. What do we mean by that: you will be able to take the service from the network that we build, the wholesale service from the network that we build, and do with it whatever you like -- copy what we do if you’re prepared to invest, or differentiate. That’s what we’re proposing, it will be purely open in that sense.”

Tags TelstraNBN

More about Australian Competition and Consumer CommissionOECDOpen AccessOptusParadigmTelstra Corporation

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