Aussies taking determined steps toward functional separation

If you read about functional separation on this website, then you have a very solid understanding on one of the most important regulatory tools for enabling competition in telecommunications. The UK and New Zealand have successfully implemented functional separation on their incumbent operators. Australia is very close on their heels.

From a CommsDay report, we learn:

In Australia, the Department of Broadband, Communications and Digital Economy has hired a BT director to provide a $60,000 consultancy on functional separation.

New cable down under will lower broadband Internet costs

A new international broadband cable landed on Sydney’s north shore. Stretching 4787km to Guam, the Pipe Networks project, dubbed PPC-1, offers Australian broadband users the promise of significantly lower Internet costs.

Do monopolies have an interest in thwarting broadband plans?

In recent weeks, this site has focused a great deal on the situation with Telstra in Australia. It’s because this drama has so many dimensions worth analyzing. A key development was the court ruling against Telstra on the improper use of Optus client information. Telstra used information it had access to as wholesale service provider to assist its own retail unit in targetting Optus customers.

These smaller developments are contributing to what is going to be a very dramatic overhaul of telecommunications policy down under.

Optus Chief Paul O’Sullivan on why he thinks Telstra will try to delay roll-out of the new broadband network proposed by the Government:

“The incentives for Telstra to delay a roll-out of a new high-speed broadband network or to try to re-monopolise a high-speed broadband network remains,” he said.

“The fundamental drivers of most companies’ behaviour lie in their underlying economics and in their competitive position. In Telstra’s case that drives them to very notable characteristics.

“First of all, they have a very strong incentive to delay the roll-out of any competitive infrastructure which levels the playing field in services to the home.”

The news from Australia should only make us wary of FINTEL. Is the upcoming announcement in July merely rhetoric of change from their part, when all that’s really being done is securing FINTEL’s competitive position? As wholesale provider of bandwidth to Vodafone, Digicel, Kidanet, etc. they say that market forces and competition will drive down prices. But, looking at what the Optus CEO is saying and the court ruling on the improper use of customer information, it is becoming harder and harder to believe FINTEL.

As developments in Australia prove, without competition in the operation of the underlying network, pricing of services will remain high.

The trouble with Telstra and lessons for operators in our region

An earlier post outlined how regulators in Australia would require Telstra to agree to a functional separation of its network and retail operations. This post is an attempt to explain how a shifting regulatory environment is forcing major changes for Australia’s incumbent operator. Later this week, another post on Telstra will highlight a recent court verdict which forms the basis for why funtional separation is an unavoidable reality for network operators like FINTEL.

Leadership at telecom operators around the Pacific would be wise to look at the situation Telstra finds itself in down under. The Australian, reports on what can only be described as an implosion. Telstra finds itself battling government regulators, trying to piece together a functioning board of directors, selecting a successor

Telstra comes under attack on many fronts

for a very controversial CEO who has been sent packing, and in the latest development, likely prospect of a shareholder revolt.

Under the confrontational leadership style of CEO Sol Trujillo, the company has for years bristled at what they called burdensome government regulation. At times, this has resulted in Telstra carrying out a quite vocal campaign against Canberra. The aggressive stance of the company under the Trujillo-era culminated in the recent exclusion of Telstra’s bid to tender for construction of a national fiber network and the government opting to go the process under its aegis.

Functional separation hops onto stage down under

Telstra has received clear signal of change in policy direction from Canberra

Last week, an unprecedented $43 billion plan to build a next-generation national fibre network was announced by the Australian Government. The announcement is a change in direction by the Government, which is now seeking a public-private partnership to deploy a fibre-to-the-home network covering 90% of Australians in the next eight years. The paper also outlines new measures the Government and regulatory bodies will pursue to foster greater competition. The move has great implications for incumbent operator, Telstra, now facing a very different competition landscape and downward pressure on its stock price.

A key new addition to the toolkit of regulators is functional separation, where  the incumbent operator (owner of the network) is required to create a separate network unit which handles essential network services to other providers and to the incumbent’s own retail units at the same prices and using the same non-price terms and conditions and processes.