In April 2005, the government released a discussion paper outlining possible options for telecommunications competition regulatory reform.
The main policy issues surrounding the full privatisation of Telstra are:
generally fostering competition and ensuring that the regulator is an effective enforcer of the competition rules, and
currently and specifically, ensuring the delivery of broadband services around the country.
Equal access to Telstra’s network is not the only important issue. Innovation is also crucial for economic growth and social wellbeing. Broadband is the key infrastructure for our knowledge-based society and it has been recognised that it has far-reaching consequences for economy and society in general. It would not be in the national interest for all elements of this section of the economy to be under the control of one player.
My key recommendations to the government’s inquiry are:
Telecoms Commissioner and enhanced regulatory powers
Enhance the powers of the ACCC to ensure a much speedier outcome to access disputes (within a 3-month period).
Appoint a full-time dedicated Telecommunications Commissioner within the ACCC.
Total and transparent operational separation between Telstra Wholesale and Telstra Retail, resulting in two different organisations – building, staff, billing, systems, etc – whereby Telstra Retail will have to buy Telstra Wholesale services on the same terms and conditions as the rest of the industry.
Until operational separation is in place the current retail price caps needs to be maintained, as Telstra is too dominant and has too many options to play the system – as it was able to do with the rebalancing of line rentals and voice calls.
Price controls, however, can be limited to line rentals only, and perhaps some regional services.
Transparency in Telstra’s wholesale pricing to its own retail services would, for the first time, provide the level playing field essential to allow Telstra’s competitors to fully participate in telecoms markets in general, and the broadband services market in particular. It will also assist in creating a more effective USO policy.
A more creative approach to USOs will most probably lead to less subsidies and more industry participation. The HiBis scheme can be used as an example.
However, the current trend is that Telstra is increasing its share of this subsidy and the scheme should be adjusted to make it more pro-competitive.
The government has to quantify ‘future-proofing’ of regional infrastructure, and its term ‘up to scratch’ (see Exhibit 1, below)
Based on such a community/industry/government based commitment and quantifiable broad aims, a committee should be established to analyse the various options such as:
fibre-to-the-home plan from the Nationals,
broadband powerlines and wireless alternatives,
Telstra Country Wide
strengthening of regulations that would stimulate competitors to better utilise the current network infrastructure.
All future infrastructure plans should be based on the principle of open networks, allowing all service and content providers equal access to deliver their services via this infrastructure, without network operators obstructing access and/or ‘acquiring’ or ‘retaining’ exclusive content rights.
As indicated above (USOs), operational separation will also be of great assistance to deliver better services, as well as competition, to regional Australia.
Exhibit 1 – Future-proofing Australia – measurable outcome
By 2006 every Australian household/business should have access to a minimum of 2Mb/s broadband at a price under $50 per month. By 2010 this should be a minimum of 10Mb/s for the same price, and by 2015 a minimum of 45 Mb/s, again for that price.
Biennial reviews (or 3 years including the review year) should monitor progress and finetune the plan as required.
Media and Telecoms
Integrate media and telecoms regulations in order to prevent the misuse of market power through leveraging combinations of infrastructure and content assets that impede competition and innovation.
The separation of Foxtel from Telstra is a very clear first step that needs to be taken in this context. Telstra is already too big to properly regulate, and a Foxtel split also makes sense in this respect. Telstra can bundle this into Sensis and create a new media company, which, at the same time, would bring formidable competition to the cosy media oligopoly.
Apart from the monopolistic aspects of Telstra/Foxtel, in recent times (Optus/Foxtel digital TV deal) it has become clear that Telstra’s major shareholding is hampering the full commercial exploitation of the Foxtel asset.
The government has regularly indicated the importance of infrastructure-based competition. The rest of the world is using competition between cable TV companies and telcos to achieve this. Australia is one of the few countries where the incumbent telco is allowed to dominate the cable/pay TV market as well.
The current regime hampers infrastructure-based investments from both Telstra and its competitors:
In the absence of any real competition Telstra is not motivated to make innovative investments – instead it is restricting its strategies to milking the existing assets for as long as possible.
The threat that Telstra can simply undo any investment made by its competitors by cutting wholesale rates clearly undermines investments by these organisations (Optus HFC network, Nextgen, IP1, etc).
Operational separation will encourage Telstra Wholesale to make new infrastructure investments and, with the correct regulatory powers, will safeguard investments made by competitors. (Government policies in the USA, Canada and Europe have been in place since the 1980s. These can be used as a guide as to ways to stimulate new infrastructure-based investments in the Australian market.)
Australia – Regulations – Recommendations for T3 reforms
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