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Executive Summary
Editorial - Telstra separation - Plan B
BuddeComm believes that there still is wriggle room in relation to the structural separation of Telstra.
Ideally by now we should have had an agreement between Telstra and the government regarding the future of their participation in the NBN. If that situation were clearer it would be easier to address the interim situation (including the structural separation of Telstra).
As it stands at the moment it is most unlikely that the Senate will support the structural separation. They first need to have a better understanding of the overall plan, and, while the lack of progress is not ideal, the Senate’s position on this is understandable.
So what might Plan B look like?
Preferably an agreement with Telstra – or else we will see a rather heavy-handed solution that will take the form of regulatory arrangements aimed at preventing Telstra obtaining access to spectrum and/or a structural separation between Telstra and Foxtel. Strict USO rules will continue to apply for Telstra as well.
While this ’going alone’ would not be ideal it will give the government a viable way forward. But unfortunately it would undermine Telstra’s long-term position and that would not be good for the ongoing negotiation process.
I remain convinced that it is in Telstra’s own interest to come up with a solution that allows it to develop its own plans rather than being forced into situations that might not fit into its long-term strategic plan. We only have to look at Telecom New Zealand to see what happens if you loose leadership in the market.
Plan B would not require Senate support and therefore Telstra would have less protection in the ongoing NBN process. Telstra’s short-term focus on its shareholders is understandable but, again, not in accordance with the company’s own long-term strategy. It might indeed go its own way but in a regulated market it is the government who holds all the cards, again look across the Tasman.
In any case, whatever happens, the NBN process is going to continue and for Telstra the structural separation issue is becoming a liability that needs to be resolved one way or another. The issue should be less important under the new Telstra management, since they have agreed in principle with the NBN vision and therefore it is unlikely that they will revert to the destructive situation we had under the company’s previous management.
While not ideal, the NBN will survive without Telstra and with its commitment to low wholesale prices and trans-sector approach as well as its latest plans regarding top class business services, it will be interesting to see how Telstra is going to compete with them in the long term. True short term Telstra can hang on to its lucrative business but as we saw in the last results that market is on a downward spiral, the future is clearly in the NBN.
Paul Budde
