C15MichaelSainsbury 

Consensus IT Writers Awards

The position of Telstra in the Australian telecommunications market has become untenable with the company flexing its muscles to further diminish what is left of real competition.

One.Tel has gone as a result of its spectacular collapse and rationalisation across the industry in a tightening market has resulted in the cutting of thousands of jobs.

As a result, and together with last year's decimation of a whole raft of smaller players, the Australian telecommunications industry stands at a major crossroads.

The futures of surviving smaller telecommunications companies such as RSL Communications, New Tel, Uecomm, PowerTel and Primus Communications look extremely shaky.

To address this situation effectively there is only one answer - to split the infrastructure and retail arms of Telstra into separate entities.

Right now, Telstra controls 95 percent of the non-mobile telecommunications infrastructure in Australia and rakes in over 75 percent of the revenues. Telstra has network access to basically every home and business in the country and it continues to exploit this monopolistic advantage for profit. Telstra is able to do this both despite and because of a complicated regulatory structure. This regulatory structure is supposed to control the telecommunications industry but it simply can't compete with the massive legal resources of Telstra, nor even keep up with the demands on its time resulting from Telstra's activities.

It is now getting near to five years since the much touted "deregulation" of the Australian telecommunications industry. But, in attempting to remove the stops from competition in this key growth market, successive Australian governments have, instead, succeeded spectacularly in creating a Telstra-heavy duoply - blowing hundreds of millions of dollars in the process and leaving millions of customers battered and bruised in its wake.

Its recent raft of price hikes underscores Telstra's return to a level of comfort at the top of the telecommunications companies heap. Only a company that is confident of minimal challenge from the rest of the industry would dare put up prices in this arbitrary way. 

In recent months, Telstra has moved to raise prices and remove customer subsidies in two of its nominated growth areas - mobile and data.

Access to infrastructure has proven to be the absolute essential in having a successful telecommunications business. Companies that spent money on building networks have clear and cost-effective access to their own networks. Others have been obliged to strike deals with infrastructure owners, in the majority of cases Telstra. 

The high prices, delaying tactics and obfuscation displayed by Telstra over these past five years in its dealings with other companies seeking access to its networks has demonstrated only one thing - that Telstra will spend as much as it takes and use every possible avenue of appeal in bloody minded attempts to slow down any threat of competition. Telstra has refused to use its networks - the building of which was paid for by the Australian people - to promote competition.

And this from a company which is still majority owned by the Australian Government, that is by the Australian people. Despite Telstra's stated position of wanting a viable wholesale business to run alongside its awesome retail division, its actions have spoken much more clearly than its words time and time again.

How seriously can we take Telstra when it moves its wholesale business across to become a cost subsidiary of its legal and regulatory division; where the untenable situation has arisen in which one individual, Bruce Ackhurst, is responsible for selling access to Telstra's network to its competitors? Ackhurst is also responsible for running court cases to block access to, and enforce unfair prices on, those same competitors.

The Federal government is an invidious position. The government professes to want competition - after all that is what will increase the efficiency of Australian businesses. Yet it is still insisting on selling off more of Telstra. In the role of a parent company, the government, through its chief financial officer Treasurer Peter Costello, wants to be able to sell the business at the highest possible price - another case of getting money for old rope. For this to happen, Telstra must be seen to be making good profits and achieving worthwhile growth. Telstra is certainly succeeding on both counts, but at the expense of the rest of the industry, business and consumers.

Once upon a time a Labor federal government, under then Prime Minister Paul Keating, had a plan to split Telstra into wholesale and retail businesses. But Keating bowed to his Communications Minister Kim Beazley who had been snowed by Telstra management.

The current Labor Federal Opposition has a chance now to turn back time and right the wrong.

The ALP's communications spokesman Lindsay Tanner has solid credentials, having performed well as shadow finance minister under Beazley as Leader of the Opposition. Labor, together with one or other of the Greens and Democrats could block the government plan to further sell down Telstra.

A brave Tanner could advance the only sensible option - to break up Telstra. The network management side of the business could be left in majority government ownership in corporatised form, much the same as the whole of Telstra is now - if that is what is necessary to appeal to the socialists in the ALP. Retail Telstra could be totally privatised as that business has the size to be able to cut itself great deals on network capacity - something Telstra claims it already does in its internal accounting - so that business should not have too much to whinge about.

Tanner, and the Australian Labor Party, have a great chance here to repair and revitalise an industry which is inextricably linked with Australia's long term future as a continuing member of the top flight of international economies.

The question is do they have the balls to do it?

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