ACCC tells Telstra to replan separation

The Australian Competition and Consumer Commission (ACCC) has indicated that it may reject Telstra's structural separation undertaking filed last month, citing concerns about assurances from the telco offering equivalent wholesale services to its competitors.

Last month, Australia's largest telecommunications company submitted to the ACCC its plans to structurally separate and migrate customers onto the National Broadband Network (NBN). The plan aims to address how Telstra's wholesale business will function in the interim 10-year period as the NBN rolls out across the country.

The regulator today published a discussion paper (PDF) airing its concerns to the structural separation documents, telling the telco that it didn't make it clear that the services offered to its retail competitors would be equal to that offered on its own retail arm.

"The ACCC's main area of concern ... relates to the adequacy of Telstra's proposed interim equivalence and transparency measures. The ACCC's initial view is that there needs to be a clear and enforceable commitment to an 'equivalence of outcomes' that enables wholesale customers and Telstra's retail businesses to gain access to key input services of equivalent quality and functionality," new ACCC chair Rod Sims said in a statement.

The concerns on equivalent services seem to reflect those raised by Optus when Telstra lodged the initial plan. At the time, Optus described Telstra's structural separation plan as "the bare minimum", and a basic repackaging of what Telstra does in the current regulatory environment.

The competition watchdog was also concerned that a clause in the plan would have allowed Telstra and NBN Co to make agreements further down the track that would be exempt from competition regulation without the consent of the ACCC.

The ACCC said that it anticipates that Telstra will consider these issues and submit a revised structural separation plan, and has called for industry to comment on the plan before 27 September 2011.

In a statement to the Australian Stock Exchange, Telstra's company secretary Carmel Mulher said that Telstra will work with the ACCC to resolve the issues before the Annual General Meeting on 18 October, where shareholders are set to vote on the NBN deal.

"If this does not occur, Telstra may nonetheless seek Telstra shareholder approval at that meeting," she said.

Industry lobby group, the Competitive Carriers Coalition, today said that Telstra failed to consult with competitors before creating the separation plan, and said that Telstra should not try to force the ACCC to hurry along in its decision process.

"Telstra must accept that as a consequence of its poor management of the process to develop the first version of its undertaking, it cannot now meet its deadline to present its plans to its shareholders in October. Telstra should not expect the regulatory process to be compromised to accommodate its own failure," the spokesperson said.

"Telstra should now do the right thing and ask the ACCC to suspend the present undertaking while it does the necessary work with access seekers to make the fundamental changes needed to bring its undertaking up to the appropriate standard."