Coonan threatens to break Telstra in half

Coonan threatens to break Telstra in half

Summary: Communications Minister Helen Coonan has revealed the government is considering the structural separation of Telstra as part of a planned fibre-to-the-node rollout.

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Communications Minister Helen Coonan has revealed the government is considering the structural separation of Telstra as part of a planned fibre-to-the-node rollout.

Coonan said the government's expert taskforce, which is in charge of monitoring the tender process for the proposed urban FTTN deployment, is also considering a split for Telstra.

"We are looking at whether or not some structural separation may eventuate in any event as a result of the expert taskforce," Coonan told Sky News.

Coonan's comments follow earlier suggestions by the Minister that, should one of Telstra's rivals win the FTTN network contract, structural separation may become a necessity in the government's eyes.

It's thought the government may also be considering such a change in light of international events. The British incumbent, BT, was structurally separated at the behest of the local regulator in early 2006, while earlier this month the New Zealand government mandated a similar split for Telecom New Zealand.

Telstra said it would welcome clarification from the Minister on whether there has been a change of government policy on the structural separation question.

"We're obviously interested in what seems to be a new position. It's not something she's raised with us -- it wasn't raised at the time of the Telstra sale," a spokesperson for the telco told ZDNet Australia. "We think the way the wholesale and retail [units] are currently operating works well."

David Kennedy, research director at industry analysts Ovum, said a structural separation of Telstra would bring both advantages and disadvantages to the telco.

"The disadvantage is that there are costs involved [in separation]. It's harder to run a vertically separated strategy and I think their business strategy is predicated on retaining integration," he said. "The benefit is a much more light-handed regulatory approach."

While Telstra may be unlikely to favour a move towards separation, some industry pundits and the telco's rivals believe such a change could benefit Australia's broadband environment.

A report released by the Allen Consulting Group at the end of last year, for the Competitive Carriers Coalition, suggested that the need for structural separation is greater than ever.

"The longer structural separation is put off, the less competitive telecommunications markets will become, particularly with Telstra fully privately owned ... [Lack of separation] has reduced, or at the very least, delayed many of the benefits that stem from a vibrantly competitive market. Behavioural approaches -- such as accounting and operational separation -- are inferior alternatives," the report said.

Topics: Broadband, Government, Government AU, Telcos, Telstra, NBN

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10 comments
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  • Telstra may grate on you...

    ... but is the need for structural separation really grater than ever?

    I have images of Sol in the kitchen whipping up some spag bol and grating carrots into it...
    anonymous
  • Oooh Dan

    Guess you won't be employing the ZDNet Sub any time soon? ;)
    anonymous
  • Keep calm Senator.

    Oh Dear Senator Coonan displays all the mental capacity of the original neanderthal.

    Her attacks on the Telstra Executives show her (and her Governments) panicking desperation. Why should Sol not promote Telstra, and why should a company not be allowed to state it's opinion simply because the Government of the day fear the results of these announcements.
    anonymous
  • Cheers

    The sub team is "grate"ful to you for pointing that out. The typo has been fixed.
    anonymous
  • Separation of Telstra

    Depends what she means by 'separation'.

    The biggest mistake the govt made was not retaining for Australia, the part of Telstra that establishes and manages infrastructure.

    Then the spin off of Telstra is a marketing structure that competes on an equall basis with the Optus's et al. A much better solution.

    Then the infrastructure part can retain the corporate memory of where the wires are buried. That's now lost since they fired most of the local techies.
    anonymous
  • More bluff & bluster ?

    It's about time!
    Senator Coonan should have taken this approach from the start of her appointment.
    The government should have made this decision years ago. Now they play catch up, as usual. They don't have an original idea amongst the lot of them.
    How many O/S governments have to make the decision to separate their monopoly Telco's, before it sinks in?
    Sydney L doesn't like this change of attack by the Senator. The continuing attack by Sol & his idiot PR Exec have stirred the government so much, what did he expect. It's not so radical!

    Can't happen soon enough, unfortunately the government is in a do nothing mode due to the PM's indecision over when to call an election. Dithering as usual!

    It may never happen!
    anonymous
  • Telstra Separation

    At last Coonan has lost patience with Sol & Co. They deserved every bit of it. Bring it on.

    It's a pity about the shareholders but even that's by no means certain. Many analysts are saying it's a good thing for Telstra.

    Sorting Telstra out could lead to less need for regulation and Telstra management having to compete on an even playing field.

    Ultimately that would be to everyone's benefit.
    anonymous
  • Get the lubricant, we will all need it

    I am a large personal shareholder, despite what you may all think this company has provided great returns and enough movement in the price to make short term trading profits.

    I expect all of this uncertainty to weigh heavily on the price until the election is over and the elected idiots stop playing games and make a decision one way or the other.

    Coon(m)an is simply playing politics at the moment hoping that enough people hate the company enough to vote for the incumbent if the voters thought they would will live up to their word.

    Lets make some predictions here, start with Labour government in 2008, they will make the ACCC a bigger a toothless tiger then it is today, then FTTN will be decision delayed due to complexities and selection process, then throw their hands up because Telstra will have given up waiting and implemented their own solutions forcing the others to follow suit rendering the previous 2-3 year delay meaningless.
    anonymous
  • Sell up your shares

    Spoken like a true shareholder. Perhaps you should invest in something that doesn't run on the presumption, "If its big and dominant, it must be safe..."

    For once, and only once I agree with with Helen's separation proposal. In the world of Telcos the playing field has been most unlevel and Telstra has kept Australia in the dark ages and kept the prices high, and don't get me started with quality of service!!!!

    If its bad for the shareholder, it'll probably be good for the rest of us.
    anonymous
  • Every pne of us is a shareholder

    Every major superannuation fund holds Telstra shares and although you may not notice it today you will when you become old a senile... sorry you are already one of these.
    anonymous