Separate Telstra AND Optus: Gen-i

Separate Telstra AND Optus: Gen-i

Summary: Telstra and Optus should be forced to separate their retail and wholesale operations so that smaller players like Gen-i could compete on an equal footing for corporate work, the Telecom New Zealand subsidiary said last week.

TOPICS: Telcos, Legal, Optus, Telstra

Telstra and Optus should be forced to separate their retail and wholesale operations so that smaller players like Gen-i could compete on an equal footing for corporate work, the Telecom New Zealand subsidiary said last week.

Phil Varney
(Credit: Gen-i)

"The Australian Telecoms market is dominated by Telstra and Optus, who effectively compete between themselves for the vast majority of the business market," Gen-i Australia's general manager Phil Varney told Varney was appointed to the role in September last year.

Amongst other wins, Telstra and Optus were both recently appointed to a panel for South Australian telco services where $389 million in contracts will be within their reach.

Telstra was appointed as sole supplier of the government's $15.4 million in mobile services. Optus also recently snagged a deal worth $143 million with the Department of Immigration and Citizenship to implement a contact centre and 7,000-seat Voice over IP solution.

Varney believes smaller players such as Gen-i were limited as to the scope of work they could take on. Separation would provide equal access to the telcos' networks which would allow them to offer integrated communications offerings on the same footing as the incumbents, he said.

"Naturally the incumbents resist this as open competition, on equal terms, mean that they are unlikely to retain their business unless they can reduce their overhead structure and provide a much more flexible commercial proposition and enhanced service levels," Varney said.

The Australian Telecoms market is dominated by Telstra and Optus, who effectively compete between themselves for the vast majority of the business market

Gen-i general manager Phil Varney

He believed that separation would provide more choice for Australian business and lower costs to be consistent with those of other markets around the world.

Varney admitted that when not done correctly, separation could damage the incumbents. "The New Zealand example of a 6 per cent return on the fixed assets will not excite shareholders so, in fairness, to make the model work the returns have to be commercially sensible and, frankly, whatever they eventually get set at is fine as this will become the cost base for setting the pricing for all of the players."

The debate on the separation of Telstra raged for much of 2008, with major telco players demanding its separation in the event that the telco won the tender for the government's $4.7 billion National Broadband Network. It was, however, unpalatable for the telco, which, after it could gain no assurances from the government that it would not be required to do so, did not put in a full proposal for the network. This caused the government to throw it out of the bid process, after which talk on separation has been scarce.

It was, however, exactly Conroy's decision that made Varney think that separation for Telstra and Optus could be on the cards in the future. "Whilst when I arrived in Australia last September separation appeared a distant prospect, I feel that with the latest developments with the NBN and the firm stance the government are taking generally, it seems much more likely that the debate will step up several gears over the next few months," he said.

Topics: Telcos, Legal, Optus, Telstra

Suzanne Tindal

About Suzanne Tindal

Suzanne Tindal cut her teeth at as the site's telecommunications reporter, a role that saw her break some of the biggest stories associated with the National Broadband Network process. She then turned her attention to all matters in government and corporate ICT circles. Now she's taking on the whole gamut as news editor for the site.

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  • How nieve....!!

    Nice Try!! However its not going to happen with BOPTUS let alone the Big "T"
  • fair competition?

    Theres a reason Telstra are the number 1 provider over 20+ years in the business.

    Why on earth would they take a step back and complete your operational separation its a big step back for the company.

    If you want market share how's about being more creative and coming up with innovated differences between the big guys and the little guys? that will give you brand distinction then maybe you can make it on your own.

    In your eyes you may see the convergence as being a unfair advantage but it wasn't always like that, hard work and smart investments especially over the last 4-8 years are the big contributers to why Telstra is in the position it's in today.
  • Pots and kettles

    What a hoot. Gen-i calling for the separation of both Optus AND Telstra. They've still only got Clayton's sepatration in NZ. But the kinds of contracts Gen-i will be losing out on are really contracts for network services not facilities management. If they can't win mobile business after pfaffing around with Vodafone and/or 3 for years I don't know what separation will do.

    But JasonMC get your history right - Telstra has been the market leader for about 150 years in one form or another - since the delivery of the telegraph. It is a market position that still derives from the legislative monopoly, not the marketing genius of any current or former (like me) Telstra employees.
  • Nice try

    In my opinion if they want a piece of the market Build your own D@M network. You cannot expect just because a business has a bigger better network ( witch they funded and improved) then yourown that you are entitaled to have access to THERE network. Spend the money and claw you way to the top telstra didnt have any handouts. shore it was existing government network, But Optus have had to do the same thing claw there way to the top and spend the money back in singapore.
    Build you own network.

  • Nice try? You didn't try.

    Building a network, nationally, is worth $15 billion or more.

    For a small / new business - $15 billion isn't going to come easy.

    Telstra of course didn't take that $15 billion dollar risk at all. The aussie taxpayers took that risk. The aussie taxpayers built Telstra. Telstra was sold off, and now they simply refuse to respect their founders (the aussie taxpayer).

    Gen-i makes a good point in some respect - seperated wholesale bodies in Optus and Tel$tra may improve the situation.

    Before you say "build your own network" - be prepared to cough up the billions to fund it, because it's a risk the aussie taxpayers aren't going to take again it seems.
  • Nice try Anonymous -- 19/01/09

    Telsta and other telcos get hadouts and are asking for more all the time. Keep on dreaming.....
  • Compitition?

    What added value are these leaches going to provide if they are just reselling what Telstra and Optus are already providing? It doesn't give the customer real choices, as the only difference to the service is where the bills come from. Why would any company take risks on innovation, if someone else can come along and sell it when it gets off the ground at some arbitrary price set by the government?
  • @Compitition?

    As I see it, I reckon this guy Varney is simply wanting to enter the ranks of overpaid executives, without having to put in any effort whatsoever.
  • take it off them

    Is there a telco anywhere in the world that possess infrastructure and does NOT engange in anticompetetive behavior unless forced by legislation?

    Consumers will never get a good deal unless a regulator with balls and foresight is present, or rather than separating telstra the govt should force telstra to exchange its fixed network for all the remaining govt owned shares. Telstra never built it (taxpayer owned Telecom did) so they should never have been given it.

    Oh, how the misdeeds of the Howard years will punish Australian consumers for years into the future.
  • Telstra - fair enough... Optus?

    There's a significant difference between these two, and anyone who can't see it is more deluded than Mr Varney, here. Split Optus? Optus is a private company, built with their own money. Their network is an _investment_ they took a risk on and are rightfully operating to try to make a return on. To attempt any sort of split on them is to send a message to any potential business that Australia is not a country to risk investing in.

    It won't encourage innovation. It will destroy it. It will stop any business investing any money in this country, faced with the risk of being torn apart if you happen to actually be successful at it.

    It's utterly ridiculous to suggest splitting it. Even a high school student would be derided for doing so.
  • Optus fair enough

    Maybe it's about time you actually learned what occured instead of believing bulldust.

    Optus came in as the second provider, without another contender in 1992, with a myriad of assistance to help them, with the primary aim of building them up at any cost to rival Telstra.

    Telstra were built with taxpayers money but the network was in deep debt, which is why it was sold off. Telstra shareholders not only bought Telstra for about $60 billion but in doing so also copped the debt and had to repay all copper network debt, totalling $billions. So they paid for the network.

    Don't believe me, check history.
  • @Telstra - fair enough... Optus?

    You have got to be kidding if you believe that. Or perhaps you are a high paid manager at Optus.
  • You've got to be kidding

    Hard work and smart investments have put Telstra in the position that it's in today?

    I agree; it takes a lot of hard work and smart investment to make the share price head in the direction it's going.
  • Get Stuffed!!!

    Telstra shareholders own the your own $ stop the sponge off Telstra and its shareholders!!!