Tanner: Telstra split not a Labor back flip

Despite icing a 2002 plan to pursue Telstra's structural separation due to concerns Labor had for its private shareholders, Minister for Finance Lindsay Tanner today said its current position was no different.

Sir Peter Gershon and Lindsay Tanner.
(Credit: Brian Hartigan)

"Where, in effect, the government has landed in its initial position on Telstra ... over the past few months is actually very similar to what it was back then," Tanner said today, responding to a question by ZDNet.com.au at the launch of Telstra's The Government Productivity Report.

"Which is to say to Telstra: 'If you do not wish to fully separate into two companies — we are not proposing to legislate to [fully separate]; we are not proposing to force separation. We are saying, 'If you do not do that, then we want to head down the path of functional separation', which is in effect the position that we adopted in 2003."

"In 2002 I put out a discussion paper which canvassed a half a dozen structural reform options, perhaps the most radical of which was a formal break-up of Telstra," Tanner said.

By 2003 Tanner, then the shadow Communications Minister, was copping flack from Liberal Senator Richard Alston over Labor's "humiliating back down" on the issue. The report Tanner had commissioned was Separating Telstra: Protecting the Interests of Minority Shareholders.

Referring to the report, Tanner said, "It concluded that it would take a very long time, and would face all kinds of complex issues, and frankly would be too hard." Tanner said at the time that "minority private shareholding in Telstra" made it "an inappropriate strategy for reforming Telstra".

He said structural separation was the most "extreme" form it proposed and that the government's current position in relation to Telstra is "very similar" to what it was then.

However, one month ago at the announcement of the current telecommunications reform package, Minister for Communications Stephen Conroy said it was the government's "clear desire for Telstra to structurally separate".

A key threat to Telstra in its current proposal is barring the telco from future wireless spectrum auctions, which may prevent Telstra from upgrading its highly-prized Next G network to 4G or LTE technologies, unless it separates voluntarily.

But Tanner went on to say that the "underlying thinking" in Conroy's current approach was similar to his. "The core objective remains exactly the same: that we have world class broadband, universally available, and that access to the network is competitive and open and that service providers can compete on equal terms."

Tanner and Conroy are the two ministers that must approve funding in order for the NBN Co to acquire network assets. While the legislation is being battled out in Canberra, the NBN Co is believed to be in ongoing negotiations with Telstra over how it will vend in its assets such as ducts, pits, poles, and its copper network.

The finance minister went on to blame the Howard Government for creating a policy framework that encouraged Telstra to "game the system", noting that telecommunications lawyers were "cleaning up" because of it.

"They created a structure which had all the incentives for Telstra to dedicate as much of its enterprise, activity and innovation, to gaming the system... We are keen to get away from that kind of world," he said.

"Telstra ... inevitably have different perspectives to us on some of these issues — that's understandable — but ultimately they are the same kinds of objectives, which is to bring Australia into that new world of possibility, that maximises Telstra's competitiveness, innovation and capacity to earn money for their shareholders — well, we're neutral on those things — we want all telcos to do that."