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.
"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 ZDNet.com.au. 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.