Telstra bites back over plans for split

In a Senate committee inquiry into the issue, Telstra yesterday gave its most comprehensive response yet to the Government's plans to force the separation of the company's retail and wholesale operations.

The company has called on Parliament to reject the legislation or, failing that, to delay it until after the company has concluded negotiations with the Government over its involvement in the broadband network and until the network's implementation study, due in February, is complete.

The Communications Minister, Stephen Conroy, has said he would like the legislation passed next month at the latest.

The Opposition quickly said it would support the delay, but Labor, the Greens and Senator Nick Xenophon said they were likely to oppose it. Senator Steve Fielding remained uncommitted.

Under the Government's plan, Telstra would be denied access to additional wireless spectrum if it did not voluntarily separate its retail and wholesale arms.

Despite the telco's negative response, a spokesman for Senator Conroy said the Government was in "positive discussions" with Telstra and was confident of a "win-win" outcome for shareholders and the public.

In its submission to the Senate's Environment, Communications and the Arts Committee, Telstra vigorously defended the current level of competition, saying the bill was "premised on the erroneous assumption that competition has failed and that the primary cause of this failure is Telstra's vertical integration".

Telstra said there had been 17 new carriers in the Australian telecommunications market in the past year and that there had been a 5.5 per cent fall in the real price for fixed-line services.

David Forman, of the Competitive Carriers Coalition, disputed the significance of the figures. He said Australia compared unfavourably with countries that did not have dominant vertically integrated operators.

"Sadly for them, it fails the 'look out the window' test because every Australian who owns a phone knows that our prices are an international joke," he told WeekendBusiness.

Telstra argues the plan to deny it new spectrum has "no policy rationale" because the Australian mobile industry is already competitive, with three national networks.

Telstra says implementing the plan will harm consumers and its employees  mobile customers will be unable to upgrade while remaining with Telstra.

After the split the Government aims for Telstra's wholesale arm to be a part of the broadband network. The company has remained coy about its intentions to participate.

Far from bolstering the broadband plans, the submission warns that the Government's second-best option of functional separation could reduce Telstra's involvement.

"Functional separation will, for many years, divert Telstra management and resources away from migration to the [National Broadband Network]," the company said.

As an alternative to the Government's separation plans, Telstra has argued for "embedding equivalence" between the company's retail arm and its retail competitors in its IT systems.