The federal government’s decision to push for the structural separation of Telstra has generally be welcomed by those who feel it will enhance competition / reduce monopolisation in the telecommunications sector, whilst receiving a less than positive response from some large Telstra investors who fear it will harm the value of their assets.

Debates around Telstra sometimes seem to have their own special form of internal logic, where people argue and apply principles and positions that they would not do in other circumstances.

The government’s plan for Telstra appears to basically be requiring a form of divestiture – a measure which is often suggested, but rarely able to be acted on, when a player or players excessively dominate a particular industry.

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Many have highlighted the lack of adequate divestiture provisions in our Trade Practices Act, which would complement existing prohibitions on acquisitions which substantially reduce competition in a particular sector.  Former Democrat Senator Andrew Murray was one who regularly called for such a reform.

There are circumstances unique to Telstra which make such action possible in this case, and even then it requires at least the threat of specific legislation to bring it about.

Coles and Woolworths domination of – and increasing vertical integration within – the retail sector is a commonly mentioned example of unhealthy and anti-competitive concentration of market power, but there is currently little that can be done about it under our existing competition laws.

It would be nice if the debate surrounding the federal government’s plans for Telstra moved beyond the peculiarities of Telstra’s situation and history, and gave stronger consideration to the merits of adopting stronger divestiture provisions in Australia, such as those which currently apply in the USA or Europe.

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Peter Fray
Peter Fray
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