Stephen Conroy’s guidance to the Australian Competition and Consumer Commission over the regulatory approach to the structural separation of Telstra via the transition to a monopoly national broadband network is, curiously for Conroy, uncontroversial.

That doesn’t mean that it might not stir up some controversy, given that Telstra’s competitors have been urging Conroy to keep his steel-capped boots on during the lengthy transition period and help them strip more of Telstra’s customer base and/or profitability before Telstra is out of the fixed-line telecommunications business.

Conroy hasn’t done that. The guidance/directions within the draft regulatory instruments he released yesterday will, once finalised, clear the way for Telstra to lodge its structural separation undertaking with the ACCC.

Conroy would be very mindful that Telstra consciously chose the structural separation option over the even more difficult and destructive combination of functional separation and the threatened loss of access to wireless spectrum, and potentially the loss of its HFC cable network.

While it is going to be compensated for its coerced withdrawal from fixed-line services and the progressive decommissioning of its networks, to the tune of $11 billion of net present value, that decision to surrender and effectively allow its business to be structurally separated was taken on the basis that it wasn’t going to face any further major assaults from Conroy and/or the ACCC.

Telstra, and Conroy, would be acutely conscious that the NBN can’t be built unless Telstra and its shareholders agree to a binding deal with NBN Co, which will only happen if they are convinced that Telstra can emerge as a viable business with most of its remaining value intact in a post-NBN environment.

Given the government’s electoral standing, and the Coalition’s opposition to the NBN, Conroy’s dream of a $35.7 billion national fibre-to-the-premises network will be shattered if Telstra isn’t locked in. Mind you, it still could be if the Coalition emerged with a majority at the next election, but it would be more difficult to unravel.

So, the guidance to the ACCC contains no obvious encouragement for the ACCC to be any tougher on Telstra or to tighten the access regime’s screws on it any further, and therefore nothing to discourage Telstra from locking itself into the NBN.

It does direct the commission to ensure that Telstra’s undertaking prevents it from exploiting its position as wholesaler for commercial advantage during the transition period as it migrates its own retail customers and those of its competitors across to the NBN. But that’s nothing more than one would expect, and in line with the boundaries within which Telstra Wholesale is supposed to behave today.

Conroy has directed the ACCC not to accept an undertaking unless it is satisfied Telstra will put in place “appropriate and effective transparency and equivalence arrangements” during the transition.

The concept of “equivalence” in the Telecommunications Act doesn’t mean that Telstra has to offer its competitors exactly the same price for a service as it does in its own retail business, but that the terms and conditions and the methodology in arriving at the price are consistent.

The ACCC could, of course, reject the undertaking or insist on changes to it that offered more to Telstra’s competitors, perhaps making it easier for them to compete for Telstra’s customer base during the migration processes.

Conroy has, however, reminded the commission that, under the Telecommunications Act, it must have regard to the national interest in the structural reform of the industry and the impact of that reform on consumers and competition. His guidance requires it to consider the government’s broadband policy objectives and the long-term economic benefits of Telstra’s structural separation.

That could be interpreted as a gentle reminder to the ACCC to keep its eye on the war rather than the battle and do nothing to jeopardise the long-term structural gains in pursuit of some short-term wins for Telstra’s competitors .

The NBN is lurching, albeit slowly and unsteadily, towards the starting gates and for Labor there is no turning back. Having coerced Telstra into co-operating with tactics that were shocking in their brutality, Conroy’s hardly likely to allow anything or anyone else to threaten his hyped-up vision of a fibred-up nation.

*This article was originally published at Business Spectator

Peter Fray

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