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Structural separation of Telstra: Government answers key questions

by Staff Writers •
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Last week’s announcement of major reforms to telecommunications regulations by Communications Minister Stephen Conroy will effectively force Telstra to structurally separate into two separate commercial entities.

The first of the entities will be for the provision of competitive communications services; the other will cover the telco’s existing network infrastructure.

In forcing Telstra to make this separation, the Government has answered at least partially two key questions arising from Senator Conroy’s April announcement of the new National Broadband Network (NBN).

  1. What will be Telstra’s role in the NBN; and
  2. Where will the majority of the $43 billion investment estimated for the NBN come from?

Telstra’s current infrastructure, especially its largely copper-based Customer Access Network (CAN), forms the backbone of Australia’s telecommunications infrastructure.

Central to the NBN is the roll-out of a national ‘fibre to the premises’ (FTTP) network. In the absence of separation, there was a question whether Telstra, too, might invest in its own, parallel network. This was always discounted because wireline infrastructure competition is perceived to have generally failed.

So, whither Telstra?

As noted above, Telstra does need to invest in its CAN and indeed it has been doing so. By creating a structurally separate network infrastructure company, the infrastructure part of Telstra will no longer be responsive to the incentives formerly presented by commercial integration, but instead will be attracted by the opportunity presented by the NBN. Or at least, that is the theory.

It is premature to state what will happen. Telstra has some weeks to respond to Senator Conroy’s announcement, and has many issues to consider in developing its response. But it is clear the Government has changed the telecommunications playing field, and how the NBN gets built is looking a lot clearer.

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  • Federal
  • Telecommunications
  • Infrastructure
  • CAN
  • FTTP
  • NBN
  • Stephen Conroy
  • Telstra