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redesigning the telco market « Previous | |Next »
March 21, 2005

Allan Fels and Fred Brenchley have an op ed. in todays Australian Financial Review that addresses the issue of the regulation of the telecommunications market. This it is a benchmark article. They pose the issue directly, their diagnosis of what has gone wrong to date is sharp, and their cure is politically astute and reasonable.

Since this AFR op. ed. is not online, I will outline their argument. The issue is stated thus:

It's time to remove the blinkers on Australia's telecommunications industry. How long can we live with with the poverbial 800 pound gorilla dominating it? How long can we expect rural dwellers to go without modern-living essentials such as access to broadband?

Their judgement, like mine, is that T3 is probably the last opportunity to get the regulation of the telecommunications market right.

Their diagnosis states that the last 15 years of telecommunications has not delivered competition:
Today we have an industry in which Telstra has an estimated 89 per cent of directly connected lines, 81 per cent of local call revenue and 95 per cent of industry profits. Either the competitive model has failed or the supposed special regulation of Telstra by the Australian Competition and Consumer Commission has failed. Or both.

This gives us a distorted telecommunications market that stifles competition and innovation, and has inherent service failure built into it.

So why not push for the structural separation of Telstra? That would do away with the 800 pound gorilla dominating and distorting the market.

Fels and Brenchley say the only politically acceptable reform path is operational separation. The full structural of Telstra separation has been ruled out by John Howard's government. So:

The issue now will not be whether there should be operational separation, but how it is done and whether separate boards are involved .... This would allow Telstra [to] retain many of its integrated tentacles such as its half share of Foxtel.

They add that:
The solution to such continuing integration across markets is to give the ACCC divestment powers---or at least the threat to invoke such powers---in cases of extreme anti-competitive behaviour.

So getting it right minimally means an equitable playing field and an armed regulator. It is what consumers need.

| Posted by Gary Sauer-Thompson at 1:28 PM | | Comments (0)