NBN change calls Telstra's separation into question

The government needs to ensure that Telstra's increased involvement in the NBN rollout under the multi-technology mix model doesn't put it at an advantage over retail competitors, Optus' vice president of regulatory and corporate affairs David Epstein has said.

As part of Telstra's original AU$11 billion agreement with NBN Co and the then-Labor government, the incumbent telecommunications giant agreed to structurally separate its wholesale fixed-line and retail businesses.

Since then, the company has moved to separate a number of systems and staff into two divisions so that in theory, Telstra's retail business has no advantage over its competitors in using Telstra's services.

In light of the shift to the so-called "multi-technology mix" model for the NBN, Telstra will hand over ownership of its copper and hybrid fibre-coaxial (HFC) networks to NBN Co for a fibre-to-the-node network, with Telstra's existing knowledge and expertise to be used extensively by NBN Co. Epstein told the Communications Day Congress in Melbourne today that this calls into question the effectiveness of the current structural separation undertaking.

"Questions also remain as to what will be the ongoing broader role of NBN in maintaining its ongoing operations and the degree in to which Telstra staff would play in that ... and the degree into which those staff are separate from Telstra's retail arm," he said.

Epstein added that the payments Telstra will receive from the government for the NBN will also continue to place the company at a competitive advantage without it being addressed in the structural separation undertaking.

"There is a real risk Telstra will carry over market dominance."

Epstein said that the government had been "pragmatic" in its response to the Vertigan panel's radical recommendations around the NBN and telecommunications regulation, as well as those made in the Harper competition review, with Communications Minister Malcolm Turnbull indicating that much of the proposals couldn't be done just yet.

Epstein said that the recommendations from the Vertigan panel are important, but that the government has to "juggle public policy imperatives" as a first-term government with the NBN on its plate.

He said that telecommunications regulation needs to move away being focused on fixed-line access.

"It is time to move on. It has been very much a regime that has revolved around access, and primarily about fixed-line infrastructure based around an old copper regime," he said.

"It has been amended in recent years, but it still remains too tightly focused on the fixed-line market."

A "future-proof" regulatory regime needs to take into account that telecommunications providers now offer many different services, and work both in Australia and globally. He said that the Australian Competition and Consumer Commission (ACCC) should adopt a more flexible approach in determining whether to approve mergers, saying it should be more about whether there is effective competition in the market, rather than just the number of competitors in a market.

The ACCC should also be given broader powers to regulate any company with "significant market power", Epstein argued. He said that the regulator's current powers were limited to access regulation only, and this did not address market power issues.

"While to some degree, the debate has been shut down a little, quite understandably, with moving forward and rolling out the NBN, we would argue it is time to start thinking about these issues," Epstein said.