Australia - functional separation

Telstra wants splitting talk to stop

Telstra Corporation Ltd wants the federal government to stop considering splitting the telco into separate wholesale and retail businesses, saying the move could jeopardise the rollout of its proposed high-speed broadband service.

"We want this issue of separation off the table," chairman Donald McGauchie told journalists at a meeting in Melbourne.

Mr McGauchie said Telstra would only bid to build the high-speed broadband service if it could own and operate the new network.

He said separating the retail and network divisions under separate management structures would add costs and hinder development.

"If somebody else wants to build a network, that's fine. If the government wants to build a network, they can," Mr McGauchie said.

"But once somebody else ... builds it, you're talking about separating the network because we still hold a large part of the loop."

Mr McGauchie said the lack of clarity from the government over operating and investment rules could hinder further investment.

"We want to know what the rules are ahead of time," he said.

"We don't want to go out spending billions of US dollars to have the rules changed."

The federal government has set aside $4.7 billion to help fund the building of a high-speed broadband network, which Mr McGauchie said may cost as much as $25 billion, double earlier estimates.

It aims to reach 98 per cent of the population.

Mr McGauchie said Telstra's ownership of the proposed high-speed broadband network would not hamper competition.

"If we say we'll provide equality of service, we'll provide equality," he said.

The Australian Competition and Consumer Commission had overregulated the telecommunications market and this meant consumers had already missed out on advances in the fixed-line network, Mr McGauchie said.

He said Optus had built high-speed cable that could connect to two million homes but decided to invest in ADSL, which allowed broadband speeds through copper cables because the ACCC had forced Telstra to sell access at uneconomic rates.

"You have seen a failure of competition policy. That Optus cable is sitting there virtually unused," he said.

Optus, Australia's second biggest telco, responded by saying subscribers to its cable network, which can connect to 1.4 million homes, had risen steadily to 412,000 customers as of March.

Optus used the cable where it could when customers subscribed to the company, a spokeswoman said.

Optus had stopped the rollout of cable in the late 90s because it became uneconomical to continue, the spokeswoman said.

Optus, owned by Singapore Telecommunications Ltd, is leading the Terria consortium, the rival to Telstra's bid for the national broadband network.

The federal government recently extended the original bid deadline from June 25 by at least 12 weeks to give the bidders to build the high-speed broadband network time to examine Telstra's existing infrastructure.