Australia: the success of the NBN will depend on structural separation of Telstra

[brisbane times] The federal government's proposed national broadband network (NBN) can be commercially viable but only if Telstra Corp separates its wholesale and retail businesses, arch rival Optus says.

Optus chief executive Paul O'Sullivan told a business lunch in Sydney on Friday he believed consumers could have access to an NBN for $50 a month if the system achieved a market penetration of 60 per cent.

Mr O'Sullivan said that level of market penetration would only be possible if Telstra's existing network was not in competition with an NBN, and this would be brought about by structural separation.

"Optus believes that if the NBN is the only network it will achieve commercial viability," he said.

"But if there are two competing networks around the country, Telstra's and the NBN, then we think the NBN business case becomes a very challenging one."

The federal government has proposed to build an NBN, with up to 49 per cent private ownership, for $43 billion over eight years.

Doubts have been raised over the proposed network's commercially viability given the size of the capital outlay.

But Mr O'Sullivan said current fixed line revenues in the telco sector were about $17 billion annually, meaning the NBN could be viable.

He said the federal government could legislate to limit Telstra's operations in competition with its NBN, although a cooperative approach from Telstra would avoid that need.

"If Telstra's management see structural separation as a base case, then they could well reach the conclusion that cooperating with the government and moving Telstra's traffic on to (the) NBN in a separated model is the best available outcome for the company," Mr O'Sullivan said.

The government launched a regulatory review of the telecommunications industry in conjunction with its NBN announcement in April, raising the option of Telstra's separation.

Telstra and Optus are among a number of stakeholders that this week lodged submissions to the government on the issue.

Broadband success 'depends on Telstra'