Telstras broadband grip is causing concern for its rivals

Industry observers have said that unless some form of regulatory reform was included a National Broadband Network consisting of a combination of Telstra and the federal government would seriously affect competition.

Allowing Telstra the opportunity to buy as much as 49 percent of its $43 billion National Broadband Network it the company agreed to sell its wholesale arm voluntarily was being considered by the Federal Government according to the recent report by The Australian.

Stephen Conroy, the Communications Minister, will be presenting the proposal to high level officials at Telstra in the next few weeks, which says that it the telco agrees to sell its fibre network the company would be allowed to buy as much as 20 percent of the NBN company.

The removal of Telstra’s network operations from the rest of its business, which is call functional separation, is what is required for the Telstra split.

Telstra would be required to deal with every network user, which includes both its rivals and Telstra itself, equally, as the network operations would essentially become ring-fenced as a completely separate division of the company.

Following the assembling of a six-member special committee of executives and directors back in mid April in order to fend off the impending threat of far more intervention by the government in Telstra’s business, the company has been considering the possibility of a voluntary separation. No comments regarding plans to form an NBN partnership have been given yet by either the Government or Telstra.

Rather than taking the risk of the Government splitting up the company using regulatory reform as an excuse, the selling of part of its assets into the NBN company in exchange for an equity stake would make a lot of sense for Telstra according to Sachin Gupta, a Nomura analyst.

Mr Gupta said “There is a fair bit of existing infrastructure, transmission assets, pipes, etc, from Telstra and others, which the government project can use, and it makes sense to transfer it all in one entity if Australia is to have one national network.”