Opinion: NBN opens a giant can of worms

The majority of the IT and Telecommunications industry was excited to hear the Government's decision to build its own $43 billion National Broadband Network, in a move that returns Australia's telecommunications economy to an era of part-public, part-private ownership.

As the Government irons out the details of the project, industry pundits have been pushing the issue of separating Telstra's retail and wholesale division onto the top of the NBN list.

Recently, Graeme Samuel, chairman of the ACCC, said Minister Conroy's commitment to keeping the NBN network separate from retail companies should allow it to deal "head-on" with the difficulties arising from the vertical integration of the current incumbent, Telstra.

According to the ACCC chairman, the NBN project raises the opportunity to undo the mistakes made by previous governments that decided to leave Telstra in control of both the copper network and its retail operations.

"Telstra has been permitted to compete in the same markets in which it provides access services over its fixed line copper network to other companies - granting it both the incentive and the ability to discriminate against access seekers in an anti-competitive way," said Samuel.

"The vertical integration of Telstra has been one of the most substantial regulatory issues facing the Australian telecommunications industry."

The government's commitment to ensure the NBN is structurally separated guarantees a definitive break from an industry structure dominated by the vertical integration of the incumbent.

"Structural separation will mean the NBN operator has a clear incentive to treat access seekers on an equivalent basis," said Samuel.

His sentiments were echoed by Simon Hackett, managing director at Internode, who told CRN in an opinion piece, the greatest benefit of a decision to structurally separate Telstra into wholesale and retail organisations would be competition - and thus consumer benefit.

While many believe that Telstra Retail buys its services through Telstra Wholesale, this logical, but completely incorrect, assumption lies at the heart of the current problem.

"Telstra Retail is not a customer of Telstra Wholesale: Instead, it has parallel, unrestricted direct access to the Telstra network, which gives it a completely different cost structure and greater access and flexibility than the rest of the industry enjoys," said Hackett.

"Structural separation of Telstra's wholesale and retail operations has the potential to turn that situation on its head.

"If an independent Telstra Wholesale was the access path for all customers, including Telstra Retail, then Telstra Wholesale would have an incentive to offer access at commercially competitive prices and to develop new service offerings."

What do you think? Is now the right time to do more than just talk about separating Telstra? Should the Government bite the bullet and divide the company?

CRN has posted a poll on the Government's $11 billion investment in the $43 billion NBN. Vote on whether or not this enough of an investment.