From:
http://business.theage.com.au/optus-...0709-3cl4.html
NOW we know and it is straight from the horse's mouth, Optus. After 16
years, competition in the telecommunications industry has largely been a
failure. That's the message in a submission Australia's second-largest telco
has made to the Government on regulation needed for fibre optic-based
broadband services.
Optus, the major beneficiary of regulatory largesse over that period,
devotes 20% of its submission to the failings in successive governments'
policies on competition, noting that "16 years after deregulation, Telstra
continues to dominate the fixed-line sector and the current regulatory
framework has proved to be incapable of effectively regulating".
Of course, Optus does not admit that the construct of forced competition in
a natural monopoly industry was badly flawed and has only been kept alive by
more intrusive and irrational regulatory intervention. Instead, it argues
that competition has failed because it didn't go far enough.
Optus now tells us, "we have a once in a generation opportunity to get the
regulatory settings right to encourage a vibrant and competitive broadband
market" if we just break Telstra up through structural separation.
As there is no support for such a radical move among today's international
telecommunications community, Optus has gone back to the 1982 Davidson
inquiry that it claims "recommended the partial partition of Telecom (as
Telstra was known) into a government-owned national network, owned and
managed separately from the provision of customer equipment and retail
services, which would be fully privatised and open to competition".
The Optus submission laments that "this far-sighted recommendation was not
taken up". That's hardly surprising, because the Davidson committee said no
such thing. The committee's report stressed that "the committee does not
recommend selling off bits of Telecom to private enterprise" and its
recommendations on separation were limited to the supply of customer
equipment through a subsidiary.
The Hawke and Howard governments rejected structural separation when
competition was introduced in 1991 and Telstra privatised in 1996. The
European Union's recent rejection of structural separation and the British
regulator's preference for the less damaging option of functional separation
are all well known and understood by the international telco world but
seemingly not in Australia. Without a model for structural separation to
point to, the Optus submission tries to extrapolate from the experience of
functional separation in Britain and New Zealand to prove any form of
separation is better than the market structure now.
Functional separation, as expert opinion attached to the submission
suggests, is of little relevance to the roll-out of fibre-based broadband
but it is highly relevant to sustaining the arbitrage regime under which
Optus resells the copper network. Quite clearly, this is what the Optus
submission is about.
In building an argument about Telstra's market dominance, the submission
makes it clear that no company other than Telstra has the cash flow to build
a national fibre broadband network. For Optus, this is the "worse-case
scenario" and the detailed regulatory reforms it calls for are designed to
stop Telstra. As Telstra has stressed, if structural separation is a
condition of bidding, then it will pull out. But just in case the Government
doesn't buy the separation model, Optus has a strategy to make sure the
economics of a Telstra network are destroyed.
The submission calls for de-averaged wholesale prices for access to the
broadband network - lower prices in the cities and for the roll-out to start
in remote and rural areas. Given the big costs of building fibre in rural
areas, no one would start there, nor would they agree to de-averaged
wholesale prices that would allow competitors to cherry-pick lucrative
metropolitan customers. Yet, despite such obviously spoiling tactics, Optus
claims it has suffered 16 years of "fear, uncertainty and delay" as Telstra
has sought to stifle competition.
Regrettably, after being asked by the Government to make constructive
suggestions about how Australia's broadband future can be delivered, Optus
has preferred to engage in a long and self-serving corporate whinge. In the
process, it has gathered a massive lobby against Telstra that will not
merely stop the broadband network being built, but will result in a policy
failure that could consign the ALP to just one term in office.
Optus reveals its network hang-ups 
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