Postscript to TJA paper on Telstra restructure

This paper stimulated more ‘letters to the Editor’ than any other paper in the then 70 years of TJA. The following issue (TJA V54 N4, pp. 53-60) contained detailed responses from John Costa (disagreeing), Robin Eckermann (agreeing), John de Ridder (neutral), and Jim Davidson (supportive, with an alternative suggestion for raising funds for infrastructure investment).

In the national media, the paper was republished on the Henry Thornton website in November 2004, where it received an endorsement from Paul Budde. Alan Kohler gave it an honourable mention in his column in The Age. In the week in which the original TJA paper was distributed, both the Chairman of the Productivity Commission and former regulator Professor Alan Fels independently came out with statements supporting the need for structural separation of Telstra. Later, in 2005, in the lead-up to the new T3 legislation, a consortium of most of Telstra’s competitors all called for the same solution.

But the Federal Government ignored all such informed advice and went ahead in 2005 with legislation to enable it to sell its 51% share in the dominant Australian carrier, without any regulatory changes addressing the fundamental issues of (1) the lack of a balanced playing field for retail competition in broadband, and (2) the lack of incentives for ongoing infrastructure investment in a truly national rollout of broadband access, apart from an inadequately dimensioned Connect Australia fund..

Two years later, driven by the exigencies of a Federal election year, the Federal Government is cobbling together a hybrid solution of a subsidised WiMax infrastructure rollout in parts of regional Australia (by the ‘Opel’ consortium of Optus and Elders) and a subsidised rollout of Fibre To The Node broadband to the cities, to be awarded by competitive tender to the Commonwealth. The interconnect arrangements with Telstra, including wholesale pricing, seem not to have been decided in advance, which is ominous. – PG

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