Seperation anxiety

The passage through parliament of the Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2010 this week signals the beginning of an important structural reform for Australia's largest telco. However, despite the legislation now passing into law, we still have a long way to go.

In case you're not quite up to speed - you mean you don't follow the finer details of telecommunications regulation? - here is a rough outline of what the new legislation means to Telstra.

At its most basic level, the legislation requires Telstra to undergo functional separation. For its troubles, it will be compensated to the tune of $14 billion over the next ten years. That's the carrot. If it refuses, it will be denied access to future mobile spectrum. That's the stick.

This separation comprises three components, or undertakings, that must satisfy the ACCC. The first is an undertaking under which Telstra no longer controls a fixed line network whilst selling services to the public. In other words, Telstra is not allowed to use its retail divisions to sell its wholesale services. Telstra has until 2018 to make this happen. The other two undertakings relate to Telstra not controlling a hybrid fibre-coax (HFC) network and not controlling a broadcasting licence (i.e. Pay TV/Foxtel). The Minister can, however, exempt Telstra from these other two requirements once the structural separation undertaking has been accepted. This gives all parties some wriggle room, and keeps the lobbyists in work. Everyone is happy.