The Australian government wants Telstra to structurally separate and if the telco giant won't do so voluntarily, the Rudd administration will use regulation to achieve the goal.
At a press conference in Canberra, Minister for Broadband, Communications and the Digital Economy, Senator Stephen Conroy, said telecommunications legislation will be introduced that will allow the government to impose a strong functional separation framework on Telstra unless it separates of its own accord.
The changes come on the back of the upcoming rollout of the government's A$43 billion fibre-to-the-home (FTTH) national broadband network (NBN), which has the potential to change the current telecommunications regime and outmode Telstra's fixed-line copper network.
"It is the government's clear desire for Telstra to structurally separate, on a voluntary and cooperative basis," Conroy said.
The Communications Minister admitted the separation will not be an easy commercial negotiation but the government had seen a change in attitude from Telstra in recent times.
"Telstra are as hard nosed as they come," he told journalists at the press conference. "It will be a tough 8-13 weeks towards the end of the year. We won't be speculating daily. In the end, Telstra will only agree to this if they believe it's a win-win."
The reforms aim to:
1. Address Telstra's high level of integration to promote greater competition and consumer benefits
2. Streamline and simplify the competition regime to provide more certain and quicker outcomes for telecommunications companies
3. Strengthen consumer safeguards to ensure services standards are maintained at a high level
4. Remove redundant and inefficient regulatory red-tape
Telstra is one of the most highly integrated telecommunications companies in the world across the fixed-line copper, cable and mobile platforms. But its copper network is looking rather long in the tooth.
"The copper access work is literally collapsing in the ground," Conroy said. "There's an enormous maintenance requirement every year to try a keep it where it's at."
The Senator said the government had not undertaken a cost benefit analysis of the NBN, but maintained that level of diligence is not required as broadband coverage in Australia required a major overhaul.
"Have we done a cost benefit analysis? No. We've had eleven-and-a-half years of watching small business and regional Australia struggle to get access... the cost benefit analysis is staring us in the face," he said.
"The market didn't deliver us an outcome so we've prepared to do it ourselves and partner with the private sector to do it."
He said despite claims of 80 percent coverage for ADSL2+ technologies, the reality was quite different.
"It's probably only around 50 percent access to ADSL2+," he said. "It's what happens once you leave the exchange -- the infrastructure in the ground blocks the access to the broadband. There is an inherent end to the copper era coming."
The reforms will drive lower prices, better quality and more innovative services, he said.