NBN hits hurdle as ACCC discussion paper questions Telstra’s structural separation plan

The rollout of the National Broadband Network faces another hurdle, after the Australian Competition and Consumer Commission yesterday released a pessimistic discussion paper regarding Telstra’s proposed method for splitting its wholesale and retail divisions.

However, the reaction from the competition regulator is not being taken as a firm blockage of the $11 billion deal between the telco and NBN Co., despite Telstra shares dropping over 5% yesterday after the announcement was made.

“It shouldn’t be a block, because the stakes are far too high,” says Paul Budde of independent research group BuddeComm. “It’s in the interests of Telstra to solve this as quickly as possible.”

“The way I look at it, this isn’t anything major. It’s just that Telstra has not really made firm commitments, just indicators, about what they want to do. And the ACCC is now saying that isn’t good enough.”

Telstra has released a statement saying it would respond to the discussion paper’s concerns.

The ACCC has taken issue with Telstra’s proposed plan on how it wants to separate its wholesale and retail networks. In its discussion paper yesterday, it said that in its current form, Telstra’s undertaking could not be accepted.

“The ACCC’s preliminary view is that the particular structural separating undertaking that has been provided could not be accepted, and hence Telstra will need to resubmit this document in a form that fully complies with the legislative requirements,” it said.

“In this regard, the structural separation undertaking does not include a compliance plan for Telstra’s primary commitment to be structurally separated from the designated day.”

Specifically, the ACCC has taken issue with a number of matters, including that Telstra has not included a compliance plan to structurally separate by 2018. But according to chairman Rod Sims, the main area of concern “relates to the adequacy of Telstra’s proposed interim equivalence and transparency measures”.

“The ACCC’s initial view is that there needs to be a clear and enforceable commitment to an ‘equivalence of outcomes’ that enables wholesale customers and Telstra’s retail businesses to gain access to key input services of equivalent quality and functionality,” he said.

The ACCC also said it has concerns about how Telstra and the NBN Co. will continue to change arrangements without the regulatory scrutinising those changes. The discussion paper lists concerns regarding exempt areas, dispute resolution, and price equivalence and transparency.

Sims told Lateline Business last night the regulator is concerned about access to exchanges during the transition period.

Telstra responded in a statement that it “will continue to work closely with the ACCC seeking to resolve the issues it has raised”.

The business still intends to put a draft migration plan before the annual general meeting in October. “If this does not occur, Telstra may nonetheless seek shareholder approval at that meeting,” it said.

However, despite shareholders sparking a sell-off yesterday, Budde says there is no need to panic.

“Basically, now Telstra just has to comment itself on some of the things the ACCC is talking about, on subjects for which it hasn’t made concrete yet,” he says.

Sims also said on the ABC last night that he believes most of the issues included in the paper to be solvable.

“This can be blown out of proportion,” Budde says. “I don’t think it should be. The reaction from Telstra is very clear.”