BT rebuffs Telstra on anti-separation

BRITISH Telecom’s new chief executive officer Ian Livingston has hit back at criticism by Telstra of the functional separation of its retail and wholesale business, saying the move in Britain had been a win for consumers, driving broadband penetration, slashing prices and sparking a vibrant market for high-speed internet service with more than 200 companies.

The possible separation of Telstra’s business — either by way of an internal split or a more radical cleaving of the group into two or three separate companies, or the creation of a separate company to house the Rudd Government’s plan to help fund a national network worth up to $25 billion — has now moved firmly on to the agenda.

BT underwent structural separation in 2005, after striking a deal with the British regulator.

New Zealand recently followed, while the European Commission and other regulators around the world are looking at separation as a means to increase competition, drive down prices and boost innovation. The Rudd Government will this week begin to consider submissions from the telecoms and media sectors about the shape that regulation of the $34 billion-a-year sector should take with the new national network.

Apart from Telstra’s, the submissions have unanimously called for some separation of the former monopoly which still has more than 80 per cent of the industry’s profits and the highest earning margins of any former incumbent telco monopoly around the world.

In recent weeks, Telstra has raised its concerted attack on attempts to force any form of stronger separation through its chairman Donald McGauchie, who has called for the federal Government to take the separation debate off the table.

Mr McGauchie has argued that countries that had tried to regulate for separation had only produced dismal failures in terms of investment, innovation and benefits to consumers. “As for British telecommunications, it is, simply put, a basket case,” he told a media lunch in Melbourne last month.

One of Telstra’s main arguments against any form of separation is that it will crimp network investment.

“Wherever separation has been toyed with, it has increased costs, reduced efficiencies and brought investment in high-speed broadband infrastructure to a virtual standstill — not the least in the UK, Ireland and New Zealand,” Telstra’s public policy chief Phil Burgess said on Friday.

Privately, many BT executives are understood to be furious with Telstra’s continued bad-mouthing of the British experience.

However, Mr Livingston said he was happy to point to the results of the move.

“The UK now has the most diverse, competitive and vibrant communications market in the world,” Mr Livingston said in an exclusive interview with The Australian.

“Six years ago, broadband take-up was probably on par with Albania. Today it has higher take-up than Spain, Germany, France and Italy. You might say, you would expect that, but it’s also higher than Japan and the US.

“We’ve also got some of the lowest prices in the world. And there’s 200 different companies you can get broadband from in the UK — everyone from Arsenal Football Club to Z Internet — and that shows the vibrancy of the market.”

The Scotsman, who stepped up to the top job at BT last month following the retirement of Ben Verwaayen, joined the company in 2002 as finance chief and had been running its retail division for the past four years.

He said Telstra’s executives and directors “might be talking up their own book”.

“A lot of people from these countries tend to be critical of where we have come from but tend not to have the statistics we have,” Mr Livingston said.

Telstra has also complained that an internal separation will increase costs on the company through new layers of time-consuming regulatory red tape and it is here that the company has found some common ground with BT.

“The only criticism I would make of it — is that people can get a bit too bogged down in huge amounts of detail rather than … the end purpose,” Mr Livingston said.

“And the end purpose of functional separation is to ensure that the different communication providers can access a range of services at the same price of the incumbent — and as a result you can regulate the downstream business of the incumbent because everybody is on a level playing field.

“Occasionally people get too concerned with the minutiae which doesn’t help the customer or the industry. It (separation) is very good for the industry and very good for the customer and it’s something I have been very much involved in and strongly support.”

But Mr Livingston said full structural or legal separation was not the right answer.

“Complete legal separation can be very difficult to do — we looked at in the UK and found that it would be very difficult and also it can mean losing the anchor tenant,” he said.

Mr Livingston said he also stood by BT’s broadband record, adding that 90 per cent of the British population could access internet-based television services — referred to as IPTV — which was perhaps the key reason to build a faster residential broadband network.

BT is in the process of upgrading its network so all its customers can get speeds of 24Mbps — twice as fast as the 12Mbps promised by the Rudd Government under its broadband plan — and was beginning to deploy 100Mbps using fibre to new homes.

And while BT doesn’t have any plans to build a national network taking fibre closer to homes, in New Zealand — where the British model was mimicked last year — Telecom New Zealand has announced plans to build fibre to the node, or cabinet network.

Source: www.australianit.news.com.au