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ACCC believes Telstra could hamper emerging technologies by using its extreme market power to force them out of business.

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Monday 26 July 2004

ACCC believes Telstra could hamper emerging technologies by using its extreme market power to force them out of business


MARK COLVIN: The competition w atchdog, the ACCC, stepped up its campaign on Telstra today. It called on the telecommunications giant to separate its highly lucrative corporate business from its copper wire, fibre optic, and cable infrastructure. 


The regulator says that in the longer term the telco giant could hamper emerging technologies by using its extreme market power to grind them out of business. 


The call for a structural separation came as Telstra rejected last week's call from ACCC Chairman, Graeme Samuel, that it sell its stake in the Foxtel cable television network. 


More from our Business Editor, Peter Ryan. 


PETER RYAN: The copper wire network that connects every household and business in Australia goes back to the days when Telstra was part of the Postmaster General's Department, later re-branded as Telecom.  


Back then the idea of the internet, satellite communications and cable TV, were science fiction at best.  


Now, in a much different world, Telstra has hundreds of competitors, but it still has the huge advantage of owning that copper wire network and charging its competitors, who in turn are also clients, to use it. That continuing stranglehold is a major focus for the ACCC. 


Commissioner, Ed Willett, says the separation of Telstra's infrastructure from its business is a matter of survival for competitors.  


ED WILLETT: Telstra's so pervasive. They're into everything and they control most of the infrastructure, be it copper wire, be it cable. 


PETER RYAN: The ACCC wants Telstra to sell it's 50 per cent stake in Foxtel in terms of content and also the cable network that delivers the service. 


And Mr Willett says that without a structural separation, Telstra's market power could see evolving technologies that pose a threat being strangled at birth. 


ED WILLETT: There's two ways Telstra might look to strangle emerging competition by birth. One is by parallel rollouts of the competitive infrastructure to deter those new networks from competing on that basis. That was the sort of scenario we had with the Optus rollout of the HSC cable.  


The other type of activity that Telstra could get into that we see as a danger is that they could predate on the provision of those competitive services in some way by trying to undercut and cross-subsidise competitive services on their own networks to undermine the financial viability of the new competition.  


PETER RYAN: But speaking from a telecommunications conference on the ABC's Midday News and Business program, Communications Minister, Senator Helen Coonan, maintains the jury is still out on reforms to Telstra, in particular the proposed sell off of Foxtel. 


HELEN COONAN: What in fact was said was that there was a case for selling Foxtel if all of the economies of scale, and if there could be a cost benefit analysis done, and if the benefits outweighed the detriments. The Government is not convinced that that case has been made out by anyone yet and I think you'd have to be very careful before you committed to anything like a divestiture of Foxtel, when you really don't know what it would cost and what its outcome would be. 


PETER RYAN: The most recent example of Telstra's market power was earlier this year, when the ACCC imposed a competition notice in relation to wholesale broadband pricing, where it undercut clients who were also competitors using the copper network. 


Communications analyst, Paul Budde, says that's not the only reason for Telstra to reconsider the fairness of its structure. He says it needs to follow the trends of models overseas. 


PAUL BUDDE: If you look at the United Kingdom, British Telecom is voluntarily moving into their direction. So you've got a possibility where Telstra is behaving themselves better in the market, and start preparing themselves for a structural separation. That would be, of course, by far the most preferred situation, rather than heavy-handed regulations trying to force Telstra to do so.  


I mean, they've got an army of lawyers that can drag on for years and years and years before that actually happens. 


MARK COLVIN: Telecommunications analyst, Paul Budde, who was speaking with our Business Editor, Peter Ryan.