Gorillas and regulatory liposuction: CCC and Telstra square off

Telstra calls current regime “regulatory liposuction”, CCC calls Telstra gorilla with a fork

Telstra and the Competitive Carriers Coalition have gone toe-to-toe regarding where they believe the focus should be in the lead-up to the National Broadband Network build.

Speaking at the Broadband Australia summit in Sydney on Thursday, executive director for regulatory affairs at Telstra, Dr Tony Warren, argued that infrastructure investment and regulatory relief is the best recipe for ensuring effective competition and diversity in services for consumers under a new national network.

Telstra believes there is a "great deal of uncertainty" in the tender process and that the winning bidder needs to be assured that it won't be undercut by regulatory processes, overbuilding or price capping once it has invested in building the new network.

"The regulator needs to get out of the way to assist commercial certainty rather than add to it with regulatory uncertainty," Warren said.

"We must move on from the traditional regulatory approach...I call the traditional model the regulatory liposuction model that a) reduces the weight of capital investment and b) assumes there is plenty of fat to go around. That isn't going to work when it comes to securing billions of dollars in capital expenditure, especially during an international credit squeeze. We need to move from regulatory liposuction to regulatory certainty."

Executive director of the Competitive Carriers Coalition, David Forman, also argued that the current regulatory regime is inadequate, but for very different reasons.

"At the beginning of this month there were something like 36 matters being arbitrated by the ACCC between access providers and access seekers, and 18 that were being challenged in court. Telstra has been involved in almost all of those. In other countries [access disputes] are resolved by the regulator saying 'those are the prices, those are the terms, get on with it'. In Australia we don't have that system, we spend years resolving them," Forman said.

"We're completely bogged down in regulatory warfare. We've learned the hard way in Australia that using rules to control the behaviour of Telstra is like asking a gorilla to use a knife and fork to eat a banana - given half a chance it's going to stick the fork in your eye and eat whatever it wants."

Forman said there is no developed country in the world where the incumbent telco has the vertical and horizontal power that Telstra does, arguing that Australian consumers pay "ridiculous prices" for telecommunications services compared to the rest of the world.

"OECD prices demonstrate where we sit: For SMEs we're 40 percent above OECD average or third worst in the world. Similar for SOHOs - 35 percent above average...Mexicans do better than us.

"An Optus study released by Spectrum Value Partners examined the price of broadband plans of the incumbent in 18 countries across five categories of usage, from low to ultra high. Telstra is the most expensive in the world in three out of five categories of usage, and the second most expensive in a fourth, and we will continue to pay too much if the NBN is built on Telstra's terms," Forman warned.

He argued that the recent regulatory submissions to the government show that some form of structural or functional separation of the NBN owner/operator is essential to foster innovation, competition and to drive prices down.

"The separation genie is well and truly out of the bottle in this country. I think the task for stakeholders and policy makers from here is to identify what we want to achieve with policy and how best to design the regulatory separation arrangements for a future national network, that's the discussion we need to be having...we're going to be navigating a lot of distraction and noise, largely from Telstra, to suggest we shouldn't be having this conversation at all," he said.

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