062/06
23 June 2006
Telstra’s operational separation plan approved
The Minister for Communications, Information Technology and the Arts, Senator Helen Coonan, today approved Telstra’s operational separation plan which will deliver on the Government’s aim of promoting transparency and equivalence in the supply of services to Telstra’s wholesale customers to further reinforce the development of vibrant competition in the Australian telecommunications market.
“The operational separation framework goes well beyond accounting separation in providing for organisational separation, strategies for the delivery of high quality wholesale services, internal contracts for the delivery of designated services and a robust compliance framework,” Senator Coonan said.
“The plan commits Telstra to the operational and organisational separation of Telstra Corporation Limited and the equivalent provision of wholesale services to Telstra’s wholesale customers and its own retail business units.”
The plan is only one of three key elements to the operational separation framework with the detailed strategy documents and price equivalence arrangements completing the package.
Telstra’s operational separation strategies have also been released today together with the plan while the price equivalence framework will be finalised and released on 30 June 2006.
“Although I have approved the plan, I have emphasised to Telstra that the implementation of operational separation is not yet complete. Telstra is now required to implement the strategies for service quality, information equivalence, information security and customer responsiveness, which relate to Telstra’s wholesale services generally, and notional internal contracts, key performance indicators and the price equivalence framework, which relate to designated services,” Senator Coonan said.
“I will be closely monitoring the implementation of the plan, the strategies and the price equivalence framework to ensure that Telstra is meeting its commitments and requirements. There are strong enforcement powers available to remedy any deficiencies in Telstra’s implementation of operational separation.
“This is Telstra’s second draft operational separation plan and it has considerably improved from the initial draft released in February. The first draft plan did not contain enough detail or commitments, such as how Telstra would implement ‘organisational separation’ or what role the wholesale business unit would have.
“However, after considering the feedback from stakeholders during the consultation period and after lengthy discussions with the Australian Competition and Consumer Commission (ACCC) and my Department, Telstra has submitted a significantly improved plan that provides sufficient detail and the necessary commitments to ensure meaningful operational separation can be implemented.
“Under the plan, Telstra is required to establish and maintain within the company separate wholesale, retail and key network services business units. This is designed to prevent the internal functions that Telstra’s wholesale customers rely upon to compete effectively with Telstra from being operated in a way that systematically advantages Telstra’s retail business.
“For instance, operational separation guarantees the independence of Telstra’s wholesale business unit from its retail units. The wholesale business unit will now have control within Telstra for providing services to wholesale customers and the retail business units must no longer have any influence, control or responsibility for providing services to wholesale customers.
“In fact, Telstra is now required to have separate staff and separate premises for the Telstra wholesale and Telstra retail business units. Anyone who works for Telstra retail unit can no longer work for the wholesale unit.
“Notional internal contracts and key performance indicators will also be utilised to demonstrate equivalence in relation to the operational quality of designated services.
“Internal wholesale prices will be used as a key input in assessing whether Telstra is pricing fairly at the retail level compared with the prices it charges its wholesale customers.
“Before making a price change to a retail equivalent of a designated service, Telstra will use a retail pricing tool to determine whether the ACCC would be likely to have concerns about price squeezing or other competition concerns under the Trade Practices Act.
“The operational separation strategies will collectively provide performance standards around the provision of Telstra’s services to wholesale customers. In particular, the strategies will ensure equivalent delivery of services to wholesale customers with Telstra’s retail units. Together they will provide Telstra’s competitors with greater assurance that they are being treated fairly by Telstra when they buy wholesale services”, Senator Coonan added.
“The Government will continue to work closely with Telstra and the ACCC to facilitate the timely development and implementation of the operational separation framework.”
Telstra’s operational separation plan will be available from www.telstrawholesale.com