Telstra has finally been given incentive to split into two functional areas: wholesale and retail. If Telstra does not do this the government has indicated that it will deny Telstra access to new 4G spectrum and put in place other sanctions. How the government's actions will affect Telstra moving forward is still unknown, however, we do know that recently Telstra notified the market that its revenues from wireless services have now moved past revenues from fixed services.
Senator Conroy's announcement of new legislation to ensure that Telstra takes the steps that were outlined highlights that the government will need to gain senate approval for the changes and it is likely that on the top of the senates concerns will be the possibility that the government is aiming to form a new wholesale monopoly in the NBN corporation.
The senate may decide to ask for ammendments to the legislation to prevent Telstra selling to the NBN corporation such components of the Telstra wholesale division so as to make Telstra wholesale dependent on the NBN corporation. This may appear to be a straighforward approach to ensuring Australia does not move from having Telstra as the monopoly wholesale provider to the NBN becoming the monopoly wholesale provider.
Competition in the wholesale market is the most important outcome of the government's announcement to step over DSL and to move to a fibre to the home solution. Rolling out a fibre backhaul network in competition with the existing Telstra backhaul network is vital for competition.
Recently the basslink fibre to Tasmania came online and the price of data to Tasmania has fallen 65% or more due to the competition on this part of the backhaul network. Capacity on the Pipe Networks undersea cable to Guam has been presold and international traffic prices have dipped. Real price drops that will benefit the consumer will occur if there are competing wholesale backhaul networks in Australia and to international destinations.
The question that everyone wants answered is what is the government's commitment to competition in the wholesale market? The answer was not provided by Senator Conroy this week. Is the government attempting to shift the Telstra wholesale division to the NBN corporation? All of the answers to this puzzle are not yet in the open, but we do know that whatever outcome the government is trying to achieve the announcement this week was another big step along the path.