ACCC questions Telstra's commitment to separation

By James Hutchinson on Aug 29, 2011 6:15 AM
Filed under Strategy

Some ring fences not as tight as others.

The competition watchdog has raised concerns about the comparatively loose divide between wholesale and network infrastructure arms in Telstra's planned structural separation undertaking.

The incumbent telco had agreed to structurally separate into three business units as part of its $11 billion agreement with NBN Co and the Federal Government.

While decommissioning copper in areas where NBN Co rolled out fibre, Telstra would retain its own fibre and hybrid-fibre coaxial infrastructure assets under the Network Services unit.

However, the telco has been forced to clarify to the ACCC why its structural separation undertaking, submitted in late July, had failed to provide equally stringent "ring fences" between all three business units.

Telstra had proposed physically separate wholesale and retail staff in shared offices to prevent confidential information leaking between units.

The retail and wholesale units in particular were at one time alleged to have shared confidential information on competitors.

Staff of those units would also be forbidden from switching between the businesses while network infrastructure staff had been forbidden from marketing or selling Telstra products while on an end-user's premises.

But Telstra argued against physical separation of network services and retail staff, saying they required co-location in some areas.

It argued there was little cause for concern of confidential information leaking from infrastructure personnel.

Staffing restrictions did not appear to apply at the same level between wholesale and network services staff, as between retail and other Telstra staff.

"It is... a far more difficult exercise for Telstra to implement physical separation between retail and Networks Services staff than between retail and Wholesale staff," Telstra executive director of regulatory affairs, Jane van Beelen, wrote in a follow-up letter [pdf] to Michael Cosgrave, head of communications at the Australian Competition and Consumer Commission.

A clause in the undertaking exempted senior management including chief operating officer, Martijn Blanken - who had purview of Telstra's network and wholesale services - from being restricted to work for a specific business unit.

Van Beelen argued that, since retail and wholesale staff performed "customer facing roles" - and network infrastructure staff did not - the same concerns did not apply.

"The Network Services business unit's activities are largely technical and process-oriented
tasks that can (and will be) objectively measured in terms of equivalence," she wrote.

 
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