Expert: No recourse for Telstra in the High Court

By Brett Winterford, Ben Grubb on Sep 16, 2009 11:39 AM
Filed under Strategy

Where to next for Telstra?

With Senator Conroy providing Telstra few options to escape the prospect of separation in one form or another, Telstra's legal department would no doubt be spending the coming days assessing whether the carrier has a case to take to the High Court.

On few occasions in Australian history has a Government made such sweeping changes to the regulatory environment with a single company - let alone a privatised former Government asset - in mind. Telstra shareholders are rightly furious.

Telstra's legal team will be stewing over whether the Government's proposed legislation, which provides the incumbent carrier a choice between a rock and a hard place, constitutional.

Conroy told journalists yesterday that the proposed legislation is watertight from a legal perspective.

"We don't believe, on our legal advice, that there [are] any legal issues around compensation," he said. "We are offering a choice whether [Telstra] want to be in this market or on this market. We are not requiring them to do anything. We are saying if you want to move into another market [the market for 4G mobile services], there are some conditions before you can move into that market."

Legal commentator Peter Moon agrees with the Minister.

Moon said Telstra "shot itself in the foot" last year when it argued in the High Court that it should not be forced to share its copper network because such sharing amounted to "appropriating Telstra assets without appropriate compensation."

"The high court said no, no, no, no, no. Ever since the moment you were created, Telstra, you took those assets subject to obligations to share them," Moon told iTnews.  "So when you're called upon to answer those obligations, you're not giving anything up, you're just doing what you've always had to do."

Moon said the industry should not underestimate the gravity of this precedent.

"If structural separation had been forced on Telstra in the absence of that decision, [Telstra] would have an argument that the Government had to pay them massive compensation with regards to any devaluation of any of the copper network," he said.

"But instead, that High Court decision goes a long way towards eliminating any argument that forced structural separation would require [the taxpayer] to pay Telstra [for those assets]."

Moon said Telstra can thank Sol Trujillo for allowing the Federal Government to "dot that little i".

It will be at the negotiating table, rather than before the courts, that Telstra's fate is decided, Moon predicts.

The Government will achieve this by threatening to deny Telstra access to 4G spectrum, he said.

"This is the kind of thing that Conroy would also have a plan B in mind for," he said. "Plan B could be to use administrative powers that he's got that don't require parliamentary approval. Mind you the opposition is not very well placed to fight him on this."

Moon said this 'Plan B' could well come into play should Telstra "slow Conroy down or muck him around."


 

Ovum analyst David Kennedy feels that Telstra should take the easier option of vending its assets into NBN Co.

"This package of reforms is an opportunity to ... vend Telstra's copper access network into the NBN Co., providing an immediate wholesale revenue stream for the NBN Co," he said.

"This would also reconfigure the NBN Co's task: rather than building a FTTH network from scratch in competition with Telstra, its task would be to upgrade copper to FTTH. This would allow Australia to avoid a lose/lose competitive battle between the NBN Co and Telstra's copper network."

 
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