Breaking up Telstra

John Howard asserts that Telstra must be sold as a whole. I think not.

At present, Telstra consists of:

exchanges;
infrastructure (cables, electronics, etc) between exchanges;
infrastructure (cables, electronics, etc) between exchanges and subscribers' premises. Known in the trade as the last mile or the local loop.
two mobile networks;
interests in at least two satellite networks;
a wholesale arm, selling services to resellers;
a retail arm, selling services to consumers;
the BigPond Internet Service Provider and
probably other things that escape me for the moment.

Clearly this is a huge, vertically integrated, enterprise. As such, it is not necessarily an indivisible whole.

The problem is that the infrastructure on (and in) the ground is a natural monopoly. This is illustrated where attempts have been made to compete:

forests of mobile phone towers (where one would do the job) in some places, while others have little or no service;
dual optical cables (a foot apart) in some areas, while others have no service.

Vertical integration is problematic when a monopoly is involved.

The physical, terrestrial infrastructure (exchanges, cables, mobile phone receiver/transmitters - the hardware that carries phone signals, excluding satellites) [the network] has been built up over time with government funds - funds derived from the people. As such, it is property of the people in common, not a government asset.

We tend to think of the network when Telstra is mentioned. They are not one and the same.

Telstra is a company. The network is ours. If we lose control of it, the social and economic health of the nation will suffer as the dead hand of the market comes into play.

There are many planes along which Telstra can be cleft from the network. The most obvious is that between the mobile infrastructure and the satellite interests.

Telstra is already half privatised. Why not split off that half, at the point above satellite interests in the list above? That would leave Telstra as a service delivery company (hopefully, soon to be in competition with a whole slew of others).

The other bit we should retain in public ownership. We might call it Telecom, or perhaps the PMG?

14th August 2002

This is intentionally simplistic. As such, it is undoubtedly technically inaccurate. I am happy to correct any errors of fact, but not at the cost of substantially increasing the amount of text.

David Boxall david.boxall@hunterlink.net.au

Responses

Roger Clarke: A more detailed alternative.
Richard Chirgwin: More detail & a bit of the devil's advocate.
Tony Barry: A simple analogy.