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Alston must face up to his 'con job' over the Telstra monopoly

By Paul Budde - posted Thursday, 26 June 2003

Richard Alston, already notorious for his broadcasting and telecommunications policies, has carried out yet another con job.

The Foxtel/Optus content-sharing deal that was clinched in November 2002 contained elements over which the Australian Competition and Consumer Commission was powerless.

According to ACCC chairman Allan Fels, he was only able to look at the deal in the context of pay TV and had no authority to link that to the broader telecommunications or media environment in Australia.


The deal provided Telstra with a level of market dominance that is unique in the Western world. As well as this, it enabled the company to maintain a strong valuation, which would be beneficial for the privatisation of Telstra.

But it didn't stop there. In an endeavour to be seen as looking after the broader national interests, the minister recently made the following comments: "Clearly these [Foxtel/Optus] arrangements require consideration by the ACCC under the Trade Practices Act, and the government will also seek formal advice from the ACCC concerning the extent to which emerging market structures are likely to affect competition across the communications sector, including through the provision of bundled Pay TV, telephony and broadband services. The government is keen to ensure access to content on non-discriminatory terms."

The ACCC recommended that to solve the problem of market dominance by Telstra the company should divest its interest in Foxtel. In the lead-up to this announcement it had already become clear that this was the only recommendation that the ACCC could possibly make; everybody in the industry was aware of Telstra's dominance in the market, but everybody was also well aware that the minister had no intention of implementing that recommendation.

Just like the structural separation inquiry, this has been a con job from beginning to end.

I have supported the minister on the two key issues, as he sees them, in his regulatory policy:

  • Stimulate facilities-based competition (building their own network, for example Optus).
  • Open up the existing Telstra network.

The Foxtel/Optus merger is limiting facilities-based competition and the ACCC recommended that Telstra should divest its interest in Foxtel in order to increase competition. Yet, having been given a chance to address the issue, the minister rejected the ACCC recommendation.

Digital TV could be used as a platform for competition and, even more importantly, so could cable TV. Every other comparable country in the world is using the telco and cable TV platforms for facilities-based competition. Alston's latest refusal to establish this level of competition in Australia puts his handling of the issue in question.

If these two platforms (Telstra's phone network and Foxtel's cable network) are not used to establish facilities-based competition, what else is there? There is little hope of fresh investments being made and, with the collapse of several networks (for example, Nextgen) and problems being encountered with companies like PowerTel, there's little chance that there will be any facilities-based competition without regulatory intervention.

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This article was first published in The Australian Financial Review on 25 June 2003.

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About the Author

Paul Budde derives income from consulting to the telcommunications industry as in independent adviser. He has no shareholdings in the sector.

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Australian Competition and Consumer Commission
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