In today’s New Matilda, I have an article up about the Rudd Government’s decision to split up Australia’s giant phone and media company, Telstra. It marks a sea-change in Australian media and telecommunications policy, for reasons that will be immediately apparent to most Australians.
For international readers of my blog, here’s a bit of background.
Telstra is one of Australia’s largest and most profitable corporations. When Australia decided to deregulate its telecommunications industry in the early 1990s, and unlike in other countries, the company was never forced to split off its wholesale infrastructure assets from its retail operations. The result was that the privatised former government monopoly remained the last “vertically integrated” telco in the western world, effectively competing as the 900 pound gorilla against new entrants to the market. In other words, Telstra not only continued to own the legacy copper wire and fibre networks around Australia, but also competed aggressively as a retailer in the phone and internet markets. Not content with that, the company also made a series of media and content plays, eventually owning half of Australia’s major cable TV company, Foxtel. For my US readers, imagine if AT&T had never been split into the Baby Bells before US telco deregulation, but instead bought a cable TV company, and you can get an idea of how powerful Telstra was and remains.
Under the management of former Qwest CEO Sol Trujillo, Telstra used that power to aggressively fight both the Australian government and competitors. The company was notorious for its anti-competitive practices, like sabotaging competing ADSL exchanges and “losing the keys” to phone cabinets that competitors needed to access. While it was at it, Telstra spent tens of millions suing the government (still a part-owner of the corporation through the unprivatised section of the government’s shareholdings). Meanwhile Telstra leveraged its sunk costs to become one of the most profitable telcos in the world.
The result has been a disaster for Australian consumers. Australia has some of the slowest broadband internet speeds and most expensive internet plans in the western world.
Yesterday’s decision by the broadband minister, Stephen Conroy, means that the giant telco will now be forced to split itself up. It’s been a cunning series of political manouvres that have completely outflanked Telstra. It also shows the way ahead for the Rudd Government, should it wish to take on the big carbon corporations who are lobbying against its proposed emissions trading scheme.
You can read the full article here.