Australia’s biggest Telecommunication provider ‘Telstra’ is contemplating the separation of it’s retail and wholesale divisions along with selling off some of the company’s fibre cable assets to the Australian Federal Government in what appears to be ‘a change of attitude’ from management.
A Telstra separation would come as no surprise although the voluntary action to do so would be an extraordinary decision considering the years of opposition against such a move. One theory behind the speculation surrounding the potential separation of Telstra is that the Telco is aiming to reconcile with the Government in a bid to thwart off far greater penetration into Telstra’s business affairs.
The question is will the break up of Telstra consist of Structural Separation, Operational Separation, Ownership Separation or Function Separation? After all, what are the differences?
Telstra Structural Separation would simply consist of two elements being divided into separate divisions – Retail & Wholesale. This would mean that the retail arm of Telstra would have to purchase and provision services and products from it’s wholesale division.
Structural Separation is essentially ‘Ownership Separation’. This means that the carrier division of Telstra’s network is entirely severed from the retail arm from both a legal perspective and that of ownership (including the parent company). The advantages of structural separation would essentially abolish conflict of interest, alleviate any monopoly stranglehold, improve regulatory legislation and thus improve competition.
Functional separation would entail Telstra to construct fully separated entities, however the ownership of these entities would still remain with Telstra who would then act as a ‘parent company’. This means all business dealings are separate, except to say that the entities would still be legally bound to Telstra. Functional separation (aka Operational Separation) would involve stringent regulatory requirements of all Telstra’s network operations. Regulatory legislation would be introduced making it mandatory for Telstra to conduct business with all ISP’s on equal terms.
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