Telstra (ASX:TLS) has submitted detailed structural separation plans to the Australian Competition and Consumer Commission (ACCC), pending shareholder approval, which it intends to meet by 2018.
In an ASX-statement, Telstra chief executive, David Thodey, said the move was in line with the $11 billion definitive agreement signed with NBN Co and the Federal Government in June for the rollout of the National Broadband Network (NBN).
“The submission of these documents is another important step in finalising Telstra’s participation in the rollout of the NBN,” Thodey said in a statement.
“Along with seeking shareholder approval, ACCC acceptance of the SSU and approval of the Migration Plan are critical conditions precedent to the Definitive Agreements signed in June.”
The requirements of the SSU are enforceable by the ACCC in the Federal Court and any breaches made by the telco will be addressed by a range of “remedies”.
The structural separation undertaking (SSU) commits Telstra to structurally separate by 1 July 2018, which will involve the decommissioning of Telstra’s copper and hybrid fibre coaxial (HFC) networks, and subsequent migration onto the NBN. It also maps out the measures Telstra will put in place to provide transparency and equivalence in the supply of services to wholesale customers during the transition to the NBN.
According to Thodey, the interim equivalence and transparency commitments, which are binding and court enforceable, offer substantial and practical improvements in areas of industry and regulator concern.
“These commitments will provide faster resolution of perceived issues and will reduce unnecessary administrative costs for all parties,” he said.
“The SSU delivers robust, effective and appropriate equivalence and transparency during the migration period in a way that avoids the complexity, cost and industry disruption that would be caused by functional separation.”
The interim equivalence and transparency regime includes:
- The publication of a rate card for fixed-line access services, which will be made available to all access seekers who are buying new services after the commencement of the SSU
- Equivalence reporting of input costs based on the Telstra Economic Model (TEM), the primary management accounting system used internally by Telstra for its own business planning purposes, and a commitment to allocate costs equivalently between retail and wholesale business units
- An expanded set of specific non-price equivalence commitments targeted at known areas of concern which reach beyond the current Operational Separation regime
- The option for automatic wholesale service level rebates where Telstra fails to meet a committed functionality and availability service level metric for wholesale customer IT systems
- The creation of an Independent Telecommunications Adjudicator (ITA), based on the successful United Kingdom model, whose appointment and charter will be approved by the ACCC
- A fast track complaint resolution process via the ITA, who will have the power to quickly and conclusively resolve equivalence complaints within 6 weeks without regulator or court involvement
- New internal ring fencing obligations governing the permitted functions and interactions of staff in ‘retail’, ‘wholesale’ and ‘network services’ business units.
The migration plan, which details the process the telco will follow when transitioning customers to the NBN, will maintain Telstra’s “business as usual” processes, systems and interfaces for disconnecting premises.
It will also give wholesale customers more choice over when their end users migrate to the NBN, enabling wholesale customers to coordinate connection and subsequent disconnection themselves, in an attempt to maximise service continuity for end users.
Following the network rollout in a particular region, Telstra is obligated to disconnect the copper infrastructure 18 months after the region has been identified by NBN Co as “ready for service”. Should a service not have been migrated prior to disconnection, the telco is required to keep a soft dial tone in place for up to 20 days to enable access to emergency services which a replacement NBN service is arranged.
In the six months following the approval of the plan by the ACCC, Telstra is required to have established further planning for the notification process for wholesale customers to be affected by “pull through” (the use of existing copper to aid in the installation or replacement fibre); to mass disconnect all remaining services; the build of new copper “paths” after they have been permanently disconnected; the process used to disconnect special services as new NBN products are developed; and the information ring fencing arrangements to ensure any information received by Telstra from NBN Co cannot be commercially exploited.
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