The Rudd government has announced this morning a backage of reformed to telecommunication regulations that will pave the way for the break up of Telstra.

Communications Minister Stephen Conroy said the reforms would address the telco's high level of integration with the aim of promoting greater competition and consumer benefits.

"For years industry has been calling for fundamental and historic micro-economic reform in telecommunications," Senator Conroy said, further adding "Today we are delivering this outcome in Australia's long-term national interest."

This has been something which everyone - except Telstra - has been asking for since the deregulation of the Telecommunications market. The reformed will provide Telstra with the flexibility to choose its future path as either a wholesaler or retailer, but no both.

"It is the government's clear desire for Telstra to structurally separate, on a voluntary and cooperative basis," Senator Conroy said. "The government believes it is possible to achieve a win-win outcome in the interests of Telstra, its shareholders and, more broadly, all Australians."

The draft laws yet to be submitted to parliament require Telstra to lose its cable network and divest its interests in Foxtel. This will open the payTV industry up significantly particularly in terms of Foxtel being delivering other networks.

"The measures in this legislation will finally correct the mistakes of the past, said Senator Conroy. "The government will require the functional separation of Telstra, unless it decides to voluntarily structurally separate. What we're saying is that you can't be in all platforms" refering to their vertically integrated business model of Telstra.

In my opinion Telstra is more likely to choose the path of a Retail operator and sell their network assets into the NBNco. Telstra is much more than just a network operator; they have the Directories division which publishes both the Yellow and White pages, Sensis, Trading Post, Whereis, CitySearch, GoStay Hotels and LinkMe. They have their mobile network - which it seems they would be allowed to keep - Bigpond and all the retail, corporate and government services. This all represents a significant revenue stream to Telstra.

Selling their network assets to the NBNco under the structure seperation framework would return them a significant amount of cash and/or shareholding in NBNco. They would be buying services from the NBNco at the same price as any other provider, so they would not be disadvantaged. Their cash windfall could then be used to re-invest into their mobile network which is already one of the best - if not THE best - in the world. This makes senses based of the amount of money Telstra has spent of advertising mobile broadband. With an upgrade to LTE or higher speeds with HSPA there is no reason the mobile network could not be also used for fix line access as well.


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