The Telstra Split 101

Yesterday’s announcement that Telstra will be forced to split its existing infrastructure business from the rest of the companyis going to be fodder for news journalists and communications junkies for months to come. But what difference will it make to the average Internet user?

Picture by osi

The really simple answer is: no-one knows for sure, and nothing will happen for a while, but it should ultimately result in cheaper prices and more competition for Internet services, most particularly the ADSL services used by the majority of Australians.

The reason for that is pretty straightforward. I summarised the situation back when the National Broadband Network was first announced as a government-backed project in April, and that still covers most of the key points:

Most of the problems with Australia’s current broadband infrastructure stem squarely from the decision of the Howard government to privatise Telstra without making it give up control of the existing telephone infrastructure. That effectively gave Telstra control of the ADSL market for a time, a position it repeatedly abused through such consumer-unfriendly strategies as making it difficult for rivals to add their own equipment to exchanges, or only offering ADSL2 to customers in exchanges where rivals had already set up.

According to the Australian Bureau of Statistics, 57% of Australians use some form of ADSL. The vast majority of those utilise Telstra’s network, either directly or as a service which Telstra has resold to other ISPs. Telstra controls access to exchanges, so even if ISPs want to put in their own equipment to offer advanced services, they often face a difficult time. Telstra has also been the subject of frequent criticism for the wholesale prices it charges other ISPs, which in some instances have been higher than what Telstra itself charges consumers.

Since Telstra was privatised, there have been 150 formal complaints to the ACCC regarding access to the network. As Senator Stephen Conroy pointed out in the announcement of the regulatory plans, this is far higher than the level of complaints in any other regulated industry. Forcing Telstra to structurally separate, making its copper access business entirely distinct from its retail operations, should reduce those complaints and make it easier for rivals to offer competitive services.

The biggest unknown is the impact that the National Broadband Network will have. The first backhaul projects are also designed to loosen Telstra’s control of the national network.

But predicting the future in telecommunications is notoriously difficult. Back in when Telstra was first privatised, the services which received the most attention were conventional voice telephone lines. These days, with mobile phones at more than saturation level, that seems less of an issue, while Internet access is seen as vital. At the same time, the popularity of 3G broadband suggests that ADSL Internet access may also eventually go the way of the dinosaur. For all those reasons, it’s hard to predict exactly what impact the change will have, but it’s hard to make a case for it having a negative impact in terms of consumer services.

Lifehacker 101 is a weekly feature covering fundamental techniques that Lifehacker constantly refers to, explaining them step-by-step. Hey, we were all newbies once, right?