Regulatory “lipo” sucking value out of investment
At a Sydney conference today, Telstra's Regulatory Affairs Executive Director, Dr Tony Warren, described the traditional regulatory model as “regulatory liposuction” because it reduces the weight of capital investment by assuming there is plenty of fat to go around.
“That model was based on the past 15 to 20 years of regulating established industries and infrastructure. It was about forcing efficiency into the system and driving down operational expenses on existing assets during the transitional phase to open competition,” Tony said.
“But competition has done its job, and there is no more fat left. Regulation must now recognise the need for new investment in expensive, new infrastructure. Regulators around the world are starting to recognise the need for regulatory certainty, and the new Government’s National Broadband Network regulatory policy review is an acknowledgement that the current system is failing.
“Low regulated pricing of Telstra’s unbundled local loops means that SingTel Optus is under-utilising its competing cable network. Over a third of customers within the Optus cable footprint are served via Telstra’s ULL because regulation has allowed them to step down the ladder of investment and continue to use Telstra’ infrastructure.
“To put it another way, imagine your dependents finally grew up, moved out and bought their own washing machine. Then you discovered they’re still bringing their washing home on weekends … as if the laundry were some kind of natural monopoly.
“Optus has the laziest cable in the world where it could be a vibrant competitor, helping drive investment as its counterparts around the world have done” Tony said.
He also dismissed as "a distraction" recent competitor submissions to the NBN regulatory review seeking the separation of Telstra, and urged that the separation question be taken off the table.
“The competitors couldn’t get together to make a coherent argument. The mobile operators wanted to ensure that the NGN owner didn’t also run a mobile operation. Media coms competitors wanted to ensure the NGN owner didn’t have a pay-TV operation. Internet providers wanted to ensure that the NGN owner didn’t also own BigPond .Other carriers just wanted to generally chop up Telstra.
“If we listen to them all, we’ll look like that knight in the famous Monty Python sketch. The separationists seem to believe that Telstra is endlessly divisible, but despite many amputations, can still provide essential services, including emergency calls and USO. No matter how you cut us up, to them it’s just a flesh wound.
“But separation would make NBN investment impossible,” Tony said.
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