An independent analyst with telecommunications advisory firm, Ovum, has warned of “serious damage to the Australian telecommunications industry”, because of “naïve” approaches to the issue of separating Telstra.

David Kennedy of UK-based international consultants, Ovum, said his company’s view is that separation is always a local solution to local problems.

“Overseas policies cannot simply be copied into the Australian market, which has many significant differences to the UK and New Zealand,” Mr Kennedy said.

“It’s important to remember that operational separation also has costs. When the New Zealand Government announced its 2006 package of reforms, which included operational separation, Telecom New Zealand’s share price dropped around 30%.

“Separation made a major contribution to that drop, and it’s too early to say whether the cost of separation will generate compensating benefits. At the very least, it is going to take years.

“If we saw a similar drop in Australia, it would crimp Telstra’s capacity to invest in new networks and technologies.

“This could have the perverse effect of delaying investment in new broadband infrastructure. These are the kinds of factors that a separation policy would need to take into account,” Mr Kennedy said.

Group Managing Director of Telstra Wholesale, Kate McKenzie, said the Ovum commentary provides a fresh breath of sanity.

“Separation makes no sense under any scenario. It always costs more to do things twice than doing things once. Separation will delay, if not stop, the NBN build and stunt innovation,” Ms McKenzie said.

“It is insane to think that smashing up Telstra is good for the nation, or good for telecommunications in Australia. Telstra is the only company that provides services to the entire nation - and delivers those services everywhere, for the same price.

“We are now looking at a potential turning point in Australian telecommunications, with some other companies wanting to charge retail consumers in regional and rural Australia higher prices than people in the cities. That can't be allowed to happen to people in country areas - it just isn't fair and it's not the Australian way.

“If it goes ahead, the NBN will be a massive undertaking - the biggest infrastructure build ever undertaken in Australia, even bigger than the Snowy Mountains scheme. It will require many billions of dollars of investment, more than 50,000 nodes and the rollout of more than 100 thousand kilometres of new fibre.

“It will need to be maintained and upgraded by people who know the country and its distances, densities and terrain.

“Separation hasn't worked anywhere in the world. It stops investment in networks, adds massive costs and kills off innovation. The net result is very bad for consumers.

“In recent months we have been advised by some of the world’s leading regulatory minds who all believe that separation is just dumb for Australia,” Ms McKenzie said.