The decision by Australian Consumer and Competition Commission (check) to reject Telstra’s charging regime to access to its cable network by other carriers is a welcome one. The commission wants Telstra to halve its fees from $400 million to $200 million. That should mostly flow through to consumers. Some of it will get siphoned off on the way to the shareholders of the other carriers but competition will ensure that that is kept in check.
The commission’s decision goes some way to repairing what was a flawed model for telecommunications in Australia in the first place. When Telstra was privatised it was always a mistake to allow it to be both a monopoly owner of the network and a carrier. A better model would have been to split Telstra into its carrier and retail arm on one hand and its monopoly over the cable network on the other. The former was an obvious candidate for full privatisation and the latter could have been partially or fully privatised or kept in public ownership.
The split model would have prevented misuse of monopoly power. It would have prevented Telstra’s cable arm giving unfair advantage to its carrier arm.
As it happens, the abuse of monopoly power has required regulation to subdue. With Telstra, privatised or not, structured as a vertical monopoly the commission will have to be eternally vigilant.
It proves the point, though, that effective competition and significant consumer advantage can be as easily, if not better, achieved by a tough regulatory stand than through public ownership. Indeed, there are good grounds for objecting to public ownership in Telstra’s case because the regulator is a force of government and has a potential conflict regulating a government-owned enterprise — a conflict fortunately not in evidence in this instance.