ACCC may refuse Telstra separation plan

Does not meet legislative requirements.

Australia's competition watchdog has all but knocked back Telstra's structural separation undertaking over concerns it does not meet legislative requirements.

The Australian Competition and Consumer Commission (ACCC) chairman Rod Sims released the commission's "preliminary view" of the separation plan today.

"The ACCC's preliminary view is that Telstra's undertaking can not be accepted in its current form and that important changes are required," he said.

Industry has been asked to inform the ACCC of its views on concerns raised in a 207-page discussion paper [pdf].

"Subject to the submissions received the ACCC anticipates that Telstra will need to consider the ACCC's concerns before submitting a revised structural separation undertaking that is capable of acceptance by the ACCC," the commission said.

The ACCC said its primary concerns included:

• No compliance plan for Telstra's primary commitment to structurally separate by 2018.
• Unsupported interim equivalence and transparency measures.
• A deal between Telstra and NBN Co that allowed them to vary arrangements without ACCC scrutiny.
• Provisions aimed at stopping Telstra marketing wireless as substitutable for NBN services.

However, the regulator also listed a further nine areas of concern.

These included IT security concerns, exchange building access rights and assurances over the timing of implementation of equivalence and transparency measures.

They also covered a controversial exchange between the ACCC and Telstra last week, when the watchdog questioned the strength of proposed ring fences between Telstra's retail, wholesale and network divisions.

The timing of an ACCC decision on the acceptance or refusal of the undertaking would depend on the "preparedness" and "clarity" with which Telstra addressed the watchdog's concerns.

The ACCC was, however, less concerned about Telstra's draft plans for the migration of fixed-line customers to the NBN.

"The ACCC's preliminary view - subject to submissions from interested parties - is that the draft migration plan submitted by Telstra addresses all of the statutory criteria," the commission said in its discussion paper.

"However, this discussion paper seeks input in relation to several issues where it is not clear whether the draft plan addresses the criteria to the required standard."

A spokesperson for Telstra said the company has "been in productive discussions with the ACCC for some months and was aware of the issues the commission has raised in its discussion paper.

"Telstra believes these issues can be resolved in a way consistent with our principle of protecting shareholder value, and the company will continue to work closely with the ACCC to address its concerns."

Telstra shares were trading at $2.98 immediately following the announcement, down three percent.