What to do about Telstra?

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Yesterday Telstra launched their now we are talking site. You can read their reasoning at why talk?.

On the whole its a fair site given Telstra's position. One thing that shits me though is the amount of crap flying around about Telstra and regulation, whether its over or under-regulated and what should be done.

In all the debate about whether regulation is good or bad people are taking one of two sides.

1. Telstra is an evil bastard monopoly and we need regulation to stop them steam rolling their competition.
2. Telstra is just trying to generate wealth for their shareholders like any publicly listed company and it is their right to do so without the intervention of regulators.

The amusing thing about both points of view is that many Aussies have a foot in both camps. As a consumer #1 is definitely a problem - without competition prices will remain higher than they need to be and services cost us more. But many of these consumers are also Telstra shareholders who naturally want their shares to go up in value, not down as it has been doing.

The trouble with taking either side is that neither is really the "right" one. On the one hand the fixed-line infrastructure was largely funded by the government and it seems fair that it should be available for use by Telstra and its competitors - that is in the interest of the general public. On the other hand Telstra as a private company has revenues and profits to maintain on behalf of its shareholders. Telstra accuses its competitors of cherry-picking metro vs regional customers and eroding Telstra's profit but again for its competitors that's the "right" thing to do - private companies have one fundamental goal which is to make money.

Whether or not Telstra is lying about their costs (as some do accuse) the basic problem is that Telstra has an internal conflict - the national infrastructure needs to be maintained in the interests of the general public, yet as a private company the directors' mandate is to maximise shareholder value.

Thus IMHO the only clean thing to do is to split up Telstra and move the fixed line portion back under the government. Afterall it is the government's role to look after the public (at least that's how it should be). Regulation to grant competitors access to said infrastructure and/or to fix the price is just a band-aid solution to a problem which is really about fair distribution of costs.

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This page contains a single entry by goosmurf published on December 8, 2005 8:55 AM.

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