Chorus warns Australia on structural separation risks

Chorus manager of marketing strategy and insight Rosalie Nelson warned Australia’s telecommunications industry on the risks of New Zealand-style full structural separation.

She was speaking at the CommsDay Melbourne Congress and reported in Communications Day.

Nelson’s comments come as Optus chairman Paul O’Sullivan calls for Telstra to split along similar lines to Telecom NZ (now Spark) and Chorus.

Chorus landed with Telecom's regulatory obligations

When Chorus demerged from Telecom NZ, it inherited the copper network, a considerable share of the former company’s debt and almost all the regulatory obligations.

Nelson says the Commerce Commission ruling on the price Chorus can charge telcos and ISPs to use the copper has hurt its ability to pay for the fibre network.

While the arguments are well-known, what isn’t widely understood is how dependent Chorus is on revenue from the copper network and how it doesn’t get to set the prices for copper services.

High capital expenditure

She says that for every dollar the government puts into the UFB build, Chorus puts in two. For every dollar Chorus earns it needs 60 cents of capital expenditure.

Nelson says the assumption that telecommunications is like other utilities needs questioning because it is subject to rapid change. That leads to uncertainty — yet investors are usually drawn to utilities because of their stability and relative certainty.

She warns Australian telcos to make sure all their funding sources are secure before taking part in an industry restructure.