Friday, March 7, 2008

Arrogant Telstra loses one

May there be many more like this

TELSTRA'S ownership of the network of copper wires that makes up Australia's fixed-line telephone system has been legally diminished after the High Court unanimously rejected a case by the telco that its constitutional property rights were breached by being forced to allow rivals access to its infrastructure.

Yesterday's ruling found that the former government-owned monopoly's ownership of the public switched telephone network (PSTN) was contingent on the telco providing rivals with access. "Telstra's bundle of rights in respect of the PSTN has always been subject to the rights of its competitors to require access to and use of the assets," the judgment said.

The ruling, which pundits described as Telstra's "own goal", affirms the telecommunications access regime of the Trade Practices Act and bolsters the power of the federal Government before the tender process for the $4.7billion national broadband bid.

Telstra brought the case in January last year, asking the High Court to consider whether its constitutional rights under Section 51 (XXI), that the federal government can only compulsorily acquire "property" on "just terms", were being breached by 11 of its rivals, the commonwealth and the Australian Competition and Consumer Commission, which sets prices for compulsory third-party access to Telstra's network. Telstra argues the access prices set by the ACCC for its opponents are below cost and thus not acquired on just terms. But the judges challenged the scope of Telstra's "property".

"Telstra's argument that there is an acquisition of its property otherwise than on just terms is ... synthetic and unreal because it proceeds from an unstated premise that Telstra has larger and more ample rights in respect of the PSTN than it has," they said. "Telstra's 'bundle of rights' in respect of the assets of the PSTN has never been of the nature and amplitude which its present argument assumes."

Telstra general counsel Will Irving said the case had cost Telstra's shareholders "less than $1 million" but had been worth it.

Communications Minister Stephen Conroy backed the decision, which "upheld the validity of the telecommunications access regime in the Trade Practices Act". ACCC chairman Graeme Samuel welcomed it, saying that enforcing the access regime did not amount to acquisition of Telstra's property. The other winners are the G9 group of smaller telcos such as Optus, Primus and Macquarie Telecoms.

Optus's Andrew Sheridan said the judgment sent a "clear message to Telstra that it cannot ride roughshod over the will of parliament". Macquarie Telecom's Matt Healy said Telstra had been "given a harsh history lesson" by the judges, while Primus Telecom CEO Ravi Bhatia said it was "well past time for Telstra to stop wasting money and management bandwidth on misguided and speculative litigation in attempts to crush competition and subvert the law of the land".

Despite the unanimous ruling against Telstra, David Forman, from the Competitive Carriers Coalition, said the industry suspected the telco would continue to launch "serial court actions with little or no merit". "Until Telstra is separated into independent wholesale and retail businesses, it will continue to do everything it can to make it difficult for any other retail telecommunications company to do business," he said. "Telstra has still not won a single case on substantial matters since its management arrived from America in 2005 and imported the litigate-everything strategy, winning only one minor administrative law case against the ACCC."


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