Telecom NZ Shareholders Approve Structural Separation

Telecom New Zealand shareholders have voted to approve the structural separation of the company. Telecom shareholders approve structural separation 

The vote clears the way for the separated network business "Chorus" to list on the New Zealand stock exchange and raise NZ $929 million of government funding to lay fiber-optic cable to homes and businesses in 24 of the country's largest cities, including Wellington and Auckland.

The national network is expected to cost NZ $3.5 billion.

Telecom CEO Paul Reynolds said the separation vote was unprecedented. Structural separation 


Executives in Singapore might disagree, and Australia has been on a parallel track for years, as well. 

The idea hasn't been much of an issue in the U.S. or other western hemisphere markets, though the idea was raised briefly during the early 2000s. 

S. 1364, The Telecommunications Fair Competition Enforcement Act of 2001, introduced by then Sen. Ernest Hollings (D-S.C.), provides an example of the past interest in structural separation.

Sen. Hollings wanted to force the "Baby Bells" to separate their networks and retail business services functions into distinct companies, U.S. structural separation talks

Under structural separation, then-existing companies Ameritech, Bell South, Pacific Bell, SBC and Verizon, among others, would have to separate into two parts. The retail arm would have to buy and provision services from the wholesale arm.

States that also were serious, at the same time, included public utility regulators and state legislators in Alabama, Florida, Illinois, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Oklahoma, Pennsylvania, New Jersey, New Mexico, North Carolina, South Carolina, Tennessee, Virginia, and Wisconsin. States looked at structural separation

From time to time the issue still is raised by policy advocates, but it still does not appear there is any serious interest in exploring structural separation in the U.S. market. One key reason is simply the different market structure. The U.S. market has a highly-developed, ubiquitous and  successful cable industry that already has built national broadband networks that compete vigorously with telcos. 


At the same time, several national wireless networks also are competing to sell mobile and fixed broadband services, and while not perfect substitutes for fixed-line service, are credible substitutes for some applications and users. 


Structural separation so far has made much more sense where a credible, ubiquitous facilities-based network rival to the incumbent telco was not in place. In some isolated cases, an incumbent has been willing to give up its access network monopoly in trade for something the firm wanted more, namely the ability to compete in other non-regulated markets. 


New interest in structural separation

Which Road for Australia?

It isn't yet clear which road Australian regulators have in mind for that country's contestants. An inter-modal framework such as that used in the United States is one option. So is the intra-modal, robust wholesale access model prevalent in Western Europe. In Australia, it would be Telstra that builds the fiber-to-home network that other competitors would have wholesale access to.

At some point, the log jam has to be broken or consumers and businesses in Australia are not going to have access to the bandwidth they are going to need. Up to this point Telstra has been able to rely on wireless and new Internet access services to offset declines in voice revenue. But nobody really thinks that can go on forever.

Neighbor New Zealand already has opted for an "operational separation" regime that separates wholesale network operations from retail sales operations for all players in the market that want to take advantage of the wholesale access network.