Telecommunications: Telstra's structural separation undertaking: A third best solution?

On 29 July 2011, Telstra submitted a structural separation undertaking (SSU) to the Australian Competition and Consumer Commission (ACCC) for approval under s 577A of the 'Telecommunications Act 1997' (Cth) (the Act). In accordance with the requirements of that provision, Telstra gave a commitment that it will structurally separate from 1 July 2018 (defined in the Act as "the designated day") - the date on which it is anticipated that the construction of the National Broadband Network (NBN) and the migration of Telstra's customers to the NBN will be completed in accordance with the draft Migration Plan. In addition, Telstra proposed certain interim arrangements to ensure transparency and equivalence in relation to the supply of "regulated services" to its Wholesale and Retail Business Units which will apply until structural separation occurs. Although the ACCC stated in its August 2011 discussion paper on the SSU that Telstra's commitment to structurally separate meets legislative requirements, it expressed significant reservations about the interim arrangements Telstra set forth and identified other weaknesses of the SSU, including the failure to include measures enabling the ACCC to monitor Telstra's compliance with the SSU after the designated day. Industry participants have also been critical of the SSU's interim arrangements which fall short of functional separation and are seen by many as only a marginal improvement on the operational separation measures in place since 2005.