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Australia: a call for separation August 7, 2006

Posted by Jasper in Regulation.
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Two economic professors (Jerry Hausman and Joshua Gans) often on both sides of the fence bury the hatchet in an article in the Australian Financial Review and call on the government to consider splitting Telstra into two fixed line networks with separate ownership. One would be the traditional copper cable access network and the other cable TV infrastructure.

The federal government should force Telstra to divest its cable infrastructure and its interest in Foxtel. In return, it should be allowed to invest in the next generation of broadband technologies without regulatory intervention. Why? Because with the cable network safely in the hands of a competitor who would offer broadband and telephone service, there would be no need for regulation.

In addition, the authors argue:

The sale of the third tranche of Telstra offers the opportunity for change. It can be structured to protect current non-public shareholders by having a buyback. At the same time, the regulatory relief will enhance the total value of Telstra – something within the government’s power and the public interest.

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