How Evil is the Evil Empire?

For those of you not in the telco biz this is a reference to Telstra. It is an apposite question because the Competitive Carriers Coalition has come out today to say that telco reform including splitting Telstra is more important than the NBN.

When you live in telco land it is easy to frame everything in its relationship to Telstra. I recall two particular issues from my earliest days at AAPT. The first was the accusation that Telstra was intentionally frustrating our access to exchanges to install the very earliest DSLAMs (for ADSL broadband). The second was that Telstra improperly used information about our customers, that was provided to retail information their wholesale business obtained.

Both of these types of behaviour have been recently subject of court action, so it provides an apportunity to really review the outcome.

Firstly we'll talk about exchange access. Much later than my involvement this became an issue of exchange capping, that is saying there was no more space, rather than truly "lost keys" which is not turning up to give access at the appointed time. My comments back in 2000 were that we should always assume that Telstra management was honourable and that failure to gain access was the result of over-zealous employees. In those days my expectation is that field techs would think they were "doing the right thing" in not assisting a competitor.

The Gederal Court has just determined a case that dealt with the issue of exchange capping. The facts that access seekers had been improperly denied access were agreed, what was at dispute was the size of the fine - how guilty was Telstra. Clayton Utz have prepared a short summary of the matter. Where Telstra erred was in not having in place systems to ensure compliance with their obligations and how they responded when it was found they didn't.

Interestingly the penalty of $18.5M falls way short of the $300M that an early report suggested they would face - which was the actual maximum they could face under the Act. In reality it is almost the midway point between the $34M the ACCC sought and the $3-5M Telstra believed it was worth.

The second matter about misuse of wholesale information was also subject of a case about different matters decided in April 2009. In that decision the judge only found that there was a breach of the access conditions. There are reports that a full bench of the Court ruled that Telstra also breached confidentiality and that Optus will now claim a percentage of Telstra's profit. (I can't find the judgement and suspect that this was a procedural decision in the appeal not the end of the appeal).

The interesting thing is this case is over very very old material, and relates only to Telstra using wholesale information to prepare market share reports. I recall that I was at Telstra at the time and used to argue that (a) the use of the info was probably dodgy and (b) that it wouldn't be dodgy if we decided to publish market share info (or agree with Optus to do so). There is unfortunately a real fear in business about releasing information for "commercial confidentiality" reasons when its absence means that not only are the assumptions of the economics invalid but also the firms in the market are "guessing".

Telstra can be a bit stupid, a bit slow to react. Despite the fact I'll call it the "evil empire" till the day it is separated it ultimately is more dumb than malicious.