In a policy halfway house

The smaller players nipping at Telstra are not going to produce a solution for the nation. They may come up with good ideas, but they don't have the scale and scope to deliver them.

The risk with overplaying the value of competition is that we emasculate the dominant infrastructure player. The policy process favours its competitors, although they are unable to produce what is needed. We end up with a frustrating policy halfway house. No one is satisfied, yet neither will give ground.

The benefits of competition for network businesses in Australia have been largely exhausted. They have been pulled apart, prices driven down and inefficient cross-subsidies reformed.

It's time to put it all back together again - but competition fails because it's divisive, and mistrusting regulators can't make it happen either.

A cutting-edge telecommunications network will arrive only when a single network operator is allowed to manage efficiently prices and investment between high-cost and low-cost regions.

The present model encourages cherry-picking; small competitors are chipping away at profitable customers via access arrangements that ignore the fact that dominant infrastructure owners must service the entire network. This truth is not acknowledged because if real system costs were factored in to access prices, third parties would be unable to compete and open access would be revealed as a pointless long-term exercise. Put another way: open access is designed for competition, not efficiency.

And is it any wonder Telstra is concerned about making new investments on a pro-competitive basis?

It is these dynamics that are not in our national interest. It's time to elevate the debate to this higher level, rather than dwell on tired old claims that competition is being victimised for reasons of shareholder value or that Telstra should be more co-operative.