Until last week Paul O'Sullivan was head of Optus. Now he has moved into the non-executive chairman role, which still allows him to have a go at the competition.



He used a Trans-Tasman Business Circle lunch in Sydney yesterday to savage Telstra and what he says is the Government’s favourable treatment of it, because of its special relationship with the NBN.



”The Government is under enormous pressure to provide the incentives to Telstra to play along, regardless of political party. In the process the consequences for competition, the consequences for the modernity and the efficiency of services that you're going to receive for the next decade, plays second fiddle to the urgency of being able to get a rollout underway.”



He described his comments as an “inconvenient truth” that isn’t talked about much, but other Telstra rivals have said much the same thing recently. iiNet’s David Buckingham was rather forthright on the subject when he announced iiNet’s financial results.



“When a company can make $7.5 billion in free cash more profit than the cashflow of the whole Vodafone Group last year and still get paid $640 million by the Government for the NBN, things are weird,” said Buckingham. Vodafone Australia chief Iñaki Berroeta has also been vocal on the subject.



O’Sullivan said Telstra should be split up. “If Telstra is going to have a key role to play in the NBN, because we're now dependent on its copper in order to get from the node to the home, there's a huge conflict of interest if they're also upgrading and maintaining the network. It needs to be taken away from Telstra’s operational control. Putting a company that competes in the market in charge of Internet access is like putting a fox in charge of the hen house.



“A perfect storm is brewing, the result of the confluence of impatience within the electorate and a desire to see the NBN rolled out, and some very clever leveraging by the incumbent of its power. It is five minutes to midnight. Competition is more threatened by the way the NBN is being constructed than it has ever been since competition was introduced in 1992.”



O'Sullivan said that over the next 30 years Telstra will receive up to $90 billion in payments from the NBN under the previous access agreement negotiated by Labor and from the agreement currently being negotiated to accord with the new realities of the Coalition’s ‘multi technology mix’.



“Telstra will have a lot of cash coming its way, and it's going to have a strong commercial incentive to use that cash. It's only fair they will to want to use that money to bolster its market position.

“We need a way to check how Telstra spends its money, and there isn’t a good way to do that today. The current competition rules have several severe flaws in them.



“If there’s one lesson after the last decade of unbundling the local line loop, it’s that no amount of regulation can overcome the conflict of interest that will exist for any company in how you provide access to competitors to a network in order for them to compete against it. You simply cannot regulate for it.



“The Vertigan report has reflected the same thing. Vertigan has said that having a wholesale-only company that's a monopoly is a bad idea. You need competition in wholesale.



“We want to see clarity around what are the rules of the game, and, once we know they're abundantly clear, then Optus will make a final decision on how it wants to operate. If we get the rules right, we get the settings correct, we can still have a great result with NBN, but we must make change from the direction it is heading right now.”



An inconvenient truth?