Is Structural Separation The Ticking Time Bomb In Telecoms?

Last week Japan's government was reported to be revisiting plans to carve out the NTT access network and place it into a separate business - a process called structural separation. The access network covers the connection from a home or business to a service provider's street cabinet. Next month the government of Australia is expected to put forward legislation to impose structural separation on the incumbent Telstra. Structural separation was first implemented in the UK in 2006 when BT created Openreach, a move that was subsequently replicated in New Zealand.

Structural separation is an area we have covered in our research. Two years ago, we published a report called Access Structural Separation And Regulation Gain Traction where we offered advice to incumbent strategists. The advice was twofold: 1) Telco strategists need to understand the latest developments and formulate an appropriate response; and 2) they must adopt a new mindset and treat this conversation as an opportunity to negotiate a positive outcome - not a confrontation.

To most incumbents, the idea of structural separation is, of course, a complete anathema. But, as the examples of Japan and Australia show, it remains on the agenda of regulators and governments. So structural separation is, for incumbents, a bit like a ticking time bomb. Whether incumbents accept it as a concept or not they cannot ignore it, so they must have a strategy worked out in advance to deal with it. In short, the advice we gave in our report of the topic two years ago is as relevant today as it was when it was written.

But what do you think? I'd be happy to discuss further.