The Department of Broadband, Communications and Digital Economy has hired a BT director to provide a $60,000 consultancy on functional separation.

AusTender revealed yesterday that Peter McCarthy-Ward has been awarded a six month contract to the end of the year to provide “consultancy on functional separation models and ad hoc issues re functional separation.”

The appointment is the latest sign that the government intends to press ahead with stronger separation controls on Telstra.

McCarthy-Ward was formerly the “equivalence” director of the team that implemented the company’s “functional separation” between 2004 and 2008 and is currently contracted as one of BT’s nine regional directors in the United Kingdom, overseeing East England, — according to his LinkedIn page and biography on the BT website. Despite an Age report today suggesting he is retired from BT, we also established he is currently in BT’s employ by being directly patched through to him from their London switchboard last night.

McCarthy-Ward is a strong advocate of the benefits of separation, having expounded what he saw as the positives of the experience to the Senate NBN Committee in Canberra on 4 March.

He said that BT had reconfigured its systems to provide equivalence in its wholesale systems for both its own retail unit and wholesale customers.

“Often it was a series of small but subtle and very important changes that we had to make to the wholesale services to render them fit for BT itself to use. This is quite a salutary piece of learning, because we had believed that we were behaving ethically and properly to our wholesale customers, but when confronted with using the same product under the same conditions we found that it was not fit for purpose for our use. The changes that we made to make it fit for purpose for ourselves flowed through as benefits in product improvements to our wholesale competitors.”

McCarthy-Ward said BT Retail has actually increased its sales performance subsequent to separation although he acknowledged a STG135m cost in implementing the changes. “It is worth saying that one of the reasons that performance has improved was that the corollary of building a very robust and satisfactory wholesale regime was that our regulator felt able to deregulate retail prices, and from that flowed some advantages to our retail business in terms of the flexibility and freedom that they had in pricing.”

He also said that functional separation had forced BT to formalise systems for fault restoration and so on because previously much troubleshooting was based on informal contacts between staff.

Curiously, the Senate committee did not question McCarthy-Ward on a draft regulatory decision made just one day before in the UK which substantially watered down the functional separation requirements on BT because they were seen as an inhibitor to broadband investment, and neither did he raise it. UK regulator Ofcom described the changes, which effectively allow BT’s Openreach to develop its own active wholesale broadband products instead of offering passive access, as a boost for “super-fast broadband.” Gilbert & Tobin partner Angus Henderson described the development later that month at a NTC conference in Thailand as having “substantially undermined” functional separation.

McCarthy-Ward’s consultancy forms part of the DBCDE’s current review of regulation.