Now that is a huge investment. When you consider that iHug will invest $20M if the government unbundles the local loop. Hmmmm.... economics 101
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Comment by sbiddle, on 25-Mar-2006 10:39
I was listening to the radio this morning and Telecom's rollout featured on the news. It also went on to say that customers should not expect to get fast speeds anywhere near the full speed (news also said 24 Megabytes per second) at busy times of the day and these speeds would only be available at offpeak times.
Comment by juha, on 26-Mar-2006 11:33
Compared to the money Telecom gets from the $42.80/month line rental that everyone has to pay (yes, I know, some people pay $10/month less in areas with TCL cable), that investment isn't much. In fact, if Telecom doesn't t plonk down that money and get ADSL2+ out a.s.a.p, the guvmint would be entirely justified in asking if Telecom should be allowed to keep the local loop sweated asset, or be forced to share it on commercial terms with providers willing to invest in it. It's also worth noting that Telecom is very late in rolling out ADSL2+. My understanding is that the network has been ready for it since last year... so why wait until 2007 for a large scale rollout?
Comment by techremarks, on 1-Apr-2006 18:26
It\'s all smoke and mirrors. The introduction of ADSL2+ is primarily a way of taking it to the next level if local loop unbundling happens. Check out: http://techremarks.com/2006/03/telecom-announces-details-of-ngn-today.html and http://techremarks.com/2006/03/next-generation-network.html Great blog. I have added you to our NZ tech blog: http://techremarks.com/
Comment by techremarks, on 4-Apr-2006 12:48
I think the interesting thing will be what services Telecom is trying to leverage off ADSL2+ and how they can "divert" traffic away from the grasps of the resellers. (IPTV with Sky and video phones appear to be the first step.)
Comment by Steve, on 20-Apr-2006 14:52
First let me note that the following is only my personal opinion and not that of this website or any other site or organisation. Yea, I understand that $20m by ihug isn't alot alot compared to the $150m-$170m offered by Telecom... nor would it be likely that another company would offer any significant investment in the network either. I also understand the "ladder of investment" idea that once a provider has customers it will invest in infrastructure to support those customers. However Economics 101 might suggest the benefits of local loop unbundling are not enough compared to the costs of regulation, remember that all forms of regulation have a cost. Although Telecom threatens to lower investment if LLU is implemented they really would not have a choice. They would have to maintain investment levels to beat the competition, but they would simply invest in different areas (rather than the local copper wire network). This was the Commerce Commissions conclusion when LLU was originally up for debate in NZ. Then there is the consideration that the local loop will slowly be replaced by wireless local loops with companies such as Woosh, as the technology improves. If local loop unbundling does happen it will hurt those companies trying to come up with local loop alternatives because the incentives will be to use the existing local loop. If the existing local loop is not an option then there is the incentive for a new local loop solution. With LLU Telecom still maintains its "monopoly" over the local loop, but this would not necessarily be the case without LLU. On the otherhand if we have LLU it will improve the investment incentives of Telecom to improve services, ie installing ADSL2+ dslams earlier than it is, because they need to fight off competition. At the moment they are doing it in order to fight off government. Note that it is happening at exactly the same time as any announcements from the governments telecommunications stocktake (Does anyone else notice this sounds a little suspicious?). Government should really not be in this position of "competing". Government should not have to participate in the lowering of prices, but should create the competitve framework that this happens by itself. LLU improves investment incentives for Telecom and other providers in terms of exchange and/or dslams etc but not in terms of a competitive network. Despite my argument against LLU I do believe LLU is still the solution in the "short term", untill technology on wireless local loop technologies catches up. This is for a number of reasons. 1. NZ is a very small player world-wide and most of the developed world (if not all (mexico developed...?))has implemented local loop unbundling. Therefore the incentives to develop wireless local loop technologies will not change much with LLU. (incentives to implement wireless may change because there is now the threat that the government would want to unbundle these wireless local loops). 2. Wireless solutions have the potential to be considerably faster than wired local loops. This is because the speed of data through a wire is limited by the size of the wire, but through wireless it is limited by the "infinite" size of the air. Wireless technologies therefore have the inventives to be developed as they can potentially outperform any incumbent operator. Thus with or without LLU a reasonable standard of wirless local loop technology will eventually exist in NZ and be able to compete at a technology and competing network level. 3. LLU allows competing service providers more muscle in negotiating wholesale deals with Telecom or other wholesale providers. wholesale customers could "threaten" to install a dslam and remove that threat with the appropriate deal from the wholesaler. This would mean there is further competition at both the retail end and the wholesale end (I know it is not true competition for wholesale but it may have similar effects in that Telecom would be competing with their wholesale customers alternative options of installing a dslam or applying for a Commerce Commission determination and in the long run it would be true competition because they would be competing with providers who use alternative local loop solutions). This benefit from negotiation may not have been included to such an extent in any commerce commission investigation. In my personal opinion LLU would allow competition for the benefit of all consumers untill technology creates this competitive framework on its own. It will be interesting to follow what happens in June after the government's stocktake.
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