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Hard and Fast


Naked DSL: not quite the early panacea

By Antonios Karantze, in , posted: 16-Jul-2007 12:42

Ive been dropping hints in Geekzone forums for the last few months that Naked DSL wasn't going to be cheaper than UBS, and that it would take a while to come out.

True to form - and good on him for this action - Matt Crockett has been quoted on stuff today. I say good on him, because the perception has been laid by the Minister and loads of commentators that broadband was going to get faster and cheaper, not more expensive and take longer to get (in the medium term). The reality - again - is that going faster and doing more means buying new equipment, spending more money developing products, training people and so on and so on ad nauseum. The sort of stuff people get bored hearing of, but which service providers get savaged if they can't deliver on day one.

COPY STARTS:
Telecom Wholesale head Matt Crockett is bracing himself for a backlash from Internet service providers and consumers who expect they may be able to save as much as $43.60 a month once they are able to avoid renting a Telecom phone line in September.

Mr Crockett says Telecom will begin wholesaling a service that will let customers buy broadband-only phone connections that do not connect to Telecom's public switched telephone network (PSTN) from September 28. Telecom will reveal the price for the service in two to four weeks' time and Mr Crockett says he is nervous some people will be disappointed. "We want to put forward what we believe is a reasonable price, but there is always an incentive for customers to want it to be lower. There could be 'noise' and we will have to wait and see what happens."

The service - known as Naked DSL - is expected to appeal to people who want to use Vodafone or Telecom mobile phones or low-cost Internet services such as Skype to make all their phone calls. Orcon, CallPlus, WorldxChange and Telecom itself are among those expected to retail it. Mr Crockett says that since Naked DSL will still require a copper line to the home, Telecom Wholesale will have to pay Telecom's network services arm a fee for using its local loop. Because of this, he says it is not realistic to expect Naked DSL to be priced the same as Telecom's wholesale broadband service, which costs ISPs from $26.35 a month plus gst. "If we did that we could end up in a situation where Telecom Wholesale was losing money."


Instead, the price of Naked DSL is likely to be somewhere between the cost of a broadband plan, and that figure plus a line rental. If it is in the middle of this band, households prepared to do without a connection to the PSTN might save about $20 a month. Broker ABN Amro is understood to have suggested this as a viable compromise. Internet Service Providers Association president and ihug regulatory manager David Diprose says he has not formed a view, but he also believes a premium for Naked DSL that was set at half the line rental charge might be reasonable.


"Part of what we are thinking through in the way we price this is that we, in the new environment, will be facing the local loop input cost," Mr Crockett says. "Obviously we need to take that into consideration and on top of that we need to work out what are all the other relevant costs that are incurred to provide broadband and what is a fair market price."

Mr Crockett says that, at first, Telecom Wholesale will be able to provide Naked DSL only to customers who do not already have broadband. It will not be offered to people who have broadband till the end of the year.


He says this is "not ideal" and would disappoint ISPs, but customers' phone lines are currently identified by their connection to the PSTN and the services are hard to unpick. "There are quite complicated system changes required to deprovision a home line without deprovisioning a broadband line at the same time."


Telecom will offer the "commercial" Naked DSL wholesale service voluntarily, but will be obliged to offer Naked DSL on terms and conditions set by the Commerce Commission by the end of next year. The commission, not Telecom, will set the price of the regulated service, which will guarantee households a minimum "committed" broadband connection speed and a dedicated voice circuit that will ensure the quality of Internet phone calls.


Naked DSL will make broadband more affordable and increase uptake, Mr Crockett says.

"Calling revenues could be impacted, but that depends on the way Internet voice services are priced on the new platform, and we are going to lose some network revenue when people go on to Naked DSL - it will be cheaper than a PSDN line plus broadband - but this new technology lets us lower our costs as well.


"Our challenge is to meet customer expectations while using the opportunity to take cost out and maintain profitability. It is pretty hard to see exactly how we are going to pull that off. There are challenges to Telecom around that, but we do not intend to stand in the way of it."


Naked DSL will soon become the only type of household connection offered by Telecom, as it is scrapping its PSTN and will in future route all voice calls over the Internet. Consumers are unlikely to notice the change, except for the fact they will need new phones or a gateway device in their homes that should provide a raft of new services over time.

Customers are likely to be offered multiple phones numbers for each phone, each of which could be used by a different family member and could be separately programmed to forward calls or put them through to voicemail.



Other related posts:
2Degrees prepay price change
Consolidation (“and then there were fewer”)
Introducing the Hot New Social Network (updated!)








Comment by Jama, on 16-Jul-2007 13:04

Where is the $10 per month all you can eat broadband that Slingshot and ihug were promising a year ago?


Comment by TinyTim, on 16-Jul-2007 13:32

Ive been dropping hints in Geekzone forums for the last few months that Naked DSL wasn't going to be cheaper than UBS


Naturally. At the moment a monthly rental is (cost of phone line) + (cost of connectivity to switch and ability to make local calls) + (cost to Telecom to retail the service - e.g. corp overheads, billing etc). Plus the cost of ADSL if you get broadband. Get rid of the Telecom phone service bits and you end up with Naked DSL cost = (cost of phone line) + (cost of ADSL) - you're only going to save the cost of connectivity, local calls and retail. And the big issue is going to be what the cost of the phone line is.

The result is we're only going to see plans similar to what TCL is offering now - either a basic broadband service with a phone line or a top-of-the-range (expensive) broadband service with no phone line.


Comment by Bung, on 16-Jul-2007 13:56

"Naked DSL will soon become the only type of household connection offered by Telecom, as it is scrapping its PSTN and will in future route all voice calls over the Internet. Consumers are unlikely to notice the change, except for the fact they will need new phones or a gateway device in their homes that should provide a raft of new services over time."

Was this from a Telecom press release or was it Tom Pullar-Stecker adding a claim that has been made regularly for over 5 years now?

Will your power company have to know that you are relying on them for your phone service? :)


Comment by sbiddle, on 16-Jul-2007 14:15

Am I the only person out there who is happy to pay good money for a decent broadband connection? I don't want $19.95 broadband because I know it's going to be crap.

Telecom however are shooting themselves in the foot with some of their claims. The cost of a naked high speed connection and VoIP solution should be less than it currently costs for a POTS circuit and ADSL connection and you can't blame Telecom for trying to keep that price as high as they can. I personally believe setting the cost as the UBS value + 1/2 the cost of a POTS circuit is too high. I'm guessing it's also going to mean Wgtn and Chch customers will pay less for a naked ADSL circuit than the rest of NZ?


Comment by Brenda, on 16-Jul-2007 17:28

i've been on cable, with no phone line, for about a year.

No hassles.


Comment by Marty, on 18-Jul-2007 09:50

I see a good future for small UPS retailers (router and VOIP base support).


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antoniosk's profile

Antonios Karantze
Wellington
New Zealand


I'm a born and bred Wellingtonian, and have chosen IT and Telecommunications as my industry, as a Commercial Manager.

Credits include but are not limited to:
- The O2 Xda smartphone range, and O2's range of 3G Mobile Internet services
- Numerous TelstraClear Mobile and IP voice products

In my journey through the industry I have worked at
- Bellsouth NZ
- Telecom NZ
- ICO Global
- T-Mobile International (formerly One2One Communications)
- O2 Plc
- TelstraClear
- Vodafone NZ

I'm a fan of technology, and what it can do for people and business... and I enjoy bringing new things to market and seeing them grow. Enjoy the blog, take the time to think about what I write - it's not technology heavy, and is my reflection on life and the people around me.