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Topic # 33116 30-Apr-2009 09:40 Send private message

I got a copy of the open letter Orcon has sent to the Commerce Commission. Interested to know your ideas and comments on this:


Open letter to Commerce Commission 
29 April 2009


Open letter from Orcon to:
Paula Rebstock
The Commerce Commission of New Zealand
PO Box 2351
Wellington 6140


Dear Ms Rebstock,


Commerce Commission must ensure viable broadband competition


As in any market, competition is the single most critical factor in providing value to consumers in the New Zealand telecommunications market.


Take broadband. Unbundling the Local Loop was a huge step forward in ensuring that competition could flourish providing significant performance increases, price reductions and better quality service to consumers.


These benefits have not been obtained by technological advancements, rather by making it viable for companies such as Orcon to leverage these technological advances through investment in delivering a better a broadband experience.


So specifically what have we seen as a result of Unbundling? 
• Residential broadband and homephone packages came down in price first in Auckland, and then nationally
• Telecom have responded to the improved performance competition, now customers across New Zealand generally have better broadband – one only need to look at the reports from Epitiro and IDC to see this
• Service levels have improved, as a result of more control over the broadband experience


Another significant milestone for progress in our industry is approaching, with the imminent release of the Sub-Loop Unbundling determination. Will this milestone ultimately benefit consumers? Or will it turn in to another S92a and require expensive surgery?


For historical reasons, Telecom owns a substantial infrastructure. Its overdue investment in roadside cabinets has been the logical step in providing higher speed broadband services. It has always been Orcon’s intention to build on our existing LLU investment and deliver increasingly superior performance by deploying our equipment in the cabinets.
However, we believe there is a very real risk that Orcon and companies like us will be precluded from investing any further in the New Zealand broadband market.  Telecom’s proposed pricing would leave little room for even a modest return on our investment in sub-loop cabinet equipment. 


The Commerce Commission is charged with ensuring competition can thrive for the benefit of New Zealand citizens. If companies such as ours cannot gain viable access to cabinets, competition will wilt and eventually die. And consumers will still be paying too much.


Broadband in New Zealand is finally heading towards achieving a respectable performance level in the OECD rankings. To risk this would be folly.


Orcon urges the Commerce Commission to ensure viable competition results from its forthcoming determination on the regulated terms for sub-loop unbundling,


Yours sincerely,


 


Scott Bartlett
Chief Executive Officer
Orcon







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  Reply # 210822 30-Apr-2009 10:12 Send private message

However, we believe there is a very real risk that Orcon and companies like us will be precluded from investing any further in the New Zealand broadband market. Telecom?s proposed pricing would leave little room for even a modest return on our investment in sub-loop cabinet equipment.

Obviously, Orcon have seen Telecom's proposed pricing even though the ComCom have not released their determination yet.

It's very difficult for anyone else to make an informed comment without also having seen the proposed pricing. However, reading between the lines, there is obviously cause for concern.

I hope the ComCom gets it right so that competing providers can make a return on their investment. Otherwise we could all be looking at a return to the bad old days of a natural monopoly.

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  Reply # 210876 30-Apr-2009 12:39 Send private message



Obviously, Orcon have seen Telecom's proposed pricing even though the ComCom have not released their determination yet.

.


We could assume that, yes....here it is:


Mr Bartlett feared the commission would base its decision on unaudited accounts supplied by Telecom.


Telecom had proposed fixed charges of $600 to house equipment in a cabinet, $1000 per access seeker for backhaul and a charge of $130 per customer connected, he said. That was in addition to a monthly rental for copper phone lines to customers' premises.


 


My opinion...Ouch!


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  Reply # 210901 30-Apr-2009 14:15 Send private message

who is actually suprised Telecom would do something like that? cant say i am, yet again we have to hope the ComCom will force the issue in the name of fair competition

i love this quote as well

"A specific example, he says, is that the company refuses to tell Orcon the specific length of each copper cable running between a customer?s home and an exchange or cabinet, making it a lot harder for Orcon or another independent ISP to implement an upgrade to VDSL2"

Pathetic.




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  Reply # 210902 30-Apr-2009 14:33 Send private message

A spokeswoman for the commission addresses some of Scott's criticisms here:
http://www.nbr.co.nz/article/orcon-plea-comcom-don-t-price-us-out-fibre-cabinets-101760




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  Reply # 210927 30-Apr-2009 15:53 Send private message

Telecommunications in a geographically disperse country like NZ is a natural monopoly, if Orcon and Vodafone think the sub loop unbundling pricing won't reflect the fact that Telecom has to service rural areas with cabinets where there are only a handful of customers not the 200-300 in central auckland they are in for a shock.


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  Reply # 210932 30-Apr-2009 16:05 Send private message

Chief executive Scott Bartlett told The Dominion Post that Telecom should be forced to provide access to Orcon and other competitors at below cost if that was the only way to keep competition in the telecommunications market alive.
(source: stuff)






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  Reply # 210942 30-Apr-2009 16:46 Send private message

I think its a shame that the NBR quoted numbers from Mr Bartlett that are draft prices rather than re-re-re-submission prices.
For example the $130 connection charge quoted was revised around 20 April to $81 (cf $75 for an exchange).  The ComCom acknowledged an error in their benchmarking process.  Until a LRIC based analysis is undertaken the ComCom is relatively restricted in applying a benchmarking process to determine the price-based aspects of a determination.

I'd also like to think that there are elements of mischief in Mr Bartletts letter.  Broadband improvements are they related to a change in methodology (ADSL2+ measurement) or as a result of competition from unbundling?  Similarly the service levels - related to unbundling and competition or related to separation and systems changes?  Both of these are very subjective issues. 

I'd be surprised if the discussions and submissions subsequent to the "loopy" methodology for the draft determination havent resulted in a case of sour grapes.  Anyone who has some spare time can have a good read through the methodology, submissions and cross-submissions that have been occuring for the past 10 months.  They make for an interesting read.  And the ComCom is pretty transparent about their process which I doubt will be railroaded by an emotive letter. 

BTW, given the cabinetisation polygons and the geospatial information available on household location wouldnt it be possible to calculate copper lengths from cabinet to home?

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  Reply # 210955 30-Apr-2009 17:32 Send private message

NBR first published the commission's draft pricing on April 7.
http://www.nbr.co.nz/opinion/chris-keall/roadside-cabinets-a-roadblock-competition

I think it's great that it got out there in the public domain. The more information that's out there, and the more public debate, the more likely it is that the commission will make a good decision when it determines final pricing.




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  Reply # 210974 30-Apr-2009 18:30 Send private message

cokemaster:
Chief executive Scott Bartlett told The Dominion Post that Telecom should be forced to provide access to Orcon and other competitors at below cost if that was the only way to keep competition in the telecommunications market alive.
(source: stuff)




HA! What a joke. Orcon expects Telecom to become a charity now?

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  Reply # 210995 30-Apr-2009 19:29 Send private message

Why does Telecom have to spend $600 on silicon?  That's an awful lot of money, most PC's motherboards probably don't cost that much.

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  Reply # 210999 30-Apr-2009 19:34 Send private message

timestyles: Why does Telecom have to spend $600 on silicon?  That's an awful lot of money, most PC's motherboards probably don't cost that much.


Most PC motherboards don't provide DSLAM like connectivity nor reliability of more specialised (read: expensive) hardware.




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  Reply # 211001 30-Apr-2009 19:40 Send private message

I think it's a little crass on Orcon's part (and that of other providers, too) that they complain about costs regarding installation and network access, but then only seek out the most profitable areas/locales in which to install equipment and offer service..




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  Reply # 211006 30-Apr-2009 19:47 Send private message

Ragnor: Telecommunications in a geographically disperse country like NZ is a natural monopoly, if Orcon and Vodafone think the sub loop unbundling pricing won't reflect the fact that Telecom has to service rural areas with cabinets where there are only a handful of customers not the 200-300 in central auckland they are in for a shock.

If the ComCom use such a simplistic method to determine the pricing as you have suggested here, then there is little hope of a workable outcome.

Surely it would be dereliction of their duty if they applied such a simplistic "blanket rule" approach to their determination.  Obviously, the calculations have to be on a case-by-case basis i.e.

-  The greater number of customers connected to the cabinet, means that the fixed costs per customer become lower.

Any attempt to cross-subsidise rural cabinets at the expense of urban cabinets is bound to fail.

In saying that, it is equally untenable to expect Telecom to provide cabinet access at prices below their cost.  There must be some middle ground which will allow Telecom as well as the Access Seeker to make a reasonable return on their investment.

Finding that middle ground will be the interesting part Tongue out

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  Reply # 211026 30-Apr-2009 20:42 Send private message

munchkin: I think it's a little crass on Orcon's part (and that of other providers, too) that they complain about costs regarding installation and network access, but then only seek out the most profitable areas/locales in which to install equipment and offer service..


+1

If they're going to insist on lower pricing for access so in turn they can provide 'viable competition' then they should be providing this 'competition' to the whole country.

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  Reply # 211052 30-Apr-2009 21:35 Send private message

Whiners... They want the world but not to pay for it.

If they are not happy with the rack space costs and are saying that they need to have loads of customers to make it viable, why dont they go halves in a dslam with the red network guys.

I would have thought that they could just rent pairs from the exchange to the cabinet to deliver backhaul on, rather than paying telecom the quoted rates, or whack up a pole and use a microwave link or whatever.

But no, they want to put out no/minimal money, pay a pathetic amount to chorus for the wire and profit and profit...




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