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Topic # 36050 18-Jun-2009 15:24 Send private message

Both Orcon and Vodafone are not happy with todays' ComCom decision on sub loop (read the decision here)


Orcon: Comcom broadband decision fails consumers

New Zealand broadband consumers have been let down by the Commerce Commission determination announced today, according to Orcon CEO Scott Bartlett.

“The commission has failed to protect the interests of consumers, instead opting for a pricing structure that inevitably will lead to market domination by one player.

“The commission’s decision not only prices Telecom competitors out of the game it also lacks any alternatives for continued investment in local loop unbundling, taking us back to the ‘bad old days’.

“All of the improvements in broadband price, speed and service Kiwi consumers have benefited from during the past two years have been as a result of competition brought about by unbundling. Those days may be coming to an end.

“With this determination, any player would need between 25 and 30 per cent market share to engage in sub-loop unbundling.  That’s about as much as the entire non-Telecom industry players combined.

“The determination is flawed.

“The service is prohibitively expensive – we simply cannot see any one player having the necessary fixed-line market share to deploy new infrastructure, certainly no single player does today.

“The commission admits the service is more expensive but says it will be paid for by high value services.  This is a very big assumption, given the state of the economy and the pressure we are all seeing on prices.

“In determining prices, the commission has failed to factor in the Telecom “Loyalty” offers. These offers clearly demonstrate that Telecom’s costs aren’t as high as they say they are. Because Orcon led the unbundling of the local loop, the so-called loyalty offers have been structured in such a way as to prevent us from taking advantage of them.  This is a blatant breach of the separation undertakings.

“Every player in the broadband market agrees that fibre to the home is the right solution eventually. But we’ve just had one of the rungs of the ladder of investment pulled from under us.” 



Vodafone: Commission decision challenges access competition

Today’s Commerce Commission decision on sub-loop costs will make it unviable for competitors to unbundle all but a few Telecom cabinets.

The decision has set backhaul costs at ten times the costs outlined in the draft determination and co-location costs are 50% more than the draft determination.

According to Vodafone’s General Manager Corporate Affairs, Tom Chignell, the decision will make it almost impossible to make a business case to unbundle all but a few cabinets.

“No one is going to provide competition if it means losing money hand over fist, after paying Telecom. This is before any of our own costs such as backhaul, cabinet equipment and marketing and support costs are considered.

“ An access seeker with a 10% market share of an average cabinet would pay Telecom $184 per customer per month, excluding set up costs.

“Taking an average revenue of $90 per customer per month, the lack of viability becomes clear,” says Chignell.

In contrast, an access seeker at an average exchange would pay Telecom around $22 per customer per month, which is almost unchanging across a range of market shares.

The decision also cripples the wholesale market.  For Vodafone to compete in the wholesale bitstream market, it would need to pay up to $184 per month to onsell a service to compete with Telecom Wholesale’s service which costs $47 per month.






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  Reply # 226346 18-Jun-2009 17:18 Send private message

No matter what happened those 2 would be complaining. Seriously, the only thing they would be happy with is something unrealistic like $5 for the loop and $20 to put the gear in the cabinet.

If the economics are not there for a single ISP then they need to either cooperatively purchase and install equipment or to get out of the business since they clearly are not equipped to compete in it.




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  Reply # 226348 18-Jun-2009 17:30 Send private message

What about competitive market pricing in line with the actual cost of delivery?
Personally I love not having a choice in who my dollars go to, wholesale or retail it's all headed off shore to the big old US-of-A.

and @richms "since they clearly are not equipped to compete in it." is akin to saying - "if you don't have enough stones to kill the guy with the gun you shouldn't be trying to fight."

Trouble is that they're fighting for a fairer and cheaper market (for their own purposes of course) - something that I believe EVERY New Zealander who isn't a Telecom shareholder / employee would agree with. Pity the ComCom doesn't see it that way.

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  Reply # 226349 18-Jun-2009 17:35 Send private message

Is it better to turn to wireless technology like LTE, WiMAX, etc?
or wait for Fibre to the Home ?

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  Reply # 226356 18-Jun-2009 17:48 Send private message

Best to wait for fiber IMO - if they are not happy with telecoms charging for the old copper and a space in a small rack then its a good incentive to surpass it with newer stuff. But I cant see that happening when they can just cry to the CC and get telecom to be forced to offer us more of the same for a slightly lower price.




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  Reply # 226359 18-Jun-2009 17:54 Send private message

But wait for how long? We'll be paying hand over fist to a bloated old dinosaur company that has been bashing us for ages. Fibre-to-the-door isn't right around the corner.

Perhaps I'm wrong but I haven't seen teams of trucks ripping up the streets laying fibre like it's going out of style. Have you? We will be waiting for a good time yet.

Every month that Telecom make more $ than their competitors is another month they cement the prices higher. Prices have gone up, and will keep going up - not down - for broadband for a while yet.


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  Reply # 226393 18-Jun-2009 18:47 Send private message

freitasm:
...

“In determining prices, the commission has failed to factor in the Telecom “Loyalty” offers. These offers clearly demonstrate that Telecom’s costs aren’t as high as they say they are.




I'd like to know more about the true costs...




– J

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  Reply # 226419 18-Jun-2009 20:21 Send private message

jermsie:
freitasm:
...


“In determining prices, the commission has failed to factor in the Telecom “Loyalty” offers. These offers clearly demonstrate that Telecom’s costs aren’t as high as they say they are.






I'd like to know more about the true costs...


They just give discounts on DSL handover etc when you agree to solely go with Telecom for wholesale dsl, nothing amazing really.

This looks like the end to sub-loop unbundling, ISPs just need to learn how to differentiate themselves in the market and not only think about price alone.

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  Reply # 226445 18-Jun-2009 21:19 Send private message

EnzoYug: But wait for how long? We'll be paying hand over fist to a bloated old dinosaur company that has been bashing us for ages. Fibre-to-the-door isn't right around the corner.

Perhaps I'm wrong but I haven't seen teams of trucks ripping up the streets laying fibre like it's going out of style. Have you? We will be waiting for a good time yet.


there may not be fibre just around the corner, but there is probaby empty conduit running down the street waiting for a fibre to be blown down it without digging up the street again.  once the ftth project is launched i expect telecom, vector and whoever else will be renting out the conduit space wherever they dont have the contract to deploy fibre so it might happen quicker than we think




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  Reply # 226448 18-Jun-2009 21:21 Send private message

DjShadow: Is it better to turn to wireless technology like LTE, WiMAX, etc?

or wait for Fibre to the Home ?


wireless has been "coming" for longer than people have been dreaming abount fibre.  it was coming before adsl2, adsl2+ and vdsl.  don't hold your breath.




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  Reply # 226458 18-Jun-2009 21:44 Send private message

Lets look at some of the numbers that have been disclosed publicly so far that influenced the decision...

- Number of cabinets: 3600
- Approximate average cost to roll out a cabinet: $145,000

So some napkin math gives a conservative estimate that Telecom have invested at least $522,000,000 just on rolling out the cabinets.

- Estimated monthly cost to run cabinet: $972

So ~$3,499,200 per month running costs

Logically there's no way Sub Loop pricing was going to be below an amount that gives a reasonable return on that large investment.

























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  Reply # 226466 18-Jun-2009 22:16 Send private message

richms: No matter what happened those 2 would be complaining. Seriously, the only thing they would be happy with is something unrealistic like $5 for the loop and $20 to put the gear in the cabinet.



If the economics are not there for a single ISP then they need to either cooperatively purchase and install equipment or to get out of the business since they clearly are not equipped to compete in it.


Really, what needs to happen is for everyone else to get the same bill Telecom gets for the cabinet - to hell with the "return on investment".  Pity it's a National government, since you'll never see National do anything to offend Big Business.

Admittedly, I did my head in trying to understand the decision paper linked.  I can't for the life of me work out where Vodafone got their figures from (since the commerce commission says that the SLU price is 26% above the LLU price, not 260%).

The bit that hacks me off about this whole scam is that Telecom/Chorus knew that cabinetising LLU customers would result in massive service degradation (unless their engineers are as thick as two planks, anyway), then went ahead and did it anyway.  I wonder why - trying to damage customer perception of other providers so they'll switch to Telecom perhaps?

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  Reply # 226486 18-Jun-2009 22:58 Send private message

Kyanar: ..to hell with the "return on investment". 



If that was case everyone would just sit on their hands and DO NOTHING. If you don't offer ROI then the only way to provide such a service is through the Government, and even then why would they want to loose money if they could charge in a way to at least break even?

nzbnw








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  Reply # 226489 18-Jun-2009 23:02 Send private message

  Kyanar:
Really, what needs to happen is for everyone else to get the same bill Telecom gets for the cabinet - to hell with the "return on investment".

that arguement is fine when the investor is the government or a SOE, not for a private company.

Kyanar: Pity it's a National government, since you'll never see National do anything to offend Big Business.


take a look at who sold/privatised telecom in the first place....   it wasnt the national government!





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  Reply # 226502 18-Jun-2009 23:31 Send private message

Yes, and I hate the idiot who sold it in the first place. This iteration of the labour government was finally trying to put it right, and as soon as the Nats take over we get crud like this new SLU agreement shovelled on us.

When I say "to hell with return on investment" I don't mean that Telecom shouldn't be able to break even. What I DO mean is that Orcon, Vodafone, etc should get the same prices as Telecom gets for using the cabinet. When you see Telecom charging $150 wholesale per customer to other ISPs, and $50 to themselves, doesn't that seem just a little... anti-competitive? We're talking about a network which cannot be (and should not be) easily duplicated here, "build your own" isn't an option.

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  Reply # 226504 18-Jun-2009 23:40 Send private message

I should also add, that when a customer is unbundled, Telecom should leave the line the heck alone. It should NOT be connected to a cabinet without the express permission of the freaking customers - Telecom is deliberately harming other networks' customers by cabinetising LLU lines.

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