Telecom New Zealand's local loop to be unbundled next week
Telecommunications minister David Cunliffe was quoted on TV3's Campbell Live current affairs programme saying he has had "a gutsful" of Telecom's recalcitrance. Perhaps as a reflux to that, sources close to officials in the Beehive say that Cunliffe has speeded up his "industry stocktake", announced after Telecom said it had missed the wholesale broadband target by two-thirds and tried to worm its way out of that commitment by saying it only applied to new connections - something both the minister and the regulator, the Commerce Commission immediately denied, saying Telecom had committed itself to delivering one-third of all broadband connections minimum via wholesale or resale.
Here's the dynamite though: the sources say local loop unbundling is on the table when Cunliffe's stocktake is presented to the cabinet. A structural separation of Telecom's retail and wholesale operations is also included, but little else is known.
The local loop unbundling is apparently a firm decision, but the structural separation my be jettisoned if Telecom squeals too loudly. If that's the case, the new regulation may not be very effective for reining in Telecom, which has already rolled out its Next Generation Network, which is considered almost "unbundling proof" in the usual meaning of the term.
Next week will tell if the country can expect some long-awaited action to improve competition and services in telecommunications, an area in which New Zealand is now at the bottom of the OECD after over a decade of un-regulated privatised monopoly. There is also concern that the government and Telecom have secretly agreed to a largely ineffective LLU as a sop to public opinion, while compensating the incumbent telco through increased Telecommunications Servce Obligation (TSO) levies which competitors have to pay to subsidise "unprofitable" customers in remote areas. The TSO is levied as a part of a competing telco's revenue, and a succesful competitor will pay more that way, even though it doesn't have any landline connections like Vodafone.
Other related posts:
Apropos that new Telecom logo
Pipe Networks signs PPC-1 MoU: Sydney-Guam cable to go ahead
What will happen to telecommunications in New Zealand next year?
Comment by techremarks, on 29-APR-2006 13:37
Juha,
This is truly a scoop if it eventuates next week. I was intrigued at Cunnlife's comments on Campbell Live when asked if the government has been to weak in the past. Something along the lines of "wait another month and ask me again...". I thought that was telling in that "something" of some substance is probably coming. (But we have been there before!)
Comment by Neutral, on 29-APR-2006 21:08
Wow! I don't see how the government could afford to unbundle the Local Loop. Government is heading into a bit of economy slowdown and the surplus has disappeared as they are subsidising the hip replacements and high income family's text fees. Anyways their social agenda will take up what ever is left of the surplus.
How will they compensate Telecom? And do we really want to buy back as taxpayers an obsolete PSTN network that has already been juiced to the max and will need massive investments in the short term to continue operating. Well that last test could make for the just the type of ventures that Labour would invest in!
Anyways if we could just get the separation of Wholesale and Retail, it will make me happy.
NGN is pretty much outside the governance of ComCom and govt regulation. But for a long time to come NGN will depend on the old PSTN for fulfil. Therefor creation of wholesale will still give the government and regulators some control for the next five years at the least.
Comment by tonyhughes, on 29-APR-2006 21:57
IDG wont let me sign up, saying my email address is invalid... :-(
Invalid Email 'suchatallguy+idg[at]gmail.com' specified for 'Email' field. Use format 'aaa@bbb.ddd'
I took the @ sign out just for this comment... but otherwise the address shown is valid, and works.
Comment by Neutral, on 29-APR-2006 23:11
Well Telecom would obviously fight it tooth and nail. But such is the nature of regulation that it is not what they want but what is good for the economy. We have several cases that precede Telecom - UK most lately with Openreach. I actually hope that Government instead of unbundling , separates the wholesale and retail. AND then forces Telecom to provide other retailers with appropriate services. If I was Telecom I would be praying that the government does buy my fully depreciated and milked assets so that someone else can maintain them. And I get several billion to invest in my NGN which is beyond government regulatory reach.
Comment by antoniosk, on 30-APR-2006 09:36
Unbundling the copper is the wrong path. All that will happen is the industry will be left with the old and mouldy stuff, which telecom will refuse - quite correctly - to keep upgrading. Meanwhile their shiny new fibre network is off-limits.
Far better to have structural seperation ala BT, where the network company is responsible for selling to all at published rates, with setup for VNO's. Then everyone get's access to everything, the network company focuses on building the best for them to make money.
Governance will be an issue though. You can't have Teresa running both shops ;-)
Comment by Neutral, on 30-APR-2006 09:59
I think if the structural separation occurs it has to happen at the very fundamental level. They will need to be separated at the equity and P&L level. This and only this will give some teeth to the wholesaling body. At the moment they are pretty much neutered by the ownership of TCNZ.
And guys don't forget that while regulation doesn't apply to the NGN space, it does apply to the PSTN space. As far as I can see, I can't imagine Telecom erecting a completely SEPARATE network for NGN. There are going to be dependencies and they are going to be integrated. Thus regulation will then extend to the investment in the NGN, if not for the new services but to augment PSTN. Telecom will not get away scot free on this one. But just the separation of the two wings is going to take solid Cajunas on Cunliffe's behalf. I mean this is the same government that changed the path to LLU based on one strong letter from Theresa! I doesn't take much to scare them.
Comment by Nick, on 30-APR-2006 13:48
Thread discussing this entry @ GP forum. Check out the monopoly photoshop =)
Comment by Matt, on 1-MAY-2006 16:52
I'm not sure why people are talking about compensating Telecom. Compensate them for what, exactly? They're not being divested of anything, merely ordered to allow competitors to place their equipment in exchanges at a mandated commercial rate. It's a rental situation, not a property-deprivation one.
Why bump up the TSO? They are no longer forced to supply service to "unprofitable" *coughBULLEXCREMENTcough* customers, since competitors will finally have equal access. I hope people haven't forgotten that those customers weren't so unprofitable that Telecom would sell them to Clear.
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Comment by tonyhughes, on 28-APR-2006 23:26
is friday fryup a subscribable newsletter somewhere?