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New Zealand Government Moves to Unbundle Local Loop
Posted on 3-May-2006 19:08 | Tags Filed under: News

According to Communications Minister David Cunliffe, New Zealanders can look forward to faster, better broadband Internet services thanks to a comprehensive telecommunications package announced.

The government believes the package is a vital part of the Government's drive to transform the economy and push New Zealand's broadband performance into the top quarter of the OECD.

Today's package includes:
  • Requiring the unbundling of the local loop and sub-loop copper-wire lines between telephone exchanges and homes and businesses, allowing other Internet Service Providers to compete fully with Telecom to provide faster, cheaper broadband.
  • Regulatory action such as information disclosure, accounting separation of Telecom's business operations and an enhanced Commerce Commission monitoring role in order to ensure improved competition.
  • Removing constraints on the existing regulated Unbundled Bitstream Service to ensure ISPs can offer better and cheaper broadband at upload speeds faster than 128kps.
  • Encouraging investment in alternative infrastructure such as fibre, wireless and satellite networks by measures including a review of public sector investment in telecommunications infrastructure to encourage a whole-of-government approach; reviewing whether Telecomís ability to reduce local prices solely in response to new competing infrastructure investment should be constrained; developing a rural package and expansion of the Digital Strategy Broadband Challenge fund.

    "We are continuing to look at whether additional measures are warranted, such as the structural separation of Telecom's retail and lines operations," Mr Cunliffe said.

    There is increasing recognition that advanced broadband services are a key enabler of economic growth and the development of a knowledge-based economy, and most OECD countries are placing considerable emphasis on broadband performance.

    In December 2005, in response to the evidence that New Zealand was slipping behind its OECD peers in broadband services, the Government commenced a stocktake of the telecommunications sector.

    The purpose of the stocktake has been to consider developments in the telecommunications sector as a whole over the medium term (three to five years). While a primary focus has been placed on the broadband market and broadband performance as a factor in economic performance, the review has had regard to the overall performance of the telecommunications sector.

    As set out in its Digital Strategy, the Governmentís goal is for New Zealand to be a world leader at using information and communications technology (ICT) for economic, social and cultural gain, and to ensure that all New Zealanders can access the benefits that ICT can bring.

    Advanced broadband services are a key enabler of economic growth and the development of a knowledge based economy. High speed broadband brings about innovative new services and can help transform sectors, government services, and offer greater benefits for users.

    A number of studies indicate that broadband take-up contributes to increasing GDP. An efficient telecommunications infrastructure is seen as a pre-requisite for a modern economy.

    While dial-up (narrowband) Internet penetration is high, broadband uptake is comparatively low and concerns have been expressed about speed, pricing, quality and the availability of advanced services.

    According to the New Zealand government, one of the reasons for poor performance in this sector is the lack of effective competition in key market segments. A common factor in the leading OECD countries is the competitiveness of their broadband markets. Although competition has increased as a result of recent market activity in New Zealand, it has not developed to the degree that is common in the leading countries.

    Telecom New Zealand dominates the broadband market. The majority of the alternative provider market share depends upon a restricted speed "unbundled bitstream service" (UBS) that allows limited options for competitors to develop differentiated broadband products.

    Most OECD countries already have "local loop unbundling," in which competing telecommunications companies have access to the "last mile" of copper wires between telephone exchanges and homes and businesses to install their own equipment and provide their own competing services.

    In May 2004, the Government accepted the recommendation of the Commerce Commission to introduce a limited speed UBS instead of more extensive unbundling. The governement now says the decision was based on the expectation it would lead to the co-operative development of an effective wholesale market.

    While Telecom achieved 279,123 residential broadband connections by December 2005 and exceeded the voluntary target for broadband uptake of 250,000, it did not, in the Commerce Commissionís or the Governmentís views, meet the wholesale target that a third of these (83,000) be with wholesale customers (it achieved 63,495).

    The stocktake found that the local loop remains an access bottleneck that restricts the development of effective competition. New entrants require access on fair and non-discriminatory terms to Telecomís network, to be able to provide high quality, cost effective and differentiated services. "Last-mile" access for the majority of New Zealand consumers is likely to rely heavily on the local copper network for sometime.

    The stocktake analysis indicated that unbundling and an improved UBS would help close the gap with other OECD countries on broadband uptake, price and quality.

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