Telecom's Cabinetisation Plans

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#96841 25-Nov-2007 15:03

Just throwing in a layman's opinion for this thread....

First of all, there is legally nothing "wrong" that Telecom is doing, by introducing their NGN. Fully entitled to roll out this NGN, very good business plan and strategy too!

It all comes down to this question though...
The center of debate: "Do we uphold business integrity... or do we allow that to be eroded, as a shortcut to introduce competition and hopefully drag down prices for the good of the country"???

From the past 7 pages of this thread, it would appear that quite a few users are in support of "business integrity". It is certainly not very "fair", for the country's biggest telecommunications company to be "screwed", because that is the fastest way to introduce much needed competiton....

But on the other hand... And myself personally... Eroding "some" business integrity.. Forcing Telecom to open up their NGN, through this "unfair trade".... Personally, I don't think it is THAT wrong... If this would allow much needed competition and bring down prices for the people, yes, unfair as that may be, perhaps it is OK that Telecom and it's shareholders earn abit less, for the good of users in NZ.

freitasm

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#96863 25-Nov-2007 18:43

After TUANZ bashing, comes the understanding... This is from TUANZ's Ernie:

My posting last week "Telecom Wholesale Has a Case to Answer" created a bit of a storm. I've had strong representations from both sides and phone calls from highly unusual sources, lobbying me about the position TUANZ should take. At last count I can remember at least 18 conversations ranging from TCF Board members, hands-on regulatory people, industry observers, and CEOs. And there’s been a reaction from readers in the Blog comments - even one who had second thoughts and asked for their comment to be withdrawn!

Telecom Wholesale addressed the issue with its customers on Thursday. TUANZ wasn’t there as our invitation came a bit late, but I've chatted to a few people who were.

So my feeling a few days later is that we can still trust Telecom's sincerity. I think it could have handled the communication better and I'm really concerned about the impact on its competitors' LLU investment plans. I hope it will take a "friendly wholesaler" view in looking for compromises. But we're all learning in this new environment and will get a few things wrong - the trick is to learn from them.

So for now I'm giving the Wholesale team the benefit of the doubt. Lessons to learn - yes. Better communication needed - yes. Fix-up job ahead - yes. Fundamental reason for customers to reduce trust - probably not.

And a final word to CEOs right across the industry. This is one of several illustrations I've seen that people closely engaged in the regulatory scene are very, very battle weary. Please make sure the key ones, on all sides of the process, get a good break this summer. It really has been gruelling for many people and they need and deserve this.

Well done.

I would only hope some of the people who replied to this discussion here would understand...

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#96910 26-Nov-2007 08:44

So my feeling a few days later is that we can still trust Telecom's sincerity. I think it could have handled the communication better and I'm really concerned about the impact on its competitors' LLU investment plans. I hope it will take a "friendly wholesaler" view in looking for compromises. But we're all learning in this new environment and will get a few things wrong - the trick is to learn from them.

Ah. We have all been distracted by a simple case of Hanlon's razor.

freitasm

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#96944 26-Nov-2007 12:22

Another one, now from Paul Budde:

Telecom Cabinets Analysis - Shortsighted Industry

However, I was very critical about the industry whose total focus was to get some quick fixes to the wholesale regime in relation to local loop unbundling. Telecom had made it very clear that it would take until 2008 before new wholesale products would become available.

BuddeComm consistently warned that New Zealand was fighting battles which occurred in Europe in the early 00s and in Australia in the mid 00s and that in the meantime the world had moved on and that by 2008, also in New Zealand, the discussion would have moved on to fibre networks. Unfortunately nobody at that time wanted to seriously discuss that issue and started to beaver away in what we called old-world wholesale issues.

Telecom fibre plans are no surprise

Based on our analyses of Telecom NGN plans, going back to the early 00s, we were certain that Telecom did have a plan which would see them moving deeper into fibre networks, as a matter of fact we had mentioned the company at several occasions in our global research reports as being one of the early adopters of this new concept and their GEN-I initiative also made it very clear to us where their future thinking was. It therefore didn’t come as a surprise to us that they announced their new fibre plans in the way they did it, making 2,000 copper based exchanges obsolete in this process.

However, we are very disappointed that Telecom at the same didn’t indicate how they are going to take the rest of the industry with them on this exiting new path. This is certainly against the sentiment that I first encountered in May 2006 and that we have quite publicly supported over the last 18 month.

As a matter of fact the lack of a visionary national approach could potentially set the country back many years, basically throwing it back into the dark days of the monopoly. Surely the new structural separation legislation will eventually assist the industry. However, without Telecom’s support that could take many years.

More and more I see people agreeing with the view I and some others here share...

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TinyTim

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#96964 26-Nov-2007 14:43

If the Commission had waited and done both LLU and subloop unbundling at the same time, then it really would be too late. At least getting the easy one out the door first has meant those interested have got something to get on with. And some are interested - including those that are complaining - and some aren't interested - like WorldXchange, which is sticking with UBS.

Budde is confused and blathering. Either that or he's not talking about this cabinetisation announcement. He's talking about the replacement of the old exchanges (all 2000 of them! Does Telecom know it has that many?) with NGN switches (which certainly will make unbundling at the exchange level obsolete). Or perhaps he is talking about FTTH which would make even subloop unbundling obsolete. Hard to say. He certainly doesn't seem to have read the Telecommunications Amendment Bill cabinet paper (May 2006) in which unbundling and the NGN were all discussed in detail. Nor has he read Telecom's cabinetisation paper.

A summary from a holistic point of view: LLU is simply another step on the path between reselling ADSL and the entrant building their own infrastructure. 'UCLL' is an LLU entree before subloop unbundling comes in as the main course. Perhaps *by itself* UCLL is too late, but it shouldn't be by itself for long.

And to ensure that entrants don't get cosy with ULL there will be incentives for them to build their own infrastructure: public sector investment, access to spectrum (2.3GHz, 2.5GHz), Digital Strategy Broadband Challenge fund, consideration of price discrimination issues, competitive cellular market (see cabinet paper, p18, box B). So the long term idea *is* have competing access networks.

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#96974 26-Nov-2007 15:54

TinyTim:

And to ensure that entrants don't get cosy with ULL there will be incentives for them to build their own infrastructure: public sector investment, access to spectrum (2.3GHz, 2.5GHz), Digital Strategy Broadband Challenge fund, consideration of price discrimination issues, competitive cellular market (see cabinet paper, p18, box B). So the long term idea *is* have competing access networks.

The upcoming spectrum auctions could now become very interesting. All that 2.3GHz and 2.5GHz spectrum would be perfect for running backhaul (WiMAX anybody?) from a cabinet rather that relying on fibre.

Rather than Vodafone selling At Home boxes to end users maybe they could just get a cabinet next to the Telecom one, fill it up with all those At Home boxes they imported that nobody wants and deliver cheap phone services! :-)

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TinyTim

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#96976 26-Nov-2007 16:03

sbiddle:
The upcoming spectrum auctions could now become very interesting. All that 2.3GHz and 2.5GHz spectrum would be perfect for running backhaul (WiMAX anybody?) from a cabinet rather that relying on fibre.

Yes! Backhaul is one of the original purposes of WiMAX according to the WiMAX Forum. Assuming an operator can get enough spectrum (but that's a different story...)

KiwiOverseas66

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#96980 26-Nov-2007 17:28

jesseycy:
But on the other hand... And myself personally... Eroding "some" business integrity.. Forcing Telecom to open up their NGN, through this "unfair trade".... Personally, I don't think it is THAT wrong... If this would allow much needed competition and bring down prices for the people, yes, unfair as that may be, perhaps it is OK that Telecom and it's shareholders earn abit less, for the good of users in NZ.

nicely put! I think you've managed to encapsulate what is seen as a fairly reasonably option - and that is its ok for the govt to intervene and regulate if it produces better value for consumers, better competition, and cheaper broadband. The only thing that needs to be added to the mix is "balance" and "scale".

I don't think any company in NZ expects to have a completely free hand in terms of how they conduct their business - but whether or not a govt wants to be light handed or heavy handed - companies just want some certainty as to how the govt is going to act so that they can put their plans in place. When you are looking at billons of dollars of infrastruture development across 5-10-15 years, you need to know that you can operate in a reasonably stable environment. I don't think that's an unreasonbale thing to ask. At the end of the day consumers will be better served by having enthusiatic companies investing in new technology, vying for customers, safe in the knowledge that its ok to make a buck and its not a sin to earn a profit. One of the previous posts talked about the govt having a 10 billion dollar surplus and therefore having the cash to build and own a fibre network. The problem there is that the govt doesn't make money - is simply collects it. It needs heathly companies and a fully employed population spending its wages so that it can collect lots of corporate, personal, and consumer tax - cause that's where all the surplus is coming from. Displacing corporates in whatever industry would be a finite strategy for any government.

Secondly - I'm unsure as yet as to which is better - one company spending 100 million on a single strategy, or 5 companies spending 20 million each on their own strategies with the govt acting as the referee. The second scenario is what I think the govt prefers ( and IMHO technology is hard enough without adding committees to the process). Telecom is a gorilla, but its a home grown gorilla, and from a technical point of view I can see some advantages to their being at least one, fully nationwide network. The trick, I think, will be to strike a balance between the large and the small - allow for the big, nationwide network developments that can be done by a big entity - but also allow the smaller companies to operate/ thrive without being swamped.

Fraktul

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#96982 26-Nov-2007 17:39

There is already plenty of DMR backhaul kit on the market, including that in new specturm ranges recently opened up in NZ. You dont need WiMax for that.

Nation wide or regional 2.3/2.5GHz spectrum costs vs DMR licenses - depending on how many cabinets you were looking at I would suggest DRM would be the way to go. Especially if you had purchased spetrum rights and had intentions of using that spectrum for WiMAX point to multipoint transmission - you are hardly going to waste it on backhaul if this presents you with spectrum management issues between base stations and/or cabinets.

jesseycy

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Ultimate Geek

#96983 26-Nov-2007 17:44

Well said, KiwiOverseas66.....

So, basically, unbundling, perhaps forcing Telecom to freely "open up" its cabinets too to other Telco providers, is it fair, and something we want in this country?

My argument for that, is still, yes! Why it's OK, it's because it's the best way to intoduce competition (and I mean good and proper competition that will bring prices down) into NZ. Companies wishing to invest, will look at 3 things. Stability of investment (as you pointed out), returns, AND entry requirements.

And really, it's "unbundling", opening up of the copper loop, forcing the mighty Telecom to open up its exchanges and cabinets, that will lower entry requirements. Yes, from Telecom's point of view, it's not fair, the network is theirs, the investment is theirs, etc. But really, allowing other companies to "leech" abit from Telecom, is it really too much to ask, and something we should defend so strongly about???

P.S: Hence, we are worked up when Vodafone complains, since it can well have its own network, but I guess if smaller companies like Orcon or Maxnet wants access, we probably would be OK with it...

TinyTim

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#96999 26-Nov-2007 20:15

jesseycy: Yes, from Telecom's point of view, it's not fair, the network is theirs, the investment is theirs, etc. But really, allowing other companies to "leech" abit from Telecom, is it really too much to ask, and something we should defend so strongly about???

Telecom might not think it fair, but the government had threatened them for so long with regulation if it didn't do more to encourage competition - culminating with Telecom promising to get 83,000 wholesale customers by December 2005 and failing. Of course they probably didn't expect the government to actually have the courage to carry out its threat.

Fraktul:
Nation wide or regional 2.3/2.5GHz spectrum costs vs DMR licenses - depending on how many cabinets you were looking at I would suggest DRM would be the way to go. Especially if you had purchased spetrum rights and had intentions of using that spectrum for WiMAX point to multipoint transmission - you are hardly going to waste it on backhaul if this presents you with spectrum management issues between base stations and/or cabinets.

It is point to multipoint - just higher bandwidth terminals. However I think it is the government's preference that the spectrum is used for access not backhaul (as an alternative to LLU).

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Fraktul

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#97007 26-Nov-2007 20:41

TinyTim:

Fraktul:
Nation wide or regional 2.3/2.5GHz spectrum costs vs DMR licenses - depending on how many cabinets you were looking at I would suggest DRM would be the way to go. Especially if you had purchased spetrum rights and had intentions of using that spectrum for WiMAX point to multipoint transmission - you are hardly going to waste it on backhaul if this presents you with spectrum management issues between base stations and/or cabinets.

It is point to multipoint - just higher bandwidth terminals. However I think it is the government's preference that the spectrum is used for access not backhaul (as an alternative to LLU).

Yes I know its point to point and point to multi point but this was raised in the context of point to point backhaul, I only mentioned point to multipoint to point out another disadvantage of using the spectrum mentioned for point to point.

Higher bandwidth than? (we get higher spectral efficiencies out of our 802.16-2004 PHY layer gear then fully compliant 802.16e for example) ;) Aint generalisations a bugger, always come back to bite you in the ass.

Anyhow getting OT.

KiwiOverseas66

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#97018 26-Nov-2007 21:45

jesseycy:

My argument for that, is still, yes! Why it's OK, it's because it's the best way to intoduce competition (and I mean good and proper competition that will bring prices down) into NZ. Companies wishing to invest, will look at 3 things. Stability of investment (as you pointed out), returns, AND entry requirements.

The only problem I have with regulated entry is that its using the law to overcome a commercial barrier - and that makes me kind of nervous as it means the underlying commercial problem (flaw) will still be there (then again - this is a potential problem everytime any government uses the law in any sector in this way). Why can't smaller operators invest? There will be a variety of reasons but one of them is sure to be that smaller operators simply don't have millions of dollars of capital to spend. That begs the question of whether or not they can afford to be in the industry in the first place. That then raises the question of how much law do you use to assist smaller companies, and for how long? Don't get me wrong - I think unbundling is a good thing and good on the govt for having a strategy - but at some point the smaller businesses will have to act like a business and win customers the good old fashion way (which is no less than any other business in loads of other sectors - who don't have the advantage of the kind of legislation in telcoms these days). I think some of the ISPs are taking up the challenge (voda, Xnet) - but some seem to be more comfortable mirroring a lobbying firm then an ISP. I wouldn't mind laying down odds that in some cases companies prefer to push the legislative button in the hope that the law makers will save them money in the long term. All part of a viable corporate strategy.

On the investment front - the telco business is a global industry so it may have nothing to do with how attractive NZ entry requirements are - not when you have markets like China, India, and even Australia vying for the same investment dollar. Here in India Hutch Mobile was taken over by Vodafone earlier this year. They went from having no customers to 23 million at the stroke of a pen - and it cost voda 11 billion to do it.

On the competition front - I suspect for the government competition has actually become the objective in itself - based on a general perception that "more companies" means "more fighting for consumers" and that this will be achieved by "lower prices". In short - they really haven't connected the dots as to how said companies will find capital that they don't have now, and spend more while potentially earning less by investing in high cost technologies to win customers?!

And really, it's "unbundling", opening up of the copper loop, forcing the mighty Telecom to open up its exchanges and cabinets, that will lower entry requirements. Yes, from Telecom's point of view, it's not fair, the network is theirs, the investment is theirs, etc. But really, allowing other companies to "leech" abit from Telecom, is it really too much to ask, and something we should defend so strongly about???

From an economic point of view? I agree with you - the impact on Telecom of a few small providers leasing space in a exchange will be minor. Again what worries me is how strong is the business case for companies that require continuous govt legislation to support their existence. That is not a recipe for technology innovation - its are recipe for corporate welfare ( and I'm a bit resistant to the idea of using tax payer funding to safeguard the income of a slingshot or similar company, let alone grow them from a 50 million dollar company to a 250 million business so that said owners can trade in the typhoon for a merc - although why would you want to? Strangely enough the LLU policy may have inadvertently strengthened Telecom's position as it has defacto become the govt approved wholesale provider of choice. Go figure!

KiwiOverseas66

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#97023 26-Nov-2007 22:03

TinyTim:
Telecom might not think it fair, but the government had threatened them for so long with regulation if it didn't do more to encourage competition - culminating with Telecom promising to get 83,000 wholesale customers by December 2005 and failing. Of course they probably didn't expect the government to actually have the courage to carry out its threat.

Glad you brought up this little gem of information Tim. Probably illustrates more clearly than anything else the confusion that sometimes surrounds govt policy, and resulting industry FUD. The target was 250,000 connections for the year and Telecom got 270,000 in total - but only 63,000 were by wholesale whereas the govt wanted 83,000. So what do you do - congratulate them for 20,000 more connections in total then promised - or punish them for 20,000 less connections achieved via wholesale? Obviously the latter since Telecom was roundly slated for its results. IMHO it wouldn't have mattered if Telecom had achieved a million connections in that year because competition had become the policy. The actual number of connections has become irrelevant. In addition - do you really think its telecom's job to encourage competition? Isn't that a bit like saying its Nokia's job to help Motorola?

richms

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#97029 26-Nov-2007 22:17

They even tried, I recall some ad's about how great broadband is and that you should call you ISP to get it.

Really, I find it insane that telecom were punished for other ISPs inability to sell a simple product that they wholesaled off telecom.

The cynical side of me says that they didnt try so that telecom would be found to have failed and have the resulting action happen.

Richard rich.ms

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