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.