The telco skies are opening

Après le deluge yesterday, I admired my new indoor water feature at the back of the house, and checked out what the tech news this week was. It’s been raining telco news this week, starting with the sale of the Yellow Pages Group by Telecom for a staggering two and a quarter billion dollars

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The telco skies are opening

Après le deluge yesterday, I admired my new indoor water feature at the back of the house, and checked out what the tech news this week was. It’s been raining telco news this week, starting with the sale of the Yellow Pages Group by Telecom for a staggering two and a quarter billion dollars.

Speculation is rife as to what Telecom will do with all that money. Will it use part of it to build a GSM network to replace the CDMA one, or maybe get a fibre to the premises network going? Probably not the latter, as Telecom won’t want to risk being forced to open it up for wholesale, but surely some of the money will go towards a new mobile network if only to put an end to the embarrassment of Theresa and other executives having to use Vodafone GSM phones while travelling for roaming service?

Then there’s all of Telecom’s Australian business crying out for more money. Hutchison 3G could swallow $350 million alone and I read in Communications Day that Telecom’s subsidiary AAPT is a “key stakeholder” and infrastructure provider for a plan to provide national broadband coverage. For Australia that is, at 24Mbit/s and for under A$1 billion. There may even be a 4G network coming out of the Community Consortium as the group featuring AAPT, CommsLogic, Motorola and the Community Telco of Bendigo is called.

In fact, there so much going on in Australia for our incumbent that it’s considering resurrecting the Telecom Australia name, with PowerTel and AAPT folded into that new company.

Telstra’s plan to build a data cable to Hawaii for A$300 million is not good news for Telecom, however. Telecom makes large dollops of dosh out of the Southern Cross Cable, with Telstra shipping plenty of data across it. Losing the Australian incumbent as customer would hurt SCCs revenues, unless other providers step into the breach – the SCC may have to lower its cost to attract new customers, and there’s the issue of getting the bandwidth delivered to providers networks in an affordable fashion as well.

The existing 240Gbit/s capacity on the SCC isn’t currently being fully used so if Telstra goes ahead with its submarine cable, it remains to be seen if Telecom, Optus and MCI/Verizon go ahead with the planned 1.2Tbit/s upgrade announced earlier.

Next week we’ll have number portability too. This should spur plenty of telco action as customers can now shift to a competing provider yet retain their existing phone numbers. If there’s not a substantial amount of “customer churn” in first two weeks, I’m going to stick my neck out and say we don’t have a competitive telecoms market in New Zealand.

Oh, and that TSO tax that provides us all with “free local calling” and 9.6-14.4kbit/s guaranteed internet access has been determined by the Commerce Commission for the 2003-2004 year. The number of Commercially Non-Viable Customers, or CNVCs as they’re called, is down to 60,960 from 65,679 the year before. Almost five thousand customers gone, just like that. How on earth did that happen in just a year!

Unfortunately for telcos other than Telecom, those non-viable customers were dearer to service in 2003-04 at $63.8 million, compared to $56.8 million the year before. The cost per customer went up from $865 a year to $1,047 a head. That’s a increase of 21%; there was clearly massive cost inflation in the telecommunications business four years ago.

TSO charge payable to Telecom
Vodafone $17.9 million
TelstraClear $5.3 million
WorldxChange $197,962
CallPlus $55,943
Compass $99,443
Ihug $154,095
TeamTalk $21,494
Total $23,665,071

Those figures are actually higher than the TSO levy determined, as the ComCom is adding use of money charges on top for the first time. This is calculated up until this year, and with Telecom’s $44.3 million it makes the TSO tax for the 03-04 year almost $68 million, or $1,115 per non-viable customer.

I’m still struggling with the concept of Telecom making a $93 a month loss on more than 60,000 residential customers when it earns over $600 million a year from its access and fixed line business supplying phone service only, from 1.4 million lines. It doesn’t quite add up...

- Telecom Yellow Pages sold for $2.24 billion

- Telecom launches initiative to keep NZ internet traffic local

- Number portability next week but where's Vodafone's At Home?

- Telstra plans $300m fibre link

- Commerce Commision: TSO determination for the 2003-04 year (PDF document)