Simplify regulation in New Zealand says Telecom boss

Departing Telecom CEO Paul Reynolds takes aim at the number of regulatory bodies in NZ, and includes InternetNZ and the TCF in his sights

In part two of our Q and A with departing Telecom CEO Paul Reynolds, he revisits the outages that plagued the XT network six months after its launch in 2009. He also discusses New Zealand's regulatory landscape, Telecom's deal with Sky TV, and what he might do when he leaves the telco.

Things you would have done differently with XT – did you go to market too soon?

Not at all.

There was some concern you might not have done all the right testing and this fault went undetected.

No. You will recall we did a report on it [Analysys Mason], they never said we hadn’t done the testing on it at all. We had.

The issue was that the network grew faster, it was more successful, then the plan said. And the growth showed that some of the technology in the network didn’t cope with the volumes as much as it should have done. It didn’t meet the specifications. So that was a surprise to us of course.

And obviously Alcatel Lucent [technology partner] paid compensation to Telecom.

I can’t comment on that.

Now Telecom appears focused on getting the CDMA customers onto XT because the former network will be switched off in June. A new wholly-owned MVNO, or sub-brand, Skinny has launched on the XT network. MVNOs seem to be quite prevalent throughout the world and yet when XT launched you were very anti-MVNO and you lost TelstraClear as a customer, do you regret that?

I completely refute your statement. We were never anti-MVNO. We probably have the strongest wholeseale in New Zealand seeking MVNOs and we have several MVNOs.

Not from the start though.

Not on day one because that’s kind of inappropriate when you’re building something. Certainly we had a very defined plan for CDMA and for XT to be available quickly after launch.

I think by any objective comparison Telecom has been very strongly for MVNOs. I think however the New Zealand market is small and there haven’t been a lot of operators with the capital resources really to take that opportunity up in a big way.

We’ve launched the Skinny operation, which is a stand alone operation from Telecom. It’s completely independently managed in recognition that the brand Telecom has really wide appeal in New Zealand, but a brand cannot be all things to all men and women.

There is a place for alternative brands with very distinct characteristics, so Skinny appeals to youth, particularly urban youth, and also pricing and service attributes that the big brand doesn’t do. It’s an incredibly low cost operation.

It’s also brought in SIM locking and that’s rattled a few regulatory cages.

I don’t think it has. The regulators have not shown any issues with it at all. Because the Skinny people have been extremely clear.

We can offer you an incredibly cheap handset if you’re going to be with us for a period of time. You don’t have to have that handset, you can have a dearer handset at a different price if you don’t want to commit.

It’s not universal handset locking as you’ve seen in other countries where there is no option. The regulator has come out in complete support of that as you know.

“Watching brief” I think, is what the telco commissioner said.

I think our competitors have been really rattled by it. This is a much lower cost offering then anywhere else in New Zealand. It’s really quite exciting, the kids love it.

So how many customers have you got on Skinny?

We’ll tell you that when it comes to the results and I think you’ll be surprised and interested.

When our greying competitors start moaning about it, you know you’re doing something right.

Telecom says it’s doing some trials around 4G. Are you going to roll out the service on your 1800MHz spectrum, or wait for the 700MHz spectrum to become available?

We’ve done some trials and we will do some more activity later this year. We have a number of spectrum options and at the moment we’re talking with vendors. And when we know that answer we’ll tell you.

I’m pretty confident all three mobile operators will want some of the 700MHz spectrum and there’s plenty to go around.

Telecom has 53 percent of the broadband market. You’ve got an agreement with Sky TV that you announced last year, but you haven’t really done anything with it. Why is it taking so long to launch Sky services?

We’ve partnered with Sky for a long time and we have several hundred thousand of our customers already on our Sky/Telecom package. But we’re both, Sky and ourselves, working on something that is exciting.

We’re looking forward to an Ultra Fast Broadband world, so our thoughts are not really quick and dirty and me-too. They’re about the right preparation for the future and we’ll show you the services when they’re ready.

Do you think there should be regulation in this area? Do you think broadcasting and telecommunications should be brought together?

I think there is certainly an argument for broadcasting and regulation to be considered under the same roof. In the UK it happened in, I think, about 2002, and Australia is certainly going that way. The economics of the industries are coming together. The way these things interplay is changing. So I think having things under the one roof enables regulators to act over the full economics of the services those customers will buy. I would support that.

I would support simplifying the whole regulatory framework in New Zealand. In telecommunications there are four quasi-regulatory bodies, which is quite complex. You go from Ministry of Economic Development at the policy level, to Commerce Commission at the delivery level, to Crown Fibre Holdings at the UFB level, to Telecommunications Carriers Forum at the industry level.

We do a lot of comparisons with the UK and Australia but I don’t see quite the same complexity elsewhere.

You were happy to put Telecom’s name to that TCF letter that said CFH should be scaled back, if not scrapped?

My personal viewpoint is that the four regulatory bodies should be simplified. There are just too many. I would not single out CFH at all – look at the whole thing.

I could add to that point. You’ve got Internet NZ clipping the ticket from every internet user and enacting all sorts of quasi-public policy as well, effectively with public funding. You’ve just got a whole suite of stuff that needs to be rationalised. How much money is there to go around to fund this overhead?

Are you going to stay in New Zealand?

My wife and I have lots of friends here, we love New Zealand. Our son is at university here and we have family here. We expect to spend some time here, whether my next full time job is in New Zealand is probably unlikely, but we will have to wait and see what comes up. I haven’t even started looking yet.

Has anyone been looking for you?

Yes, the door has been getting knocked since I announced that I am intending to leave, but Karen and I intend to take a break and enjoy some time together before deciding what is next. I’m not going to compromise that by being opportunistic.

Would you want to stay in telecommunications?

I think telecomms is probably the most likely but I’m open to other industries. There are certain industries that offer an interesting challenge and I think the skills of leading an organisation and helping it to change are applicable to multiple industries.

Having said all that, I think I have deep expertise in telecommunications.

You’ve kept a relatively low profile in New Zealand, although there’s been plenty of media around your salary – how have you felt about that? The highest paid executive in the country.

Which of course I’m not, as you well know. I think it goes with the course. In every country in the world, if you run one of the biggest companies there are public issues about appropriateness, there is always a debate about it. I think that’s fair enough.

Looking back at the five years, what was the highlight at Telecom?

In general I would say the passion, dedication and quality of people at Telecom is just unbelievable. I think it’s something that New Zealand doesn’t really know about, which is a shame.

In terms of achievements – achieving the first restructuring of the industry worldwide where a telco could be a more normal company in a less regulated state and with a very clear pathway to a fibre future. That’s just a phenomenal achievement for New Zealand and it has been a privilege to be part of the team that helped get it there.

What surprised you about the business, or telecommunications community here?

Well it’s a community in New Zealand. I’ve spent most of my business career in the UK where it’s much bigger and therefore a lot less personal. I think the friendliness of the business environment in New Zealand is a joy. And as a Scot, I know a lot of Scots in New Zealand say this, we find it a very agreeable place to be. It’s not the same as Scotland, but there is a lot in common.

You say Telecom is the first to structurally separate – where around the world do you think a similar thing might occur soon?

I think there is a huge amount of interest in Europe. However the economics of the deal that we did in New Zealand required government funding.

The magic we achieved here was as a result of a company, Telecom, willing to go there and negotiate that way and a government willing to put in substantial funding to get fibre built. I think the whole issue of getting deregulation and making telcos more normal companies is a very live issue in Europe and I think fibre is too.

However the opportunity for government funding is a lot less likely at the moment because of the financing problems that Europe is experiencing.

PAUL REYNOLDS – SNAPSHOT

Favourite mobile device: iPad

Car: Mini Cooper S

Favourite websites: www.nzfishing.com www.amazon.com www.theweek.co.uk

Most important technology innovation: Fender Stratocaster

Who do you most admire: Jock Stein, the late, great manager of Glasgow Celtic

See part one of Q and A with Paul Reynolds here.

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