Opinion: Reading Telecom

Are you feeling lucky, punk? Are you?

This afternoon, Telecom CEO Paul Reynolds took questions from media and analysts over Telecom's submission on the government's ambitious fibre plan.

On the face of it, Telecom didn't answer any of the questions the government has asked in its discussion document. Instead, it met the government's core criteria and went on to deliver two alternative proposals on how to achieve the government's vision of fibre to 75% of New Zealand homes.

Telecom's proposals are alternative visions that are part promise and part threat. They are visions where Telecom remains at the core of internet (and by extension in these IP times, voice) service delivery in New Zealand.

And what's really weird is they are visions that promise the bang-for-buck smartness that New Zealand needs. And they come from Telecom. And the company is prepared to spend money on them.

They are visions that send a signal to government and to rivals that Telecom is a newer, smarter company under CEO Paul Reynolds, and also that Telecom is a better and more trustworthy company.

Behind that new friendly face there is also a veiled threat. Fibre to the home in New Zealand without Telecom could be a very expensive proposition indeed. The company that controls the copper can still make life very hard for the company that owns the fibre, especially if the cost of a fibre connection and service is high.

And especially if you can get 10Mbit/s or better over copper, which many now do and many more will before any fibre goes in the ground.

If you want to know what the cost to fibre investors, including the government, could be if customers don't arrive, you only have to look at Murray Milner's report for Treasury.

As another tough guy (Clint Eastwood in the Dirty Harry movies) once asked: Are you feeling lucky, punk? Are you?

For a while at leat, a $40 a month plan at 10Mbit/s plus will meet a lot of needs. And Telecom can change the price, and up the speed. And keep customers away from the shiny, new, expensive fibre network.

Let's not forget, we are a Warehouse economy.

In the end, after listening, questioning and talking to IDC analyst (and Computerworld regular) Rosalie Nelson, it seems clear that Telecom will get a serious listening to. But for many service providers, a structural split of Telecom and its network arm Chorus could be a prerequisite of the kind of industry buy-in Telecom needs.

In the context of what is about to happen, that is small beer.

New Zealand is in the middle of making a huge decision. It's a decision about our future and one that requires a proportionally large commitment. We have to be smart about how we go about it.

That's the attraction of Telecom's proposal — avoid overbuilding, maximise your investment.

Reynolds delivered a lot of good soundbites today: "From Tiki Tiki to Haast", "More fibre to more people without creating a new digital divide", "Fastest return", "Biggest bang-for-buck".

"There's no catch to this. We believe in a fibre future."

But you also don't need a very long memory to remember a different Telecom. And you don't need much imagination to wonder what might happen after Reynolds leaves. That's why structural separation may be a prerequisite of Telecom getting its way.

The other submissions have not yet gone online at the Ministry of Economic Development (they'll be here "in due course", as we say in the public service).

The power line companies are, seemingly, ready to wade into these waters. Others may be too, but there isn't a lot of cash around right now, and that could be Telecom's biggest ally in this discussion.

Let's just finish on another Reynolds quote. After saying cabinetisation was complementary to fibre investment — and before saying 25 local fibre companies may not be viable — he said this: "ADSL will satisfy a lot of customer needs for for a time to come".

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