Dial-up makes a comeback in NZ

Telco analyst Paul Budde on NZ telecomms (with video)

Telecommunications analyst Paul Budde says New Zealand has laid better foundations for a fibre rollout than Australia, but there are still serious threats to progress - including an inexperienced new government.

Budde, speaking yesterday at his annual roundtable session in Auckland, says the financial crisis will have an impact on broadband and telecommunications markets, but in New Zealand's case recession arrived early, before the current international meltdown. And that has resulted in thousands moving back to dial-up internet access to save money.

He says that has to do with the way access is priced in New Zealand, where dial-up is "damn cheap". If users are only doing email and light browsing, it becomes an attractive cost saving, he says.

While New Zealand's levels of broadband penetration are now similar to those found elsewhere in the OECD, our data caps and costs are still not internationally competitive, he says.

The most immediate effect of the financial crisis in international telecommunications markets has been a drop in sales of high end mobiles of around 20% to 30%, he says.

Budde, who recently delivered his 2009 outlook for telecommunications in NZ, says the foundation of operational separation means we have an advantage when it comes to government investment in fibre to the home. There is a much better chance the money will go where it is supposed to go, he says.

However, Budde says an inexperienced minister of ICT is a worry, though he feels the Prime Minister is of the "right calibre".

"David Cunliffe did a good job," he says. "The government needs to build up knowledge and experience."

New Zealand is also positioned well in developing its digital economy, Budde says, but more needs to be done in health and education. Health is particularly challenged as it struggles to move the use of technology "from the back office to the front office", he says.

Video: Paul Budde on the flight to dial-up, cabinetisation and separation of wholesale

Budde, who has been asked to give an external appraisal of US telecommunications issues for the transition team of President-elect Barack Obama, is also concerned about Telecom's rollout of cabinets to shorten the length of the local loop and drive fibre to the node.

"It has the potential to delay or stop development," he says.

Another concern, he says, is Telecom Wholesale's ongoing relationship with Telecom Corporate. Budde says Telecom Wholesale's CEO, Matt Crockett, "should have nothing, nothing, nothing to do with Paul Reynolds".

Budde says the financial crisis could see the end of "extreme capitalism", where the idea of a role for government in regulation or investment is denied. He cites Telstra CEO Sol Trujillo as one who talks as if shareholder value is the only thing that matters.

Budde says British telco BT is now talking about voluntary structural separation - and he predicts, or rather "guarantees", the same will happen to Telecom New Zealand.

Budde praised Vodafone for wholesaling its network and questioned Telecom's refusal to follow suit with its new mobile network, to be launched in mid 2009.

"It's a strategic mistake," he says, adding that, in this instance, Telecom is still living in the old world of protectionism. As a result Vodafone will soak up resellers and win even more market share.

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