Telecom asset split no surprise: IDC

It's a case of like it or lump it says InternetNZ

Senior analyst at IDC, Rosemary Spragg, says the proposed asset split between New Telecom and New Chorus that was announced yesterday is very much as expected.

There are no surprises or major fodder for controversy at first reading, she says, but several aspects of the arrangement are complicated and there are grey areas around the assets earmarked for sharing between the entities provisionally called New Telecom and New Chorus.

The new Telecom, for example will hold national backhaul links and the new Chorus regional links. Some links will be used in both roles, Spragg says, and their ownership remains in doubt.

The treatment of the voice service is particularly complex, Spragg says. New Chorus will provide a “baseband service” to New Telecom, which will use the PSTN assets it owns to create a wholesale voice service which it will pass back to New Chorus.

This, she says, is done to preserve a revenue stream from voice for Telecom but allow customers to buy both wholesale voice and data from Chorus.

The complexities of the agreement will take time to pick through she says.

InternetNZ CEO Vikram Kumar agrees. Past experience of telecommunications reform negotiations demonstrate that you can’t base definite conclusions on summaries, he says.

However, InternetNZ will not be in a hurry to analyse the document, because in reality there is little that can be done to vary it, Kumar says. Even ICT Minister Steven Joyce cannot require Telecom to change the detail of the arrangement, he says. Telecom is in control and that is an unsatisfactory situation “as we have pointed out in more than one submission.”

Spragg agrees that that is so on the surface, but in practice, she says, there will have been a lot of discussion between government and Telecom, and “though there may be tweaks” it can be assumed that the current form of the split is substantially to government’s satisfaction.

Coincidentally, in the area of discreet discussion, Joyce has now released a letter sent by Telecom chief executive Paul Reynolds to him in 2009, which opposition ICT spokeswoman Clare Curran is trumpeting as proving Joyce was urging Telecom into a structural separation as the price of winning the Ultrafast Broadband contract.

“To date, the conversations between our teams have focussed primarily on the solution itself,” Reynolds says in the letter. “Notwithstanding these very constructive discussions, I now understand that officials have suggested that the government has a preference for Telecom to voluntarily offer to structurally separate.”

However, a spokeswoman in the minister’s office says Reynolds misunderstood the government’s intent. “The supposition regarding voluntary separation referred to by Dr Paul Reynolds in his letter was incorrect,” she says. “Officials advised Telecom of this at the time.”

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Tags IDCstructural separationinternetnztelecomChorus

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