How times change: instead of being regularly excoriated as an evil empire, Telecom gets a pat on the back by the government, pleased that there is cooperation with the new legislation rather than litigation against it.
By dumping some of the old executive pitbulls, who would staunchly defend Telecom’s monopoly in a number of areas at any cost, and saying what the nation wants to hear, new CEO Paul Reynolds has hit it off with everyone involved — media, legislators, and the public. Even the competition is cautiously hopeful that there is indeed a new Telecom in the offing.
In comparison, Vodafone, which previously enjoyed a perhaps incongruous role as the younger, hipper underdog in the market, is now experiencing some rather uncomfortable scrutiny from official quarters, and faces Commerce Commission interest and ire after being accused of selling bundled services below cost to hammer the competition.
Having set a mollifying tone in his dealings with the public and government, Reynolds now has to show he’ll deliver too. We shouldn’t forget the grand promises made by his predecessor, Theresa Gattung, which amounted to nothing in the end apart from record profits through milking sweated assets shielded from competition and deferring or cancelling network investment.
To this end, the announcement last week that Telecom intends to spend $1.4 billion over five years to provide at least 10Mbit/s to almost all customers in towns with at least 500 lines by 2011 is very welcome.
Telecom wants to achieve this through increased “cabinetisation” or shortening the local copper loop so that it can run ADSL2+ over it, achieving peak data rates for downloads of 20Mbit/s to half of all customers.
As confirmed by Telecom, the broadband build-out is an extension of the existing Internet Protocol-based Next Generation Network (NGN).
While it makes total commercial sense for Telecom to utilise assets under its control, we have to be careful that the strategy doesn’t reinforce its natural monopoly. Roadside cabinets are covered by sub-local loop unbundling provisions in the new legislation and in theory, competitors can serve customers by installing equipment into the grey boxes.
In practice, however, few have the expertise or money to do so. They are hoping to use the telephone exchanges instead but these could end up being obsolete through cabinetisation.
Then there’s the timeframe: in five years, will 10Mbit/s be sufficient? Or even 20
Mbit/s? It’s a safe bet that it won’t be as we move towards a world where even basic phone service is delivered over IP, let alone television and video on demand. Why does it even have to take five years, seeing that Telecom already has ADSL2+ DSLAMs in most areas of the country?
Will there be other technologies involved, delivering data over copper and fibre? Speaking of the latter, we have to be careful not to snip the copper monopoly and replace it with a fibre one, and find ourselves back at square one with another regulatory battle ahead.
Reynolds is indeed saying the right things at the moment, but we have to keep a watch on Telecom under his reign to press for them to happen — and perhaps also consider alternatives that keep the incumbent in check, if need be.