Go ahead, split-up Telecom, say IT service providers

Axon also questions the place of Gen-i in any new structure

IT services company Axon has come out strongly in favour of Telecom being split-up in its submission to the Ministry of Economic Development. It also questions the place of Gen-i in any new structure.

Axon argues Telecom should be split-up as the company’s vertical integration “limits the prospect of real competition in telecommunications and also has the potential to reduce competition in the associated market for IT services.”

However, Axon’s main target is Telecom’s IT service subsidiary, Gen-i. In its submission, Axon notes that the MED’s April discussion document on the separation does not specify whether Gen-i would be considered part of the company’s retail business unit.

“The nature of Gen-i’s business suggests it should be,” the submission says.

Axon is the only IT service provider to make a submission, something director Matt Kenealy suggests could be caused by other providers being worried about losing Telecom business. Others, however, go further.

Sam Mulholland, managing director of Dunedin-based disaster recovery specialist Standby Consulting, says Gen-i should not be part of Telecom at all.

“I think that Telecom is a telecommunications provider and should remain focused on that,” he says. “Telecommunications is absolutely critical for all businesses in the world now and NZ is no exception. Thus, I would like to think that they are totally focused on providing excellent telecommunications services, rather than getting diverted into other product lines and services.”

Standby competes with Telecom for the hosting business for back-up computers.

“I had one CIO tell me that he went with Telecom because he did not have to pay for the comms lines,” he says. “I queried a Telecom account manager on this and he denied that was the case. Certainly, in that CIO’s mind he was getting the service for free.”

Meanwhile, Axon argues that cultural change within Telecom will be hard to achieve under the MED’s proposal as all the unit heads will still report to Telecom’s chief executive. Axon suggests the “three box” model would be improved if each unit had its own CEO.

The company says “any Telecom subsidiary that is involved in selling wholesale or retail telecommunications products should be subject to the same requirements as other aspects of Telecom’s business.”

Standby’s Mulholland says: “The other issue you have is that if you are competing with Gen-i on a services contract and you ask Telecom for a price for comms lines you are left wondering if Telecom staff give Gen-i the nod...

“I have had a couple of incidents where I have been pricing a job and have then had the prospective client tell me that the Telecom account manager has called in, within a few days of me asking Telecom for a price. Now, that may be a coincidence, it may not. I cannot produce evidence either way, but one is left wondering.”

Telecom says it won’t comment on individual submissions to the MED.

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