The debate over Telecom’s wholesale services boils down to one simple word: equivalence. It’s what every ISP is asking for, it’s what Telecom talks about, it’s what the government wants. Everyone just wants to be treated the same way as everyone else. Unfortunately it’s not that easy.
At the moment, Telecom has one big problem. Xtra, its ISP, is treated quite differently to every other ISP in the country at the most basic level: Xtra gets its traffic capacity using a different technology from the other ISPs. The technology is cheaper to set up, it’s cheaper to run, it’s more efficient and Xtra’s the only one with access to it. Xtra uses Ethernet while other ISPs use ATM.
ATM is old-school telco technology and is priced accordingly. When it comes to shifting lots of data quickly, Ethernet’s hard to beat. You can send bigger packets, up to jumbo frames, in fact. That means your overheads are less and you can devote more of your network to the fine job of passing traffic back and forth.
So Xtra has an advantage and a considerable one at that. But it would be wrong for Telecom not do change that, right? Telecom is talking a lot about equivalence of service. So when will this be fixed?
The ISPs I’ve heard from say they don’t know. Telecom keeps moving the delivery date further away. I’m told Telecom promised to deliver backhaul services over Ethernet from the very beginning but hasn’t done so. Instead ISPs have had to fork out for expensive ATM equipment. Would it surprise you to learn that ATM equipment costs more than its Ethernet counterparts? Well it does.
Telecom should move to remedy this as quickly as possible. But Telecom tells us it only has plans to “review” its backhaul service at this time and won’t report back on this until the end of the year.
“We are committed to equivalence of inputs for our wholesale partners” says one Telecom spokesperson, which sounds to me like confusion’s not-so-distant cousin obfuscation at work.
This is all coming to a head. As our lead story says, Telecom is about to introduce proper DSL to the nation.
Actually, that’s not quite right. We’ve had proper DSL for quite some time. Unconstrained broadband has been available in New Zealand since 1999. You paid for it, of course, right up to the astonishing JetStream 30,000 which offered 30GB of traffic a month for $2,500 plus GST. Not that anybody did pay, so of course our usage levels were quite low. That in turn gave Telecom the ammunition it needed to set low traffic levels for the “average user”. So now the ISPs are faced with a dilemma: do they offer customers an equivalent plan to those unconstrained plans Xtra will be offering or not.
The problem is, traffic usage over the 4GB a month limit set by Telecom, aggregated across the ISP’s customer base, will result in the ISP paying another 50c/GB to Telecom. That kind of charge will soon eat into any profit margin the ISP may enjoy, but without those high-end plans, most of the users will migrate to the one ISP that can avoid those costs: Xtra.
That’s the bottom line here. Telecom may be offering the end users more than ever before, but once again it’s the ISPs that will pay the price. There is no equivalence here and unless we see some sign of it soon, before the year is out, Xtra will go into the brave new world of tomorrow’s regulations with the lion’s share of the customer base.