Telecom opts for voluntary separation

Telecom hopes to head off government regulation with a wholesale plan of its own

Telecom has announced that it will voluntarily split its business in half.

Following the model introduced by Britain's BT, Telecom won't wait for government regulation to impose a regime on the company but has instead voluntarily split the company into wholesale and retail arms.

Incoming chairman of the board Wayne Boyd announced the decision saying New Zealand "expects world-class broadband services" and that the company was dedicated to bringing those to market.

The new wholesale regime will be based on Telecom's wholesale charter, a self-imposed series of "best practice goals" that Telecom introduced earlier this year. While industry response to these goals was somewhat underwhelming, Telecom hopes the new structural separation model will be well received.

"It's another step to deliver customers the benefits of the new regulatory environment as soon as possible," says Boyd.

The new regime will see Telecom's wholesale division set up as an independent unit, with "equivalent service delivery processes and services levels" for wholesale customers; transparent external reporting "so all our customers can see the facts" and oversight by an independent monitoring group.

While not going as far as BT's structural separation, which included a new company name, livery, head office and independent board reporting structure, the new move will go a long way to appeasing the government and industry players, hungry for access to Telecom's network.

TelstraClear boss Allan Freeth cautiously welcomed the move, but questions the motivation.

“We welcome Telecom’s announcement, but it is only happening because of the government’s focus on a broken market. That’s why it’s so important that the legislation is passed into law so there is a strong set of rules to ensure promises become reality,” he says.

InternetNZ, which has lobbied to have Telecom broken up, and the Minister of Communications, David Cunliffe, also welcomed the move.

"Subject to receiving and analysing further detail on the proposed measures, the government looks forward to developments that improve competitive, non-discriminatory wholesale markets for the benefit of all New Zealanders," says Cunliffe.

InternetNZ's executive director Keith Davidson says the society would like to see Telecom go the extra step and institute a wholly-separate board to run the wholesale division.

"A better step for Telecom and for the market would be to appoint a fully delegated Board of Directors with a separate General Manager and its own corporate services, to manage the wholesale division. InternetNZ urges Telecom to consider this, over and above today's announcement."

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