Cunliffe uses ladder to avoid being the new Max Bradford

Behaviour-driven model inspired by coutries overseas

The minister for IT and communications, David Cunliffe, has worked hard to avoid being labelled the “Max Bradford” of his generation.

Bradford, the man behind the electricity sector reforms, saw his parliamentary career come to a crashing halt after angry voters turned against him and his party in the 1999 general election.

Cunliffe has consulted widely both within the local industry and internationally.

“It’s important to note that this isn’t one man’s opinion. We talked extensively within government and the industry locally, but we also looked oversees to other countries to see how they’ve tackled the issue.” Cunliffe says the New Zealand model most closely resembles the UK approach, which is “behavioural” in its intention.

“We want a behavioural change and so this is behaviour-driven rather than looking at the technology or regulation itself.”

Cunliffe says the OECD and EU approaches to unbundling and issues like structural separation were also useful: a consultant who has worked with the OECD peer reviewed the government’s decision before it was released.

Taylor Reynolds, analyst with the OECD telco policy division, says the decision opens to the door for more competition in New Zealand.

“Experience in OECD countries has shown that competitive access to the local loop is one of the key factors behind higher broadband penetration rates, service innovation and faster broadband speeds.”

However, he warns that the devil is in the detail. “There need to be clear conditions in place to ensure that competitors have good access to exchanges through collocation policies, reasonable cost-based pricing for unbundled loops, service level guarantees to ensure on-time delivery of unbundled loops and a concrete timetable for the upgrading of exchanges to support unbundling.”

Cunliffe says the Telecommunications Commissioner Douglas Webb, who was consulted on the proposal, and the MED will both be keeping an eye on the proceedings with a view to wielding the biggest stick of them all — structural separation. However, Cunliffe is sure the “ladder of investment” will see new players coming into the market as quickly as possible.

“At an entry level they can re-sell Telecom’s wholesale service with the new unconstrained bitstream offer. Then they can move to unbundling and finally to building their own infrastructure.” Cunliffe says incentives are structured to encourage investment.

“Resale of Telecom’s services will be at ‘retail-minus’ while unbundling will be ‘cost plus’ based. That means the new entrant will be keen to get customers on to its own unbundled lines as quickly as possible.” That’s not to say Telecom won’t be able to make money either. Cunliffe says Telecom’s incentive is to offer as good a wholesale rate as possible to keep ISPs on the bitstream plan.

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