Through the telco looking glass

In which our intrepid telco user seeks a faster service but instead ends up in a world Gonne Madde

And so we’re to unbundle the incumbent’s network.

The new player will get rights to install its equipment on the incumbent’s network. If commercial negotiations break down — and they will — a regulated solution will be handed down in due course. Either way, it’s going to happen and there’s nothing the incumbent can do to stop it or delay it.

This isn’t fantasy. This is going to happen in New Zealand next year.

Of course, it’s not Telecom’s network that will be unbundled, it’s Vodafone, and the new player gaining access will be Econet. But the whole idea really does show how much the New Zealand telecomms regulatory environment resembles a car wreck.

It’s entirely possible that by Christmas 2006 New Zealand will be the only country in the world that allows unbundled access to a competitor’s network while continuing to protect the incumbent. If this happens, all the government’s talk about competition and protecting investment will be revealed as the joke it is. We’re still waiting for the punchline, but I doubt it’s going to be a very funny one.

The Telecommunications Act makes it clear: if any new entrant in the mobile market wants to build its own network, and delivers plans for a national build, it will be allowed co-location access to install its own equipment on a competitor’s network. All Econet has to do is build a network that covers 10% of an area where New Zealanders normally live or work and it can then ask the Telecommunications Commissioner to rule on access to an existing network — namely, Vodafone’s or Telecom’s. Since Econet is using the same technology as Vodafone it could be assumed it will seek access to Vodafone’s network.

Vodafone will be spitting blood over this. While I don’t usually feel sorry for multinational companies that make large fortunes every year, we have to consider Vodafone’s perspective.

First, the government says if you want to compete with Telecom you need to build your own network, even though New Zealand is the same size (more or less) as Britain or Japan. Even though in this geographical space we have only four million people. Even though Telecom’s network is bought, paid for and installed. If you want to compete you have to build your own.

So, Vodafone goes ahead and does just that, investing billions of dollars in the local market. But then the government says it has to pay Telecom $13 million a year because Telecom has an agreement with the government to keep “commercially non-viable customers” connected to its network. Can we offer them services? asks Vodafone. No, is the short answer. So Vodafone, a company which has its own network and doesn’t need Telecom’s network at all to exist, has to pay millions of dollars to the incumbent while companies such as Orcon and Iconz (Edit note: story updated to take out Ihug and add in Orcon. I blame the writer - Ed), which don’t have their own national networks and earn a large percentage of their revenues from services offered over Telecom’s network, don’t pay a dollar.

It gets worse. Let’s take a close look at the government’s Project Probe — a project set up with two goals in mind. First, to increase the reach of broadband into heartland New Zealand and second, to increase competition in broadband offerings.

Most of the contracts have been awarded to Telecom, which is using the money to subsidise the rollout of equipment in areas where it wasn’t immediately going to offer service. However, in a number of areas Telecom is offering services on the wireless network of wholesale provider BCL. Because Telecom got the cash, not BCL, Telecom is able to undercut other BCL retailers in these areas, and that’s exactly what it’s doing. Iconz is one such ISP that had signed on to sell BCL’s service to remote parts of New Zealand and now says it can’t because Telecom simply undercuts its installation charges — thanks to all that lovely money from the government.

A cynical person might suggest that the government’s investments in Telecom via its retirement fund, the ACC and all the rest, is tipping the government’s hand in Telecom’s favour. I don’t subscribe to conspiracy theories; I’ve got another rationale that explains these things — sheer incompetence.

Bring on the New Year, I say.

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