Telecom claims Commission pricing model is ‘unlawful’

Investment in rural New Zealand threatened, Telecom says

Telecom is rattling the sabre in the battle with the Commerce Commission over proposed changes to the broadband wholesale regime — and is threatening to cease investing in rural New Zealand.

The Commerce Commission’s “Statement for Consultation” requires Telecom to offer its competitors “unconstrained” broadband, a move Telecom bitterly opposes.

Currently, Telecom decides which speeds it will offer as a wholesale service. However, the commission wants ISPs to be able to approach Telecom seeking whatever level of service the network can physically sustain.

In its submisson on the statement, Telecom says the Commission’s approach to pricing is “unlawful”. It also says that the consequences of unconstrained broadband and lowered wholesale pricing will be reduced service availability and that it won’t invest in rural New Zealand, as it would be uneconomic to do so.

Telecom also claims that should the commission go ahead with the proposed determination, it will be less likely to meet the government’s objectives in terms of broadband uptake, as set out in the Digital Strategy.

Telecom’s submission says it will not be able to supply some 7,000 customers with high speed connections if the commission lowers wholesale prices and increases download speeds.

According to the submission, increased line noise caused by unconstrained broadband will diminish its reach. Furthermore, lowered wholesale prices, which are the same for business and residential connections delivered over the same network, mean Telecom would cut back on investment in rural and outlying areas.

Telecom’s argument is supported by a number of interest groups. One of these is Federated Farmers, which fears some of its members will not get any service at all thanks to city dwellers being supplied with unconstrained broadband.

Federated Farmers also protests against the commission setting one wholesale price for residential and business DSL — the service provided being exactly the same from a technical viewpoint — stating that this will reduce the available revenue for Telecom from broadband.

Joining the hoe-down against unconstrained broadband and demanding a slowdown is Rural New Zealand Women, which says it represents approximately 4,000 members. The RNZW is concerned that the commission’s decision to make Telecom provide unconstrained broadband will compromise the education of children in rural communities, as well as the efficient operation of agricultural business.

The Tourism Industry Association’s submission says unconstrained broadband inevitably means an unspecified number of regional tourism businesses are at risk of being cut off from the productivity and efficiency-enhancing tools that broadband access is currently providing them.

Another cab out of the anti-unconstrained broadband rank is lobby group Business NZ.

Business NZ says it is disappointed with the commission, which it says has continued to effectively remove any incentive to efficiently price discriminate. The determination will lead to ISPs offering the fastest service possible, Business NZ says, with “limited competition around the edges in terms of megabyte usage”.

Submissions like this have led InternetNZ to call for sense and perspective in the UBS debate, with the society’s president Colin Jackson slamming the comments from industry groups as “deeply disappointing” as they pay scant attention to the facts involved.

Jackson says Telecom has provided no evidence of its claims that unconstrained broadband will lead to up to 72,000 customers not getting service.

This, Jackson says, is an assertion, nothing more, and one that is remarkably convenient for a company with a virtual monopoly.

Commenting on the Rural NZ Women submission, Jackson says he is amazed that it supports a monopoly that has served rural areas badly. He says in Hawkes Bay, some people he has seen are getting “shocking service” and can’t reliably dial 111 let alone use even dial-up internet connections.

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Tags telecomCommerce Commission

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