The push and pull of telecommunications

Let's harmonise regulation for emerging markets

The Telecommunications Act allows new entrants to piggy back off Vodafone or Telecom's cellphone network once they've built at least 10% of its own network and has plans to build throughout the country.

The Act is very clear on this point — if you're going to build your own cellular network you can get access to a network that already exists, so you don't fail miserably by trying to compete with the big boys before you're ready. This co-location should be worked out on a commercial basis first, but there's always the Commerce Commission waiting in the wings if you can't get a network operator to give you a realistic deal.

That's very interesting. Let's come back to that.

The Government has said it wants to encourage telcos to build their own networks if they want to compete in New Zealand. Putting aside for the moment the question of the expense involved when it comes to a population of four million people, the Government is faced with a problem of its own making: the Telecommunications Share Obligation. The TSO says if you build a network and connect with Telecom's network you have to pay Telecom a portion of the cost of connecting "commercially non-viable customers" as part of a greater social good. To date, Vodafone has paid Telecom $26 million because it has built its own network.

This is a huge disincentive to anyone intent on building a network in New Zealand and a contradiction in terms of the Government's strategy.

In addition we have the lack of access to Telecom's network. The Commerce Commission recommended against opening up Telecom's network, unbundling the local loop or ULL, to competitors in favour of a wholesale regime that still leaves Telecom in control of its network's usage.

So new entrants face a telecommunications regime that demands telcos build their own networks, then penalises them for it while simultaneously blocking full access to Telecom's network.

Instead of that, why not harmonise the whole thing? Why not take the rules we apply to the emerging mobile market and apply them to the emerging broadband market?

If new entrants want access to Telecom's local loop to offer broadband they must demonstrate their willingness to build their own network and simply use Telecom's exchanges as a leg-up in the short term.

Take TelstraClear. Here's a company that's discovered just how expensive it is to build a national network in New Zealand. Clear was haemorrhaging money before Telstra bought it in 2001 and chief executive Rosemary Howard did the only sensible thing she could: she stopped the network build.

But what if there was an incentive in the form of access to Telecom's network in the meantime? What if TelstraClear could build its own network and concurrently offer services on Telecom's network in those areas where it hadn't yet broken ground?

Just as with the cellular market, there are issues to overcome. Access to infrastructure is key to both mobile and fixed line. With mobile you have towers and issues of potential interference and so on. With fixed line you need to put your equipment in Telecom's exchanges and roadside cabinets.

These aren't insurmountable issues. The biggest problem such a scheme would face is convincing Telecom that it has to happen, but we need to do something to break out of the rut we're in.

Telecom opposed unbundling with all its considerable might. It fought tooth and nail, bringing in experts from overseas and getting its local chums to say unbundling is a bad idea. Telecom is an effective lobbyist; any company that can convince the government to give it, the incumbent, millions of Project Probe dollars to increase competition in broadband is clearly very clever.

However, a partial unbundling, let's call it PULL, based around a competitor's stated intention to build its own network with timelines, dates, places and so on, might just convince Telecom to let them in. Telecom still gets to charge a wholesale rent, it still has its own network with which to innovate and attract customers. The competitor gets a toe-hold in the market and the ability to reach into those other areas that Telecom might not want to go, like real business broadband offerings.

The Telecommunications Commissioner recently said that Telecom faced a harsh choice: do more than the bare minimum forced on it by regulation or expect tougher regulation in future. Telecom has to make a decision here. Might a partial solution not deliver what we all want?

Brislen is a Computerworld reporter

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