Judgment day for termination

Of all the things you can punish Telecom for, running an efficient network shouldn't be high on the list

IT Minister David Cunliffe has given telcos an extra week in which to comment on the Commerce Commission's final report into mobile termination rates. Perhaps Cunliffe can see there may be some problems with the Commission's recommendation.

The report outlines the Commission's investigation into the price phone companies charge to call mobile phones. New Zealand has some of the most expensive cellphone calls in the world, so I was pleased when the Commission announced it would be investigating.

The Commission has recommended lowering the rate from 27 cents per minute to 15 cents, but where it really gets interesting is in the Commission's approach to 3G (third generation) calls.

The Commission has decided to exclude all 3G calls from the rate reduction but, interestingly, decided that Telecom's new T3G service does not meet the criteria for 3G service.

This news was received with some interest at Telecom HQ where they were busily rolling out T3G in the belief that yes, it was a 3G network.

There are two things wrong with the recommendation. First of all, the Commission has once again bought the old chestnut "if you regulate we won't invest". Last time they trotted it out they decided not to unbundled the local loop so as to protect Telecom's investment in the next generation network.

Telcos are going to build 3G networks no matter what, because it's their core business and because in the long run they save money. 3G technology provides a more efficient use of spectrum, which means Telecom and Vodafone can fit more voice calls in the same amount of space and save a bundle in operating costs. They can also sell munters like you and me mobile data connections that are so expensive it makes me wince just to mention them.

The second problem is the decision that Telecom's T3G network doesn't use 3G for the voice component and so isn't really a 3G network. The Commission is on very shaky ground here, which is probably why the Minister has extended the deadline. The Telecommunications Act uses the International Telecommunications Union definition of 3G, which clearly says 3G is a network that runs at a minimum speed of 144kbit/s. It doesn't differentiate between voice and data at all.

Telecom's cellphone network uses CDMA 1xRTT and runs at 155kbit/s. Its T3G network uses an EV-DO overlay on top of that and gets up to 2Mbit/s, although typically we'll see 500kbit/s or so.

Worse still, the Commission seems to imply that Vodafone's 3G calls will be excluded from the ruling, giving Vodafone a huge advantage over Telecom in terms of pricing. Vodafone's network is expected to be slower than Telecom's current T3G network, running at a maximum of 384kbit/s.

You do not need these kinds of speeds to deliver voice. Vodafone only needed 9.6kbit/s for its GSM network. Telecom is, in effect, being punished for being efficient with its bandwidth allocation and that's just wrong. Of all the things you can punish Telecom for, running an efficient network shouldn't be high on the list.

Telecom's network is a 3G network. Its capacity is well in excess of ITU standards for 3G. The commission is splitting hairs by drawing a distinction between voice and data on a 3G network — something the ITU doesn't do.

Telecom isn't going to take this lying down and if the Government accepts the Commission's recommendation, Telecom is bound to take legal action.

Ultimately we have to consider whether any of this will actually benefit the end user. I can't see how it will: there is no onus on the telcos to pass any savings on to the customer; Telecom will be unhappy that its 3G network is derided by the commission; Vodafone will be unhappy that its 2G calls are being regulated in price. Resellers of both services will be unhappy that they have to try to work out whether a call is 3G or 2G for billing.

The Government is expected to decide what to do later in the year. Hopefully, Cunliffe will keep end users's interests foremost as he seeks to calm the telcos.

Brislen is a Computerworld reporter. Contact him at paul_brislen@computerworld.co.nz

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