Swain tips telco tenders

The Government is investigating the possibility of allowing other telcos to bid for customers deemed to be commercially non-viable following the decision not to unbundle Telecom's local loop.

The Government is investigating the possibility of allowing other telcos to bid for customers deemed to be commercially non-viable following the decision not to unbundle Telecom’s local loop.

Communications Minister Paul Swain (pictured) has asked officials to investigate the idea of a regional tendering process for the Telecommunications Share Obligation (TSO). The TSO regime, whereby Telecom provides telecommunications coverage to so-called commercially non-viable customers (CNVCs), many in rural areas, results in a number of competing telcos paying Telecom a percentage of the costs involved.

The Government last week announced that it would implement Telecommunications Commissioner Douglas Webb’s recommendation that Telecom’s local network not be opened to competitors. A form of competition known as “bitstream unbundling” would instead be introduced and competing telcos would be encouraged to invest in their own network infrastructure.

Vodafone, which has its own national network in New Zealand, has been forced to pay Telecom $12 million for its share of the TSO under the terms of the Telecommunications Act. Swain says the payment system is an issue that needs addressing.

“The problem that Vodafone has is that the more competition it takes, the fewer Telecom consumers there are, the greater the subsidy that goes to Telecom. I understand this argument.”

Swain says officials are working on a scheme that would allow competing network companies to tender for those “non-viable customers” and offer TSO services to them.

“It’s an idea that’s been around for a little while, but it would mean Vodafone could tender for those services they’re currently having to pay Telecom to cover.”

Swain says the issue is a highly complex one, especially when it comes to the provisioning of TSO obligations.

“We have to address issues like: will everyone be required to have a cellphone, what happens with 111 [emergency] calls? Then there are issues like what happens if no one tenders for a region or perhaps we have three tender winners for a region.”

Swain says Project Probe, the regional broadband initiative, could be used as a regional template for such a scheme.

“I’d fully expect companies like Woosh or Wired Country to bid for regions alongside Telecom or any of the others.”

The irony of companies competing for “non-viable customers” isn’t lost on Swain. “It could be that Telecom will be glad to see the back of these customers.”

Webb announced last year that rather than accepting Telecom’s claimed costs of $450 million a year, the total amount for the year ending June 2002 would be $65.67 million. However, Webb announced Vodafone would have to pay the largest of the contributions, around $12 million. Swain says that flies in the face of “intermodal” competition as mandated by the decision not to unbundle Telecom’s network.

The TSO replaced the old Kiwi Share agreement between the Crown and Telecom. The Kiwi Share required Telecom to offer free local calls, limited the rate at which the line rental charge could be increased each year and required Telecom charge rural customers the same as urban customers. Telecom argued successfully that the introduction of free local calling to ISPs wasn’t foreseen in the original agreement and so the TSO was introduced to update the Kiwi Share.

Under the TSO, Telecom must allow free local calls to ISPs but is only required to offer data transfer speeds of 14.4kbit/s to the majority of customers and only 9.9kbit/s to the most remote.

Vodafone’s GPRS network is capable of offering speeds of 40-50kbit/s today and Vodafone recently announced it would begin building a 3G network next year, which should offer faster speeds again.

Swain expects to hear back from officials by the middle of the year.

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