In a shock decision the Telecommunications Commissioner has not recommended unbundling of the local loop choosing instead to recommend another form of wholesaling of Telecom's DSL network.
In the final 222-page report to government commissioner Douglas Webb outlines his reasoning.
"The commission has examined a range of factors to inform its recommendations" says the report which lists the factors as competition in the relevant markets and the results of a cost-benefit analysis conducted by the commission along with several other lesser factors, including overseas' experiences.
But what exactly has the commissioner proposed?
"The commission recommends that access to an asymmetric DSL bitstream service suitable for the residential and SME broadband market and related interconnection should be a designated service. Additional entry in that market is likely to result in lower prices, act as a spur to improvements in Telecom’s productive efficiency, and encourage process innovation on the part of entrants" says the report.
In effect, other ISPs and telcos will be able to sell an asymmetrical DSL service, similar to Telecom's JetStream that uses Telecom's copper network.
Currently Telecom only has to offer the other ISPs and telcos a retail service at wholesale rates. Telecom decides what the service standards are for the product and the ISPs can only resell that service. Consequently there is very little difference between JetStream sold by a small ISP in the South Island and JetStream as sold by a large metropolitan ISP in the north.
Under the new arrangement, ISPs could specify new speed points and new traffic limits and sell different services based on their own customers' requirements. Telecom has to charge them at a wholesale rate based on a "retail minus costs" approach.
However, the commission has limited the types of new offerings that are available. The service Telecom has to offer to its competitors must be asymmetrical at speeds of not less than 256Kbit/s downstream and not faster than 128Kbit/s upstream and "is not required to support any function that relies on real time network capability" which will rule out voice over IP, video conferencing and may even impact on online gaming.
The commission feels that by adopting this approach it will kick start broadband uptake among residential customers by introducing more competition without damaging either Telecom's or the other network operators' abilities to invest in new network infrastructure.
The commission has also taken into account Telecom's proposal to offer "unbundled partial private circuits (UPC) which it feels "has the potential to adequately address a major 'bottleneck' feature of the market for ... corporates and other large users".
The commission says while the UPC offer is not "suitable" in its current form, the commission will step back for six months while Telecom and the other telcos negotiate a commercial agreement. If that can't be reached the commission will re-assess its decision at that point.