Telecom could have avoided unbundling

The benefit of unbundling may not be that competing telcos make use of Telecom's lines but that they have the capability to should they need it.

The benefit of unbundling may not be that competing telcos make use of Telecom's lines but that they have the capability to should they need it.

In Australia unbundling has been something of a mixed bag with few companies really making use of the unbundled network capacity. Instead they seem quite content to resell wholesale services from Telstra. Very few seem to have taken up the opportunity to install their own equipment in Telstra exchanges.

The reason for this is simple. The wholesale regime in Australia is quite different to the wholesale regime we currently employ in New Zealand. Over there it's a true wholesale market, where Telsta's competitors buy the connection from it and do what they like with it.

Here, things are far from that straightforward. The incumbent gets to wholesale a retail product, so the only things you'll find on offer from the other telcos are products achingly similar to Telecom's own. It's hardly a competitive market.

If Telecom had done just that little bit more than it was willing to, unbundling would not have become the Holy Grail it's now widely perceived to be. Creating a proper wholesale system is more than was mandated by the telco commissioner or the Telecommunications Act, but that's okay -- we're allowed to offer more than the bare minimum required of us by legislation.

Had Telecom done so, the commissioner's recommendation could very well have been quite different. As it is, his recommendation is not based on an expectation of an enormous economic windfall from unbundling. His analysis excludes the two markets, Auckland central and Wellington central, where subscribers are already enjoying the benefit of competition, and which account for around 40% of telco revenue. He then removes a further 25% of the market just for safety's sake, leaving a scant $200 million in expected savings over five years. Nor does the number of new customers anticipated from unbundling seem overwhelmingly worth the effort.

It has to be remembered that the commissioner has based his model on the worst of all worst-case scenarios to come up with the bare minimum of the impact of unbundling. Still, if Telecom had gone just a little bit further than it currently, does the commissioner's figures wouldn't look quite so appealing and Telecom would have a good case with the minister's office, if the issue even got that far.

Instead, Telecom has argued over every single point in the commissioner's issue paper, released earlier this year. It's clear from reading the unbundling report that Telecom wanted to limit the impact of any decision made by the commissioner and did so by rebutting every item raised in the paper. This tactic may be seen as necessary to protect shareholders' investments, but it's not going to work and in the long run has clearly done more harm to Telecom's position than good.

Brislen is Computerworld Online'sreporter. Send letters for publication in Computerworld to Computerworld Letters.

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