Unbundling decision "illogical" says Telecom

Telecom has branded the Commerce Commission's preliminary decision to recommend unbundling the local loop "illogical".

Telecom has branded the Commerce Commission’s preliminary decision to recommend unbundling the local loop “illogical”.

In its draft report released on Thursday afternoon, the commission recommended unbundling of Telecom’s local loop and its fixed Public Data Network.

"The commission admits its impossible to point to any international proof that local loop unbundling gets any results,” says Telecom spokesman John Goulter, “[and] then goes on to recommend a very wide-ranging regime."

Telecommunications commissioner Douglas Webb says the commission evaluated evidence from a range of sources, including conducting a cost-benefit analysis and evaluating the state of competition in relevant markets and in overseas jurisdictions.

“While the overseas experience has not been conclusive, the commission’s cost-benefit analysis shows substantial net benefits from unbundling. The commission would, however, welcome input and comments to refine this analysis further.”

Telecom will be analysing the recommendation and making submissions accordingly, Goulter says.

Following the release of the draft report on September 18, the commission is seeking submissions and will hold a conference next month before it makes its final recommendation to Minister of Communications Paul Swain in December.

Convincing the telecommunications commissioner to recommend unbundling the local loop has been an unequal fight, says TUANZ’s Ernie Newman.

The head of the telecommunications users group says Telecom has lobbied hard to resist opening up the last mile of its network to competitors, with more resources at its disposal than the pro-unbundling lobby.

“I thought the odds were in favour of the commissioner recommending unbundling but nothing was certain,” Newman says. TUANZ welcomes the recommendation.

Newman believes veiled threats of legal action against the government by Telecom chief Theresa Gattung, reported in The Independent in July, were posturing. He’s doubtful they’ll come to anything. If Telecom does go the courts in a bid to block unbundling, he doubts it will succeed, although it could slow the process.

“We’d be unhappy if it did that.”

The local loop network is the copper wire network that links homes and businesses to a national telephone network.

Unbundling of telecommunications networks is a means of allowing competitors to use parts of the network on a wholesale basis in order to build up a competitive offering of retail services. In a statement the commission said unbundling means other carriers will be able to compete more vigorously with Telecom in the delivery of broadband and voice services both to residential and business users.

Webb says the commission’s preliminary view, based on extensive investigation and the results of the cost-benefit analysis and the findings on competition, is:

  • to designate unbundling of Telecom’s local loop network;

  • to designate unbundling of Telecom’s fixed Public Data Network;

  • to designate access to co-location and backhaul services;

  • to apply benchmarking as the Initial Pricing Principle; and

  • to apply cost-based pricing as the Final Pricing Principle.
The draft report is available here.

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