Groundhog Day in the telco world

An international body often has a sense of dejà vu when handling a debate in one country that was traversed some years earlier in another, says Allan Fischer-Madsen, vice-chair for Europe of the International Telecommunications Users' Group.

An international body often has a sense of déjà vu when handling a debate in one country that was traversed some years earlier in another, says Allan Fischer-Madsen, vice-chair for Europe of the International Telecommunications Users’ Group (Intug).

With telecommunications, developed states all tend to be considering similar questions at different times. Prominent are interconnection among rival telcos, local-loop unbundling, number portability and the use of an industry-specific regulator. A lot could be learned from the way other countries tackled these problems, he says.

Fischer-Madsen’s home country, Denmark, went through the “watershed” of decisions on such matters in 1994. So does this mean New Zealand is six years behind?

Regarding 1994 in Denmark “I’m talking partly about the change to thinking of IT and telecommunications as a key sector of the economy,” Fischer-Madsen says. Certain aspects of this debate were traversed in New Zealand a few years ago, he says – bringing agreement from Tuanz chief executive Ernie Newman.

“We possibly did it earlier than you did,” he tells Fischer-Madsen. The pair were speaking after last week's Tuanz-sponsored Telecommunications Summit in Wellington, at which Fischer-Madsen was a speaker.

But while the "why" of telecomms evolution was pinned down at an early stage, details of the "how" are only being tackled in New Zealand now, both agree. The Danes had the "how" settled quickly, with an open telecoms market and appointment of an industry-specific regulator – the latter a feature of the Telecommunications Inquiry conclusions still being hotly debated here. Interconnection agreements were also concluded quickly and number portability is in place in Denmark for landlines, with mobile and land-to-mobile to come in the next year or two.

One role of the regulator should be setting a definite timetable for the telcos to settle such questions, before the regulator intervenes, Fischer-Madsen says. Adds Newman: “Number portability [in New Zealand] is a compelling case study of why purely voluntary procedures don’t work.”

In the early 90s the Danish view tended towards a totally open telecoms market. Fischer-Madsen disagreed, perceiving the need for a regulatory backstop.

“At that time, I believed new entrants would need protection not from the incumbent only, but from user companies setting up their own networks,” he says. “I’ve changed my mind on that one. It hasn't happened.”

Decisions by the Danish regulator still sometimes take too long, he says, because appeals are allowed and the status quo is retained meanwhile. He sees some merit in any decision of the regulator being enacted immediately and the new procedures, price levels or whatever, holding for the period of the appeal. The Danish telecommunications users’ association recently sued incumbent telco Teledanmark for return of 18 months of user costs incurred while a Teledanmark appeal on a regulatory decision was unsuccessfully pursued. The case is still proceeding.

The Danish regulator “often” has to step in, says Fischer-Madsen, particularly to conciliate interconnection disputes, and to regulate prices. This is done by regularly comparing the price for a typical basket of services against those in Germany, Sweden and Britain.

A regulator is of use for establishing fair competition, Fischer-Madsen says, but less relevant to maintaining the “level playing field” once it has been established. At that time, the regulator’s powers might gradually be pulled back from areas where competition is operating efficiently. It is already nearing that point in Denmark on, for example, pricing of leased lines (except for the "last mile" to the user’s home or office, which is still a contentious area.)

Fischer-Madsen supports full local-loop unbundling, something the local inquiry fought shy of. The inquiry’s suggestion, that Telecom can “wholesale” services to rivals does not achieve the desired effect, he says, because the rivals can only resell services offered by the incumbent. “Then [competition] becomes simply a marketing game.” If they could access the bare wire or fibre and mount their own services, there would be a more genuinely competitive market, he says.

He favours the environment that exists in Denmark, where competition is on services, not on duplicate infrastructure. The current New Zealand government seems in favour, for example, of making it possible for a third cellphone network to set up in New Zealand.

“You should build more modern infrastructure, of course,” says Fischer Madsen, “but only when users require it.” If they are willing to pay for it, then it will happen, he says, but governments or regulators shouldn’t try to legislate new infrastructure into being.

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