Unbundle local loop now

The Telecommunications Inquiry has wrapped up and will probably not make many changes to its draft report when it hands the final version over to government at the end of September.

The Telecommunications Inquiry has wrapped up and will probably not make many changes to its draft report when it hands the final version over to government at the end of September.

This is good because what the draft report proposes goes a long way to sorting out New Zealand’s telecommunications mess.

However, the report stops short of asking for unbundling of the local loop. That, in my opinion, is a big mistake.

The local loop, the last mile, is the copper network in the ground. We built it - that is, the people of New Zealand paid for it many years ago.

Telecom was given the ownership of the loop when it was privatised and sold off at the start of the 1990s. Since then it has had complete dominance of what is the cheapest form of telecommunications in the country. How cheap? Just look at the cost of making a toll call in New Zealand. In the last five years we’ve seen the charges drop from “can’t call Mum and Dad this week - write a letter instead” to “ring your Auntie in Dunedin and get that recipe off her, will ya?”

My home toll bill has stabilised at around $30 a month and seems happy to sit there, regardless of how many calls we actually make. The advent of $5 weekends, all-you-can-eat-packages and the like mean it costs me virtually nothing to make a long-distance call. Yet I’m sure the telcos are still making money out of me - which makes me think they were raking it in for the last 20 or so years.

More importantly, the local loop is still the cheapest way to get data around the country. None of the competing technologies, wireless, fibre or satellite, are at a point where I can afford to install them at home. DSL comes close, but let’s face it - dial-up still rules and will for years to come.

That's why unbundling the local loop is so important. If we progress at a pace dictated by Telecom we’ll be in the same position in a few years that we’re in now: Telecom will dictate when technologies will be rolled out and at what cost.

Wholesaling, the solution proposed by the inquiry, just doesn’t go far enough. It leaves Telecom in the middle of the process and that’s a problem. Telecom is in the industry for one reason — to make money for its shareholders. That’s it — no altruistic endeavours, no betterment of the New Zealand user/citizen. Money.

That’s not a bad thing necessarily, but it does put it at odds with what I want for our telecommunications sector – cheap fast access for all. Telecom has a thriving business selling high-speed data lines to businesses and charges like a wounded bull. Why should it cannibalise that market just to offer cheap data connections to the home or small business? It shouldn’t — it would lose money.

So we’ll end up with a market moving at a speed dictated by Telecom, basically back at square one. Wholesaling means Telecom will have to offer other telcos access to its lines at a fair price. Presumably the new commissioner would set the price, based on information supplied by Telecom, but that’s going to take a while and doesn’t solve the problem of driving the market rather than simply maintaining the status quo.

It’s obvious that around the world unbundling works by allowing small competitors in at the ground floor — they’ll never be able to compete on bulk price, so they have to be creative to get their share of the market. It’s these small players that really push the envelope that we need. We’ve sat for too long in the middle of the pack and that’s not doing us any favours.

I spoke to telecomms minister Paul Swain a fortnight ago and he seems to agree with me on this — we can and should do better. Sadly, he seems to be of the opinion that non-copper technologies are capable of competing with the local loop. I’m sure they will, eventually, but at the moment we need to get as many people on to high-speed connections as we can and the local loop is still the cheapest, easiest way to do that.

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