Telecom, what were you thinking?

I'm often struck by how intelligent the Telecom people I meet are. So why is it that the company keeps on making what seem to be obvious mistakes? This enormous wrangle Telecom has got itself into over rural connections has me confused.

I'm often struck by how intelligent the Telecom people I meet are.

At the Telecommunications Users Association conference on broadband I had the good fortune to meet with several more of them. I won't embarrass anyone by naming names, but they're all worth meeting again. They're capable, thoughtful, experienced and able to consider various arguments and positions without losing their marbles.

So why is it that the company keeps on making what seem to be obvious mistakes?

This enormous wrangle Telecom has got itself into over rural connections has me confused. By now you'll be very familiar with it: Telecom wants to charge at user-pays levels for new connections in remote places. Remote means anyone after a new connection where there are fewer than 1000 residents and the bill could be as much as $4000 to get a new phone put on. If the cost rises about $20,000, Telecom might not put a phone line in at all.

There are so many things wrong with this idea it's hard to know where to start, so let's begin with what Telecom got right.

Last year Telecom and the government renegotiated the old Kiwi Share agreement. The revamped Telecommunications Service Obligation (TSO) does not mention new connection fees at all. The agreement refers to existing residential lines. It describes them this way:

"[Any] existing residential line means a Telecom residential line (not being a party line or second line) which at the commencement date is an active connection". In other words, anything that is added since the agreement was signed in December last year isn't covered.

But that's as far as it goes when you consider what Telecom has got right with this one.

What it's got wrong is that it's upset the rural users, at a time when it was courting them over broadband. It's upset government, at a time when government was handing out lots of money to telcos for rural broadband. It's given the competitors ammunition at a time when true competition was being felt in the rural sector. It's given those that felt Telecom should be forced to unbundle the local loop ammunition at a time when the unbundling issue had gone away. And it's given mainstream business reporters a story they can understand at a time when they were feeling left out.

That the decision comes in a week when Telecom had to announce a reduced expectation of profit and when the telecommunications commissioner announced a greatly reduced interconnection rate is just bad luck.

What does Telecom stand to gain from this? Presumably the cost of these remote people demanding phone lines is so outrageous that Telecom can no longer carry the burden. It must surely be worth more to Telecom to introduce this new fee than it will cost the company in terms of bad publicity, lost business where there is competition and lost income from government initiatives.

Perhaps Telecom is trying to show the commissioner just how expensive the rural sector is. Perhaps this is its way of saying "look, we pay for these guys and we know you think it doesn't cost much, but it really honestly does cost us truckloads". If so, it's an idea that has badly backfired.

Does anyone remember Telecom upgrading the public card phones for Y2K? Telecom announced that as of a certain date all prepay cards for use in the phones would no longer work and that users who hadn't used their credit by that date would miss out. The uproar was tremendous, but in truth probably only a handful of users would have been affected. It would have been much easier to introduce the new phones and credit users if they hadn't used their cards in time, as Telstra did across the ditch. Hardly anyone would have been put out and it wouldn't have been a major news story. Telecom certainly wouldn't have looked like the short-sighted dimwit it did.

This situation has the same level of forethought written all over it. It wasn't that long ago that Telecom was looking around for someone to buy the rural network, but a blinding light struck the telco last year when government began seriously talking about rural broadband. Telecom realised there was money to be made in the sector but was caught between wanting the cash and having to tell the world how uneconomic the rural sector was.

The latest telco battleground is the rural market and Telecom has begun its campaign with its foot firmly in its mouth.

Brislen is IDGNet’s reporter. Send letters for publication in Computerworld to Computerworld Letters.

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