The company concerned is Lloyd Group, which takes its name from its founder, Lloyd Gallagher. Whether the company ever amounted to much more than Gallagher himself is hard to know. We do know that in 1999 he had at least two colleagues, as the trio featured in a story in Computerworld’s now defunct stablemate, Network World. But subsequent efforts to get Gallagher to reveal how big his company was and how many customers he had were met with vague answers. Instead of staff he used contractors; as for customers, they were overseas organisations.
The reason Network World was interested in Lloyd Group (I should own up to the fact that I edited it) was that the company had stolen a march on Telecom: it had succeeded in getting a DSL service off the ground before Telecom’s JetStream had even been born. This was no small achievement in the highly restrictive New Zealand market, and might have been taken as a sign of hope that long-promised competition was nigh. Alas – for Gallagher and for the rest of us – no. The liquidation of Lloyd Group this month following a court ruling that it owed Telecom more than $200,000 is just the latest chapter in a long history of conflict between the two companies.
How did it come to this? Was it merely mismanagement by Gallagher, who has failed at business before? Or was it, as the former Telecom technician describes it, a case of the battler being crushed by the monopolist? From the sidelines, it looks like there’s both involved. But the story is not without wider significance. It highlights an oddity of the New Zealand telecommunications environment which has gone unnoticed during a dozen years of no regulation, followed by re-regulation with the creation of the commissioner’s office 18 months ago. But first, the saga.
Lloyd Group’s DSL service, which didn't survive long enough to be given a catchy name like JetStream, used equipment from US company Paradyne. It was a variant of DSL, called MVL (for multiple virtual lines). Gallagher installed his MVL access device in a cupboard of an Auckland apartment (with great views of Telecom’s Airedale Street exchange, to his delight). He had an enthusiastic customer (up-and-coming biotech company Genesis Research and Development) and was confident enough of Lloyd Group’s future to tell Network World all about it.
His dream was to undercut Telecom’s data rates: “That’s my driving force; to bring Telecom down to a level where it realises that it actually needs the New Zealand people as clients, instead of being at a level where it can say, ‘well, what are you going to do?’.” But the dream was short-lived. The MVL gear, while approved by the Federal Trade Commission for use in the US, didn’t have a telepermit. Telecom refused Lloyd Group a circuit to connect a further DSL customer. Gallagher said that was anticompetitive and complained to the Commerce Commission. The commission found in favour of Telecom. Finally, in May, the Hamilton High Court ordered Lloyd Group to cough up unpaid charges for the Genesis and other circuits, or face liquidation.
So liquidation it is. Apart from continuing to insist that he’s been told to pay for circuits long since disconnected, Gallagher says Lloyd Group’s demise came about because Telecom holds all the cards. And he makes a good point: unlike across the Tasman, where it’s a function of the Australian Communications Authority, Telecom decides what gear gets a green telepermit tick, allowing connection to its network. As if it needs any other advantages.
The equipment testers themselves might be above suspicion that commercial pressure would be allowed to sway them. But Telecom’s business managers have proved themselves time and again to be forceful competitors. We should take a leaf from the Australian book and relieve Telecom of this function, so as many other bold competitors as possible are encouraged to take a tilt at the former state monopoly.