Most telecommunications users would favour the long-term benefit conferred by sufficient profit and investment funds for innovation than the short-term benefit of lower prices says Telecom's government relations manager Bruce Parkes.
This is Parkes’s basic argument for a cautious approach to access-price regulation.
Setting of prices for access by one telco to another’s network was the major topic for the first of a series of conferences between the telecomms industry and users and telecommunications commissioner Douglas Webb and his Commerce Commission colleagues yesterday. These are aimed at providing industry and user input to Webb’s decisions on matters arising out of the new Telecommunications Act.
“Ask Kurow, with about [a] 700 [person] population, the smallest community [in New Zealand] with ADSL," Parkes said. "Would Kurow Area School have valued more a small cut in their toll-call rates or videoconferencing with other schools and the chance to deliver a full curriculum with specialist subjects like accounting?
“Kurow got both, but the commissioner will be faced with a certain amount of trade-off between the two.”
In the language of economists, this is a balance of productive and allocative efficiency, keeping an efficient service going now at low cost, and dynamic efficiency, keeping the technology and industry progressing.
Slim margins for wholesale of services to other telcos and resellers encourage the evolution of similar services battling on price, says Parkes. A relatively high barrier to entry would force competitors to build more of their own infrastructure, which would encourage use of alternative technologies. The future is uncertain, Parkes says; no-one knows which technologies are the “right” ones for the long term – those that will most benefit the telecoms user and society.
Encouraging alternative infrastructure preserves the presence of technology competition; in present day terms, between ADSL, cable, satellite and terrestrial wireless or between CDMA and GSM, he said.
Parkes even quoted TelstraClear chief Rosemary Howard on the same theme from an interview in a Sunday newspaper.
Webb asked whether Telecom viewed independent infrastructure development versus wholesaling as an either/or situation, and Parkes conceded that there was room for both, particularly in enabling a new entrant to “round out its offerings”. He noted Telecom already resells some of its services.
A Commerce Commission representative dissected the comments of an independent economist in Telecom’s submission, saying that his view seems to indicate a favouring of as much wholesaling as is consistent with competition. Parkes replied that this would be an appropriate balance.