“The competitive market, opportunities and costs aren’t good.”
At a Telecom media briefing last week, Milner joined Telecom government relations general manager Bruce Parkes in slamming LLU.
Parkes says LLU “hasn’t worked anywhere, is tangled up in regulatory debates, companies relying on it are going broke and uptake is well below expectations”.
When it was pointed out that Telecom’s own Australian subsidiary, AAPT, has chosen to use Telstra’s exchanges, as permitted under LLU in Australia, Milner said “it looked like a good idea 12 to 18 months ago”.
However, experience has proved that the economics don’t work in most cases, he says.
“It doesn’t work, except in a small number of exchanges with a high number of business customers.”
Providing service to residential customers from shared exchanges is uneconomic, because “when you come in as a new entrant, getting voice service on the same piece of copper is very expensive — the only customers you can address are business customers, because you don’t have a cost structure for addressing the needs of residential customers.”
AAPT has restricted its rollout on Telstra lines to a small number of such exchanges in city CBDs “which have the biggest number of business customers and we expect that the number of players at those exchanges will be low — there’ll be Telstra and one or two others.”
AAPT’s plan is to get enough market share to cover our costs “and we may wholesale capacity off other DSL providers, including Telstra, to fill the gaps”.
Making money from shared exchanges in New Zealand will be even harder than in Australia, Milner says. “In New Zealand, we have a smaller number of exchanges that have a lot of business customers and our exchanges are typically slightly smaller than in Australia.”
Australian telecomms analyst Paul Budde says it’s ironic that AAPT is utilising LLU in Australia while Telecom, its parent company in New Zealand, is pushing for it not to happen here. A telco’s view on LLU seems to differ depending on whether it’s a monopoly holder or a competitor, he says.
Australia’s Competition and Consumer Commission has ordered LLU, while in New Zealand the government has allowed wholesaling of local calls but stopped short of full LLU.
The soon-to-be appointed telecommunications commissioner will review the decision on LLU in two years’ time.