On page 62 of the Telecommunications Bill, currently before a parliamentary select committee, the clause “retail services offered by means of Telecom’s fixed telecommunications network” outlines what services Telecom has to offer to its competitors at wholesale rates. The telecommunications inquiry decided to recommend wholesaling rather than unbundling of the local loop and the government has carried that recommendation through to law.
Telecom will have to wholesale its products to other competitors at an agreed rate. Nearly everyone I’ve spoken to in the months since the report was released believed this referred in particular to the local loop, that “last mile” of copper connecting nearly every New Zealand home with the telecommunications infrastructure. The inquiry report pointed out just how fundamental the local loop is:
“Residential customers in New Zealand rely on Telecom for their fixed telephony service. Although in a number of business districts there is competing infrastructure for business users, in smaller centres Telecom is the single provider of a fixed telephony service.”
For all the government’s posturing that the local loop will soon be replicated and overtaken, Telecom’s loop still accounts for nearly 98% of the lines in the ground in New Zealand.
Which makes the clause on page 62 all that much more contentious. The description of services that are to be wholesaled is this:
“A non-price-capped retail service or bundle of retail services offered by Telecom to end-users by means of its fixed telecommunications network”.
Once I’d translated it from the double speak I realised this means any “price-capped” service isn’t covered. Hands up anyone who can think of a price-capped service offered by Telecom. That’s right, residential local loop customers. You and me at home, in other words. Once again the non-business, non-CBD home user is left out in the cold.
I talked to Telecom’s manager of government relations, Bruce Parkes, about this. He says the clause troubles Telecom as much as it bothers the other telcos, and believe me, they’re all bothered by it. To Parkes the clause is too loosely worded and requires Telecom to offer for wholesale all of its non-price-capped services, such as Xtra and its Microsoft EDS alliance esolutions. This is, of course, foolish. Anyone can set up an ISP or a whatever it is that esolutions is; there’s no need to require Telecom to do it for you.
But what exactly does “price-capped” mean? Are we talking about government-set pricing? The nearest the bill gets to defining it is its description of price itself, and that’s no help. Does it include flat-rate items, set by Telecom or Xtra, such as JetStart, its flat-rate DSL offering? Is it a price-capped retail service offered by Telecom? If it is, what does that mean for the future? Given the way dial-up connections have moved to an “all-you-can-eat” model, thanks mostly to Ihug, it seems reasonable to me that broadband offerings will also move to a flat rate. What happens then? Does that mean we can only get DSL at home so long as it’s charged by the megabyte?
And what happens if a company wants to resell a flat-rate service, such as local calls, as part of a larger bundle of services? Currently only Telecom can offer a one-stop-shop for all your telco requirements on one bill to anyone in the country — line rental, local calls, toll calls, ISP services. End users love to get it all neatly accounted for on one bill, but nobody else can do that for all of New Zealand.
One industry player told me off the record that this clause was included by government as a sop to Telecom, which is being forced to pay $100 million to upgrade all the lines to 14.4Kbit/s standard. The cost of that is being offset to a degree by Telecom being able to bundle those other services to rural users. Take away its monopoly on that capability and Telecom’s costs will increase and make the company unhappy. The problem is this “solution” extends far beyond its impact on rural users to all residential users, and that’s not acceptable.
Submissions are being heard by the select committee at the moment. Chair of the committee is Labour MP David Cunliffe and he has signalled that this clause is causing concern. What worries me is his belief that government is following the letter and intention of the inquiry findings and this clause clearly is not. This one needs keeping an eye on.