New Zealand is often compared with Australia, the UK and Ireland and many government officials have journeyed to various far-flung places in order to observe their telecomms regulatory environment in situ. However, no two are qutie alike in their response to the problem.
In the UK, one government regulator is about to be replaced by another. Prime Minister Tony Blair has announced that Oftel, the Office of Telecommunications, is to be merged with several other offices to form a single electronic communications office, called Ofcom. It will oversee telecommunications, spectrum auctions, television and radio as well as broadcasting standards and even whether certain sporting fixtures can be shown on pay TV or have to remain free-to-air.
“We are aiming for joined-up regulation for a new world of communication. Getting the regulatory bodies themselves to identify some of the ways ahead, and work together to achieve it, will be a valuable contribution to a more flexible, but effective, regime” says Chris Smith, Secretary of State for Culture, Media and Sport. The government has released a white paper on the future of the regulatory regime and at the end of March released a “memorandum of understanding” that calls for an executive body to lead Ofcom, rather than a single person. Quite how it will be implemented will be made clear in the coming months.
Oftel has been criticised for its slow response to problems with Britain’s incumbent telco, British Telecom (BT) which is the current owner of New Zealand’s Clear Communications. Like so many incumbent telcos, BT has been slow to allow access to its local loop and Oftel has released a “determination” that sets out terms and conditions for BT to unbundle its local loop.
Local loop unbundling (often referred to as LLU) is the process whereby the lines in the ground owned by the incumbent, usually having been laid in the days when the company was state-owned, are offered up for any telco to use.
They still have to pay the incumbent for the use, but the regulator usually sets that rate. Many incumbents seem reluctant to roll out new services or offerings that may cannibalise their existing business models and this is one way of forcing competition on the market.
Oftel determined in November 1999 that BT has a monopoly on the local network lines and directed the telecommunications operator to lease the local loop to its competitors. It said BT must upgrade the local loop to handle new broadband digital services for faster internet connections, to encourage competition and then gave BT a deadline of July 2001 to unbundle the local loop.
But as Tim Johnson, principle analyst for market research company Ovum points out, the exchanges that BT has been offering have been scattered around the UK, which, among other things, presents difficult marketing challenges to BT’s smaller telecommunications competitors.
“Couldn’t Oftel have anticipated and worked out those sorts of problems months ago?” Johnson asks.
One UK telecommunications company, Redstone Telecom, had already decided not to simply rely on Oftel and BT. Redstone has been building its own street cabinets outside of the local exchanges. “It’s a project we’ve been working on since November with both BT and Oftel. We’re on a parallel process with Oftel,” says Redstone spokesman Bob Cushing.
The Emerald Isle
“Local loop unbundling has the potential to increase significantly the range of competitive services available to businesses and consumers,” says the Irish telecommunications regulator, Etain Doyle. As director of telecommunications regulations, Doyle has overseen the four-year process to free up Irish telecommunications.
“When you use the term regulation it has connotations of safe and conservative; command and control style of management. This is a myth,” says Doyle after her first year of operation. Instead of “safe and conservative” she says the role of regulator must be “a radical change management role”.
“The objective ... is to dismantle the old order and usher in the new.” Not one to waste words, Doyle delivers what she’s promised — “old entrenched mindsets are not appropriate for the new dynamic and liberalised market and all players have to move on.”
Ireland deregulated its telecomms market on December 1, 1998 and immediately faced problems. Ireland is world famous for its technology sector, yet only 80% of Irish households had phone lines that worked in 1998. However by September 2000, the telecommunications market was worth roughly 3% of Ireland’s GDP, with the new players’ share of the fixed line market making up 17% of the entire market.
Ireland is very similar in size and make-up to New Zealand — roughly four million people working in what was a largely primary-sector driven economy. Ireland’s great advantage is that it sits on the doorstep to Europe and as part of the European Union has access to an enormous marketplace. Indeed, the office of the director of telecommunications regulation (ODTR) was set up to bring Ireland into line with European expectations. Today Ireland is preparing to unbundle its local loop after a period of wholesaling — similar to what is planned for the New Zealand market.
“I don’t support either the huge fears or the huge hype that surrounds LLU at the moment,” says Doyle who argues the indirect access wholesaling delivers is not enough to drive the uptake of broadband services.
“It will particularly assist the development of broadband access for SMEs (small to medium-sized enterprise), a sector that makes little use of such capacity at present.”
Not everyone is happy with the move — the incumbent telco, eircom, has been dragging its feet over this issue in a manner similar to BT in Britain. After a three-month period of frustration at eircom’s lack of movement on the issue, the ODTR stepped in.
“As eircom has failed to supply all the relevant information, I have set interim prices based on the inform-ation available to me.
“Despite repeated requests and the clear direction that the 30th April was the final date for the determ-ination, there are still very substantial gaps in the material provided to me by eircom.”
The regulator has set prices for monthly rental and for connection after assessing the European equivalents.
“The line rental at £13.53 is within the EU range from £8.23 to £19.51, and connection at £119.73 compared with £47 to £221.69.”
“Eircom’s approach with respect to costing and the level of response and cooperation this issue is not acceptable,” says Doyle. A review of service level agreements (SLAs) between eircom and its competitors has also been announced.
Clearly Doyle and her department are determined to drag Irish telecommunications into the 21st century.
Across the world and across the ditch the Australian telecommunications regulator is coming to the conclusion that LLU is necessary to force its incumbent Telstra into action.
Telstra seems to be dragging its feet on the idea of enabling its exchanges for DSL. While telcos around the world are making the leap to DSL as a way of offering high-speed access over existing infrastructure, figures in The Australian show only 5000 users have DSL in Australia since it was first ordered to offer direct access to its copper lines in 1999.
By way of contrast, Holland, with a slightly smaller population than Australia, has nearly half a million DSL users.
Telstra seems hell bent on maintaining control of its ISDN business — worth roughly A$3 billion last year. Rolling out DSL capability would seriously undermine this segment and Telstra is doing all it can to avoid losing this important revenue stream. On the other side of the coin are not one but two regulatory bodies — the Australian Communications Authority (ACA) and the Australian Competition and Consumer Commission (ACCC) which took over their roles from the existing regulatory body Austel in 1997.
The ACA looks after technical regulation of telecoms and spectrum management while most of Austel’s controls were transferred to the ACCC, equivalent to New Zealand’s Commerce Commission, which will be home to New Zealand’s new commissioner.
The Telecommunications Act 1997 brought about these changes to the Australian environment and were supposed to usher in an era of competitive behaviour that would see end users benefiting from price drops alongside performance gains.
However, the first complaint received by the ACCC, that Telstra wasn’t willing to provide interconnection agreements to other telcos such as Optus, took ACCC nearly a year to investigate and its finding, that Telstra was in breach of the Act, was immediately challenged in court.
This is interesting because Telstra is still owned by the Australian government. Recent figures released by the Australian federal government show that of the $A1 billion it raised in selling off 49.9% of its shares in Telstra, it still has yet to spend more than one quarter on the “social bonus” projects it earmarked.
These include regional telecommunications projects the government has been promising for some time. According to the Tasmanian Government’s submission, ACCC should be doing better.
“It is also clear that this intervention to date has not benefited regional Australia to the extent that it should. The ACCC must widen its focus on telecommunications regulation to encompass and assess competitive effects at the consumer end and to take into account the regional differences in telecommunication markets.
It should also focus on transparent pricing and service information as a means to accelerate change in the telecommunications industry, both at the demand and supply end of the market.
This would be entirely within the scope of the present regulatory framework.”
The Productivity Commission is reviewing the entire Australian telecommunications regulatory regime.