Clear CEO: Failure to rein in Telecom is damaging NZ business

New Zealand businesses now pay more for telecommunications services than those of virtually any other developed country, according to Clear Communications CEO Tim Cullinane, who yesterday also slammed Telecom's 0867 number plan as being 'about controlling access to the Internet.'

New Zealand businesses now pay more for telecommunications services than virtually any other developed country, according to Clear Communications CEO Tim Cullinane.

In a speech yesterday to the Wellington Chamber of Commerce Cullinane said business customers were paying the heaviest price for "New Zealand's failure to tackle the core monopoly problems in telecommunications."

He also slammed Telecom's move to force Internet users onto the 0867 number range as being "about controlling access to the Internet … If the incumbent is allowed to proceed with its proposal, it will mean that consumers will have no choice as to the network they use to access the Internet. Telecom would control all Internet traffic in and out of New Zealand."

Cullinane said the commercial sector was "not getting a fair deal under the current regime" and cited international studies he said underlined New Zealand businesses' competitive disadvantage in telecommunications costs.

"The 1999 OECD Telecommunications Outlook shows that New Zealand is among the most expensive country for business telecommunications prices," Cullinane said.

"New Zealand's ranking for business prices fell from 12th least expensive in the OECD in 1997 to 23rd in 1999. In other words, New Zealand businesses now pay more for telecommunications services than virtually any other developed country."

The OECD figures were backed up by other studies, he said. A study of nine countries by the Australian Productivity Commission showed that, "by a significant margin, New Zealand was the worst performing country in terms of telecommunications prices," Cullinane said.

"New Zealand's telecommunications prices range between 47% and 181% higher than the best performing countries. The Australian Productivity Commission's study found local services for business in New Zealand were 130% more expensive than the best performing country. Data services to business were 163% more expensive than world best levels."

The studies suggested that New Zealand's telecommunications performance was "deteriorating alarmingly" said Cullinane

New Zealand's trading partners had "without exception" taken steps to tighten regulation to promote competition and deliver market benefits, keeping themselves "moving forward, and at a much faster rate," Cullinane said.

The New Zealand government chose to deregulate telecommunications without any sector-specific regulations, or an industry regulator after undertakings by Telecom to offer cost-based interconnection to new entrants, said Cullinane.

"[But] 10 years later, we still do not have cost-based interconnection. There have been no incentives on the incumbent to negotiate cost-based access to its network with its competitors.

"In the absence of any regulatory supervision, or policy leadership, there has been no way of ensuring this basic pre-requisite for healthy competition. Instead, the incumbent charges whatever it likes for interconnection to its monopoly nationwide local service network.

"These monopoly prices are passed on to each and every customer. It doesn't matter which telecommunications company you receive services from. Those monopoly access charges apply to everyone. They are a cost of doing business in New Zealand - and an unacceptable one, in Clear's view. "

Cullinane said OECD data also showed investment in telecommunications in New Zealand has been below the OECD average every year since 1992.

As "the incumbent's biggest customer" Clear was restrained from undercutting Telecom on price because its monopoly interconnection costs were locked in as part of its cost structure, he said.

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