Unbundling decision prompts intense debate

AUCKLAND (01/12/2004) - Reaction to the Telecommunications Commissioner's decision not to recommend unbundling of the local loop has been swift and condemning.

Users on a number of newsgroups and mailing lists have slated the decision, announced on Dec. 22. The commission's final report to government recommends not unbundling Telecom New Zealand Ltd.'s network but instead offers a new wholesale agreement that is specific to ADSL (Asymmetric Digital Subscriber Line) only.

The commission's report claims that unbundling would only increase "consumer welfare" as the report terms it by around NZ$30 million (US$20.5 million) over five years. The commission concludes that bitstream access, a form of wholesaling of Telecom's DSL service, would be worth closer to NZ$75 million over the same period and consequently it has recommended bitstream access instead.

"At first I thought it was April Fools, but then realized it was not April," writes one member of the DSL mailing list while another describes it as "a get out of jail free card" for Telecom.

The commissioner, Douglas Webb, comes in for a great deal of criticism.

"I have been following the whole unbundled loop story for a while now and he was quite adamant that Telecom should unbundle the local loop to allow more competition stating reason after reason the benefits this would have," says one poster to PC World's Press F1 forum." Now all of a sudden the primary excuse for the commission not going through with the decision is that it would be a complicated process to unbundle the local loop, Telecom itself takes a lot of stick for its current offerings.

"It amazes me that Telecom does not see how willing consumers are to pay that little bit extra for a full speed DSL service alone. They are passing up on a virtual goldmine.

"I for one would be happy to pay an extra NZ$10 to NZ$15 even for a full rate broadband service, of course if it was capped the cap would obviously have to be a bit higher maybe 15 to 20G bytes."

Another DSL mailing list member says: "I think at the end of the day, people really just want to see a decent service you only pay one fee per month for, without the potential for it to blow out to NZ$5,000 plus."

Not all oppose the move, however. Richard Naylor from Wellington-based fiber provider CityLink says the future lies with other technologies.

"LLU would have been nationalizing an asset they sold ages ago and that would impact the national investment market in a big way (negative). In addition DSL is the 56k modem of the 200x years. You have whoosh, Tangent, CityLink, FX and others starting to deliver on a wider scale than before, we (NZ) just have to get away from the legacy of the old phone lines and my reading is that (the Commerce Commission) are encouraging us all to get going and innovate better solutions."

The New Zealand Network Operators Group has also debated the issue, with a number of members also looking to new networks that offer far more bandwidth.

"We are fiddling at the margins here. In my view the vision must be to provide at least 100M bps (bits per second) services to the household. Tables that purport to show the 2009 uptake of bitstream services of 256K bps downstream (and) 128K bps up, are just a quaint curiosity," writes Neil James, one of the founders of the Next Generation Internet Consortium.

Keith Davidson, president of InternetNZ and owner of WiseNet, a Wairarapa-based ISP, says he is making a submission to his local government over network rollout.

"I'll be making submissions to the Wairarapa District Council's Annual Plans next year, seeking to make it compulsory for anyone who is digging up roads, making trenches etc, to put in a bit of ducting and mark it on a plan. Further, that people who wish to use the duct for fiber, Ethernet or whatever must be not for profit organizations, who are building infrastructure for public good."

Those within the industry are, for the large part, still mulling over the decision, however Australian telco analyst Paul Budde describes it as a blow for TelstraClear's plans.

"The decision clearly bucks the international regulatory trend, most western countries have already introduced these regulatory changes and countries are increasingly placing more and more emphasis on ULL and line sharing."

Budde says he would have thought the commissioner would have "jumped at any opportunity to stimulate competition in New Zealand; a market more than any other one in the OECD, dominated by the incumbent."

"Most broadband players are keen to offer a triple play service (voice, Internet, video). Without (unbundling) and line sharing this model will be very hard to implement in New Zealand and thus making any broadband activity commercially questionable on a resale/wholesale basis."

TelstraClear is lamenting what it describes as a missed opportunity. Chief executive Rosemary Howard says the move is a "timid step."

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