2 Degrees lashes out at Vodafone and Telecom

'Regulatory gaming' by incumbents cost it $30 million, company says

Not being able to co-locate its equipment in cellsites operated by Telecom and Vodafone has added roughly $30 million to the cost of 2 Degrees’ network rollout, CEO Mike Reynolds says. Reynolds' comments come after his company received a ticking off from the Commerce Commission over its failure to take regulatory obligations seriously and to make use of co-location. The situation, Reynolds says, is a “tremendous disappointment” for his organisation and suggests “that regulatory gaming by the incumbents delayed the eventual outcome and intention of the 2001 Telecommunications Act.” According to Reynolds, 2 Degrees has negotiated with a un-named potential fourth mobile network operator, to complete a large-scale co-location deal. It has also negotiated with three specialist cell tower companies to get one to commence operations in New Zealand. None of these negotiations have borne fruit, and Reynolds says once its Section 36 Commerce Action against Telecom failed and the timeframes for the STD lengthened, 2 Degrees was forced to abandon its plans for co-location in the first phase of the network construction. The Telco Act of 2001 came about after the Fletcher Ministerial Inquiry, and it sets out mobile co-location as a specified service that needs a standard terms determination (STD) to be binding. 2 Degrees financing proposal in September 2006 had approximately 39% of cell towers as co-locations for the first 500 cell sites, Reynolds says. However, as the STD was not enforceable until January this year, a “large number of co-locations were not accomplished” he says. Instead, 2 Degrees reluctantly built more towers than were planned, Reynolds says, accusing Telecom and Vodafone of requiring “prescriptive regulation” for the co-location process, as there is no incentive to deliver access. He also takes a swing at the industry organisation, the Telecommunications Carriers Forum or TCF, for taking four years to deliberate co-location, only to have the Commerce Commission intervene to resolve the matter. This he says shows the futility of self-regulation. According to Reynolds, during February and March 2008 TCF conference, Vodafone and Telecom vetoed commercial negotiations for co-location, in preference of regulation. Reynolds released his company’s response to the Commerce Commission’s letter of June 2, that said the telco had not met its obligations under the Mobile Co-Location Standard Determination granted in December last year, to Computerworld yesterday. In his letter, Reynolds says 2 Degrees now fully complies with the Commission’s reporting requirements for the STD. According to Reynolds, 2 Degrees has spent over $200,000 on a database system for co-location, by NZ Ltd. Telecom, co-accused with Vodafone of gaming the regulation, says it doesn’t want to get into a public debate with 2 Degrees on this issue, the telco’s spokesperson Ian Bonnar says. “Suffice to say we have had industry-leading processes and systems, capable of supporting and encouraging large-scale co-location in place for over a year,” Bonnar adds. Vodafone doesn’t mince its words when asked if it has used regulation to avoid giving 2 Degrees access to co-location. Its external communications manager Paul Brislen says: “It is outrageous for 2 Degrees to blame Telecom and Vodafone for delays in the process when it is 2 Degrees which has repeatedly turned down offers of co-location.” Instead, Brislen says his company has bent over backwards to give 2 Degrees co-location on its towers, but none of the sites offered have been taken up to date. Brislen says that in September 2008 Vodafone and 2 Degrees, then NZ Communications, signed a heads of agreement deal to co-locate the third mobile operator’s equipment on 116 Vodafone sites. These sites were chosen by 2 Degrees as being the ones they wanted, Brislen says. To facilitate quick delivery of the co-location, Vodafone established a “rapid access site” process, but despite that, none were taken up. Furthermore, Brislen claims that in the two years before that, 2 Degrees didn’t ask Vodafone for any sites to co-locate its equipment on. To support his statements, Brislen forwarded an email from NZ Communications Senior project manager Matthew Buchanan, from May 8 this year. In the email, Buchanan apologises to Vodafone for “the fact that we have not further communicated our intentions regarding the HOA [Heads of Agreement] sites until this time.” Buchanan goes onto say that “In line with discussions re the 65 Co Locate Sites which NZ Comms and Vodafone have agreed on over a 3 year period and the status we (NZCL) find ourselves in with our build program, we will not proceeding with any of the Site surveyed from the HOA agreement at this time.”