Telco competition benefits plain to see
- 18 May, 2003 22:00
Telecom was referring to the commissioner’s determination of wholesale rates that Telecom can charge TelstraClear for a range of services which TelstraClear can resell to you and me. The commissioner has instructed Telecom to offer a 16% discount, which he says is in the midrange of such wholesale rates. TUANZ, the telecommunications user group (among whose members are TelstraClear and Telecom -- I guess they use phones, too), doesn’t think that’s so generous a margin that TelstraClear will be able to make a profit reselling the services. Telecom, naturally, takes a different view, saying the discount is big by international standards and that it "could" see Telecom making a loss on some services it has to provide under the ruling. Note that "could".
Telecom’s bleat -- for that’s how it comes across -- goes on to say that the Telecommunications Act encourages competitors to run to the commissioner. Customers would be better off, it says, if telecomms providers sat down and negotiated or, "better still, competed with genuine infrastructure investment".
Again, who’s Telecom trying to fool? Is the release a coded message to investors, who are surely the only group with anything to gain from limiting telecomms competition? If so, then the government has succeeded faster than anyone would have imagined at subduing the former monopoly provider, causing it to resort to covert communications with its financial backers. But I don’t think I really believe that.
If Telecom is looking for sympathy in the face of a seemingly hostile regulatory regime, it doesn’t deserve any. It had ample opportunity to demonstrate its willingness to get involved in meaningful negotiations with competitors in the decade or more when our market was completely lacking regulation. Instead, it used every legal delaying tactic at its disposal to fend off rivals. When competitors did get a toehold in the market, as Saturn did in the Hutt Valley, Telecom fought dirty by undercutting its prices. There’s no better demonstration for customers of the benefits of competition than seeing phone subscribers in one part of the country pay a lower line rental than those where there is no alternative supplier.
That’s precisely the benefit TelstraClear suggests will come from the commissioner’s price ruling. Without saying when services based on the discount pricing will become available, it says customers can expect improved prices and services to result, along the lines of the Hutt Valley example. A much more dramatic illustration of the benefit of competition was provided in Christchurch, where the city council was able to prune $400,000 off its phone bill (Chch dials up $600k saving) by switching from Telecom to TelstraClear.
Just as Telecom is complaining about the wholesale ruling, TelstraClear contends that not everything has gone its way. The commissioner places limits on the extent of availability of the wholesale discount. So Telecom will not be obliged to offer it where potential TelstraClear customers are within 200 metres of TelstraClear’s network. That’s an apparent spur to TelstraClear to plough some of its revenue into network investment. TelstraClear doesn’t dispute the principle, but wanted the limit set at 100m.
TUANZ thinks 200m an "arbitrary" distance which will disadvantage telecomms service users inside the limit who miss out on choice. True enough. But there’s nothing stopping Telecom voluntarily offering the discount if by doing so it persuades TelstraClear not to build a parallel network, which reduces the value of Telecom’s asset.
Those are market manoeuvrings that users will have little interest in. What they should confidently expect to see from this ruling is pricing and service benefits. And Telecom, instead of being defensive about it, should be revelling in the fact that, according to its latest quarterly result, business is picking up. It might feel inclined to make some network investments itself, as some analysts think it should.