Australia presses NZ to break Telecom monopoly

By FRAN O'SULLIVAN and PETER GRIFFIN

The Australian Government has swung in behind Telstra in a last-ditch effort to persuade the New Zealand Government to break Telecom's lucrative telephone network monopoly.

The Cabinet is expected to make a decision next week on the recommendation of Telecommunications Commissioner Douglas Webb to allow limited competition on New Zealand's phone network.

Telecom's ownership of the wire network into every New Zealand home and business delivers annual revenue of more than $1 billion from line rentals and telephone accounts.

Telstra, 51 per cent owned by the Australian Government, is pushing for an open-slather approach.

Australian Communications Minister Daryl Williams, who arrives in Wellington today for the first Australia-New Zealand Leadership Forum, will lobby Cabinet ministers, including Communications Minister Paul Swain.

Telstra chief executive Ziggy Switkowski will put his case to a Wellington business luncheon.

"Is New Zealand open for business or not?" Mr Switkowski asked yesterday.

He said the signal the Government sent on this issue would be a big factor in Telstra's deciding whether to expand its investment in New Zealand through TelstraClear.

But Telecom chief executive Theresa Gattung said the forum should not be used to push individual commercial agendas.

The Telecom CEO also attacked the propriety of the Australian Government lobbying directly on behalf of an asset in which it is the majority shareholder. "They are deeply conflicted as a shareholder," she said.

Australian Foreign Affairs Minister Alexander Downer confirmed the Howard Government's support.

"Daryl Williams is going over to New Zealand as part of the dialogue and he will be taking up some of these issues while he is there," Mr Downer said.

Telstra has been lobbying the Government since last year to open up the phone network.

Mr Swain had no comment yesterday but there is speculation that the Government will accept limited network competition and seek cosmetic changes from the Commerce Commission.

The Howard Government is concerned at Mr Webb's abrupt reversal of an earlier report to permit limited competition on New Zealand's telephone network - known as "local loop unbundling."

A Telstra memo to Australia's Department of Foreign Affairs and Trade maintains that the Webb decision is contrary to the spirit of CER.

"If the New Zealand Government does not agree with the view that its trade law obligations require it to commit to full local loop unbundling, which Telstra has suggested in this letter, then the issue of unbundling should be the subject of an immediate request for harmonisation discussions by the Australia Government," the memo said.

Mr Downer maintained there was no obvious argument against putting telecommunications on the single market agenda.

"It's all part of the concept of creating markets."


Breaking Telecom's monopoly

* Telecom is under pressure to unbundle its network to give competitors access to the copper lines linking its customers with the telephone exchange.

* Full unbundling would allow competitors to provide new calling and internet services, with less reliance on Telecom.

* Unbundling has taken place in every other OECD country except Mexico.