KEY POINTS:
It's been a little more than 12 months since the Telecommunications Amendment Act passed into law with an overwhelming parliamentary majority.
The revision introduced sweeping changes to the market and brought about a fundamental change in the way Telecom managed its business.
No longer could the company favour its own retail division over other companies seeking commercial deals to use its network to run phone and internet services. In future, all comers would be treated equally.
It took most of last year to sort out the details of Telecom's separation and how it would provide services under the new structure.
Prices and terms for local loop unbundling and wholesale broadband services, an auction of radio spectrum suitable for wireless broadband, and plans to regulate the mobile market were all completed in the weeks leading up to Christmas.
After many years of industry wrangling, number portability - the ability to take your number with you when switching telcos - came into effect and, unlike real estate agents, the industry sorted out a robust and impartial customer disputes resolution process.
So what does this year hold for telecommunications companies?
"The last year or so has been a time of debate, sorting out the regulatory determinations and trying to get a sense of what the ultimate landscape will be that's being shaped by that act. And that's stalled a lot of the actual physical planning and getting on with it," said Rosalie Nelson, telecommunications research manager at IDC.
Telecom has been spruiking the accelerated roll-out of a high-speed broadband network to the tune of $1.4 billion and its competitors are bullish about the opportunities presented by the new telco environment.
Nelson expects to see a reasonable amount of "noise and hype" around investment plans this year.
"My expectations are we are going to see a lot of competitive smoke," said Nelson. "There will be some investment fire underneath that."
She said many players would be mixing investment in networks and local loop unbundling with wholesale access to existing networks.
However the focus would be pushed back to wholesaling broadband access as a lack of funding and the economics of unbundling - particularly as fibre networks bypassed the local exchanges - made investment challenging, said Nelson.
Phil Harpur of BuddeComm agreed, saying New Zealand was merely playing catch-up with regards to unbundling.
Unbundling - the ability to install equipment in Telecom's exchanges and operate services over the copper network running to customer premises - has been available to Australian telcos for several years.
"I guess you could say it has been moderately successful," said Harpur. "A lot of the second-tier players here [Australia] ... I don't know that it has raised their profitability all that much. It's still very tough for them with Telstra having a lot of market power."
However, he said the introduction of operational separation put New Zealand telcos ahead of their Australian counterparts.
Harpur said the changes had moved New Zealand from two to three years behind Australia in terms of broadband penetration, to one to two years. "And hopefully in a year or two they will have caught up with Australia."
With telcos reliant on wholesaling rather than network building, gaining the upper hand in the market will come down to services.
Telecom has already signalled its intention to move from being a network utility-style company to focusing on customer needs through services.
BuddeComm predicts data, internet and value-added services will boost the market by 8 per cent in the 2008-09 year, up significantly on the 2.5 per cent it forecasts for this year.
Harpur expects to see a lot more action from digital media players and IT professional services.
Nelson said discount broadband via naked DSL - taking broadband without paying phone line rental - and voice over IP (making calls over the internet) would form a core part of efforts to get all the customer's telco business.
However, not all the phone and internet companies would have the scale or capability to provide a robust voice replacement to the old phone network, she said.
Nelson is cautiously optimistic about what she describes as a "different language" emerging from Telecom under Paul Reynolds.
In May of last year Telecom was staunchly opposed to operational separation, saying it would fail to deliver the returns needed to justify large-scale investment.
Now Telecom is talking not only about putting some cash on the table but of greater co-operation between network builders to overcome New Zealand's geographic challenges and ensure adequate return on investment.
Nelson said the country could not afford to have competitors overbuild infrastructure - a situation which had occurred overseas.
She saw a place for "co-opertition" - co-operating at a network level and competing on services.
Nelson said the Government had a key role to play in the development of infrastructure.
"The nature of that role, whether it is as a facilitator, as sponsor or as an investor, or a mixture of all of those is still to be determined," said Nelson.
Despite multiple challenges to be heaped on Telecom this year - new leadership, an ambitious network upgrade, operational separation, switching mobile technology, and the continued erosion of calling revenues - both expected the phone giant to retain its dominant market position.
"If you compare New Zealand to other markets, the power that Telecom has, there'd be very few telcos in the world which would have as much market dominance as Telecom does and that's certainly not going to subside in the short term," said Harpur.
