Broad hint for Telecom on competition

By CHRIS BARTON IT editor

"You have an incumbent that dominates everything. You've got to give it a message it understands."

Ewan Sutherland is referring to Telecom and the message he thinks the Commerce Commission should deliver: the opening of Telecom's telephone line monopoly to competition, or "local loop unbundling".

The executive director of the International Telecommunications Users Group was in Wellington on Monday to deliver a lecture, "Unbundling the Local Loop - Policy and Practice", and spoke to Government ministers and officials.

Sutherland said "New Zealand is looking very, very, bad in broadband", citing its 21st ranking among OECD countries for broadband uptake.

He also says that 60 per cent of what Telecom is offering isn't broadband, merely "fast narrowband".

"Once you get to 2 or 4 megabits per second (Mbps) you are getting serious. I think a crucial cut-off point is when you can and cannot watch decent quality video."

In Brussels, Sutherland pays €$35 ($66) a month for a 3Mbps service.

In Japan users can get 26Mbps for 3828 ($56) a month and in the United States, unlimited 1.5Mbps services start at US$30 ($52) a month.



Telecom's entry level offering is $65 a month for 128 kilobits per second (Kbps) with a 5GB international traffic cap or its new price of $60 for 256Kbps with a 500MB cap.

Sutherland said New Zealand prices were unrealistically high and the traffic caps - "metered broadband" - were particularly obtuse and also inhibiting uptake.

Local loop unbundling would enable competitors to offer cheaper and more innovative options.

He dismissed the argument by wireless competitors such as Walker Wireless and state-owned BCL that unbundling would inhibit their investment in competing infrastructure.

"The belief in wireless is very tenuous. Walker Wireless is proposing an untried, unproven technology, and what it's offering in speed is not that enticing."

Sutherland is similarly critical of Counties Power which has installed fibre in its region, but is, in the main, offering narrowband access.

"Counties Power is beyond me. The idea of adding pieces of white string to connect to a fibre network when they've got plenty of bandwidth doesn't make sense."

He said Australia, which has unbundled its local loop, was not a good comparison because its telecommunications deregulation was clouded by the Government still owning half of Telstra. But some internet providers had recently removed download caps for fast internet.

The Australian Competition and Consumer Commission has published a review of price changes and a review of Telstra adherence to price control mechanisms which said the local telco industry was not yet effectively competitive.

What about the argument that New Zealand is "sub scale" for open competition?

"That's an argument for a monopoly," Sutherland said.

"I last heard it proposed by the Communist Party in Greece, which argued that telecommunications should be supported by a monopoly.

"It's a perfectly reasonable argument but it means telecommunications services would have to be heavily regulated. Telecom can't have it both ways."

And that local loop unbundling would impinge Telecom's property rights?

"This is not about taking away rights. It's not some Marxist dogma.

"It's something that's being implemented by all of the OECD countries - except New Zealand and Mexico - because it promotes competition."

But Sutherland warned that local loop unbundling was 'not a route for the fainthearted".

The commission would have to deal with many "creative things incumbent telcos do" to hamper its implementation.

"It is wonderful news for lawyers."