BT boss has warning for Telecom

British Telecom has simple advice for its New Zealand equivalent - open up your network to wholesale customers quickly or risk plunging the country's industry further behind the rest of the world.

Telecom's promise this week to split its retail and wholesale services was a "surface announcement" and more detail was needed on how network access could be opened up to competitors, BT global services vice-president Gordon Moir told a telecommunications conference in Auckland yesterday.

Telecom needed to create a system with inbuilt financial rewards linked to its staff encouraging more wholesale customers to use its networks, said Moir.

Telecom chief executive Theresa Gattung told the conference that the company was creating a shared spectrum plan or roadmap on unconstrained unbundled bitstream which would be made available to the market soon, but was not any more specific about when.

Gattung said she was looking forward to the proposed working groups to oversee the Government regulatory package "taking shape" in the next week.

Moir oversaw the development of BT's wholesale business, Openreach, which opened in January and sold network access to its competitors on similar terms to its own retail arm.

Its profit is linked to the number of unbundled lines it signs customers up to rather than being linked to the performance of BT, and included a large degree of transparency.

"When competitors can see what British Telecom and [regulator] Ofcom are doing, they can see if they are being discriminated against," Moir said.

He also warned the New Zealand industry to focus not only on the rollout of faster broadband, driven by consumers, but on other telecommunication services in need of change.

British Telecom was investing £15 billion ($46 million) in internet protocol - code which transfers data over the net - which was a clear signal that there was regulatory certainty around the investment, Moir said.

"I don't think the Openreach model could be totally applied to New Zealand right now - before we had Openreach, we had had a local loop unbundling adjudicator for three years, and a few other measures, but it is still possible for the industry here to do a lot of things quite quickly at the same time."

When BT voluntarily split, it was not just a "navel gazing exercise".

"We didn't just say to the Government we will change the services, then turn around and wink to everyone and say everything will be okay. The change required a total fundamental shift in culture, so we could respond in the same way to our competitors as to our service arms," he said.

The Commerce Commission has proposed a penalty of $1 million if Telecom breaches accounting separation. But this pales in comparison to the penalties Ofcom can inflict if regulations are breached - 10 per cent of British Telecom's turnover, which last year was £18.4 billion.

Moir said British Telecom had shown a modest rise in profits since the separation by dealing with bottlenecks in network access, introducing a high degree of non-discrimination to access seekers, recoding systems, greater transparency and a strong independent oversight of the company.

RINGING THE CHANGES

1980: British Telecom is spun off from Post Office.

1984: Company is privatised.

1991: Renamed BT.

1999: Regulator Oftel orders BT to unbundle the local loop.

December 2000: BT implements local loop unbundling.

2004: Ofcom (formerly Oftel) starts review over concerns that current set-up will not result in sustainable competition.

February 2005: Ofcom concludes that BT's network is a natural monopoly and an "enduring bottleneck" and will need to be regulated if competition is to thrive. Regulator suggests voluntary separation.

September 2005: BT signs undertaking to create Openreach, the network company.

January 11, 2006: Openreach opens for business.