Commission to expand Telecom's unbundling inquiry

By ADAM GIFFORD

The Commerce Commission has widened its investigation into whether competitors should be allowed to use Telecom's local loop network.

Its network access group manager, Osmond Borthwick, said an issues paper released in April did not go far enough.

The commission now wants to assess the full range of assets that may be involved in unbundling and include its findings in a draft report to be released September 18.

The decision was welcomed by TelstraClear and the Telecommunications Users Association, but got a frosty reception from incumbent Telecom.

Borthwick said Telecom has argued the original issues paper went too far.

"Given there seemed to be a lack of clarity about the scope, we wanted to make sure the review did encompass all things we thought would be relevant," Borthwick said.

That involved wider consideration of the experience other countries had of unbundling.

While the original review looked at regulating access to the copper lines between the exchange and the customer premises, the commission will now look at whether competitors should get access to the main distribution frame where the copper lines terminate at the exchange.

"That is a technical issue which will affect what services are available. In other jurisdictions that is part of the unbundled piece," Borthwick said.

It will look at what ancillary services may need to accompany unbundling of the local loop network or the fixed public data network, such as co-location where competitors can put their digital subscriber line (dsl) equipment in the exchange.

Unless the regulator sets out clearly how this should happen, incumbent telcos can impose terms and conditions which make co-location impossible.

Other issues include backhaul, which is how the competing voice provider gets the signal back to its own network; line sharing, where a service provider may want to use the copper for data services but not for voice; and data backhaul over the public data network.

"Some places have found line sharing makes it more attractive for new entrants, and have mandated availability of that service," Borthwick said.

As well as the work being done by officials and telecommunication commissioner Douglas Webb, English firm Oxford Economic Research Associates Consulting (OXERA) was asked to conduct a cost-benefit analysis into unbundling. Its report will be published with the draft report.

Also, Dr John Small of Auckland University was commissioned to develop pricing principles.

"We need to look at possible pricing of a service if we were to regulate it," Borthwick said.

Telecom public affairs manager, Bruce Parkes, said the company was surprised the commission expanded its investigation two weeks out from a draft report.

"We will reserve judgment until we see the report," Parkes said.

"We have views on the review full stop - that it is an issue which belongs in the last century. Unbundling hasn't been a roaring success elsewhere."

He said unbundling the local loop will actually make it harder for competitors like Walker Wireless and Counties Power to roll out wireless or fibre alternatives.

But Telstra Clear chief executive Rosemary Howard said Telecom's copper network was the only feasible way her company can get broadband to residential users and suburban and home businesses.

"We need to put broadband on copper, and until we get this wholesale, we have no viable investment."

She said New Zealand is the second last country in the OECD to unbundle the local loop, so it should learn from other countries, as the commission now intends to do.

"Because we are late, we have to do it right. Some jurisdictions got some things right but not others, and that meant the incumbent could delay things further."

In her previous role as Telstra's wholesale manager, Howard was in the thick of unbundling across the Tasman. She said Telecom should see opening up of the local loop as a positive.

"Telecom's problem is top line revenue growth is flat. This is about catching up with the rest of the world and doing more online.

"Having a monopoly is holding back Telecom's revenue and holding back Telecom's efficiency."

Telecommunications Users Association chief executive Ernie Newman said unbundling has proved to be extremely complex internationally.

"Here in New Zealand the obvious determination of Telecom to frustrate the process at every tortuous legal, political and commercial step makes it imperative that the commission's investigation, and any resultant regulation and implementation, are robust and complete," Newman said.