Eerily quiet exchanges belie unbundling argument

PERTH - Cobwebs and tumbleweeds wouldn't be out of place at Telstra's Nedlands telephone exchange in suburban Perth.

The phone and internet services of more than 6000 customers emanate from here, but it's hardly apparent - the large building, typical of a phone exchange, sits eerily quiet and mostly empty.

Decades ago, it would have hummed with noise and energy as row upon row of mainframes connected telephones. Evidence of those mammoth machines remains - divots and indents on the floor of the cavernous building act like a modern-day equivalent of the Roman ruins, telling of an age long past.

Today, a small pocket of machinery - filling perhaps 10 per cent of the exchange - does the same work and more. Compact cabinets filled with blinking lights and tiny wires deliver phone, internet and - in the case of Nedlands - super-fast internet services to the surrounding suburb.

It's hard to believe, then, that the exchange is such a closely guarded secret for Telstra - a situation closely mirrored in New Zealand. In Australia, reporters are only grudgingly granted access to the buildings, and they are never allowed to take photographs.

There are a few reasons for the secrecy. Firstly, the phone company doesn't want its rivals or the public to know exactly what type of equipment it is using, because the quality and price of it can then be independently verified.

More importantly - especially in New Zealand's case - transparency in the exchange takes away one of the company's key weapons in the fight against allowing competitors to install their own equipment: that of space.

In arguing against allowing rivals this access through unbundling of its local telephone loop, Telstra said there simply wasn't any room for additional equipment in its exchanges. While some exchanges were indeed busier or smaller and the floor space more used, the Australian Competition & Consumer Commission found that most were actually like Nedlands, and in 1999 it forced unbundling.

The situation has been replicated in NZ, where Telecom has in the past included a similar argument in its list of reasons against unbundling. But the transparency that was forced on to Telstra has yet to materialise here, and Telecom has been no less secretive.

An inside source says Telecom executives flew into a rage after photos from inside one of its exchanges were published a few years ago.

The transparency in Australia was pushed for by Telstra's rivals, and reporters are now admitted to exchanges under watchful supervision.

Australia's third largest internet service provider, iiNet, openly displays its equipment at Nedlands: a dozen ADSL2+ DSLAMs from Ericsson, costing about A$600 ($715) each. Each DSLAM services 12 customers, which means that for a total chassis cost of about A$20,000, 288 iiNet customers are furnished with broadband speeds up to 24 megabits per second.

iiNet's total ADSL2+ rollout, providing service to more than 350 telephone exchanges and 166,000 customers by the middle of next year, comes at a cost of A$50 million - or about A$142,000 per exchange.

In comparison, Telecom has about 216,000 broadband subscribers and recently announced an ADSL2+ investment of $150 million to $170 million, mainly to the urban centres of Auckland, Wellington and Christchurch.

There are about 430 exchanges in NZ. If all were outfitted with ADSL2+, it would cost up to $390,000 each. The cost per exchange would obviously be higher with fewer exchanges equipped.