Between the lines: Experts on call in telcos inquiry

By RICHARD BRADDELL

In the heydey of the Great Interconnection Rows of the mid-90s, economic soothsayers of all colours selflessly argued in the interests of the telephone companies who had hired them.

It was only to be expected as the telecommunications inquiry built up steam that the same would happen again. And, yes, it has.

While Clear Communications has tended to rely on emissaries from its parent, British Telecom, Telecom has offered opinions from a number of competition experts.

Yesterday, it was the turn of Dr Chris Doyle, the head of the telecom section of a British consultancy, London Economics, who released an "independent" but Telecom-commissioned report.

Dr Doyle's message was that local telephone network technologies were developing so fast that the choice of telephone company was either here or soon would arrive in the country.

He had bad news for rural users who might have to wait some time and might have to be satisfied with trimmed down multi-media services. His reasoning: the case for upgrading Telecom's existing rural network was poor given the high cost and the likely advent of cheaper satellite and wireless services.

Dr Doyle's remarks no doubt suit Telecom, which would like the Kiwi share's universal service obligation to be confined to voice calling. But he strayed from the party line when asked about the regulatory environment.

Yes, New Zealand had done no worse than other countries. But he had no truck with Telecom's inquiry submission that the convoluted cost modelling necessary to determine losses in servicing rural areas should be sidestepped by benchmarking with interconnection rates in other countries.

Dr Doyle was out of step, not just with Telecom, but also with British Telecom's regulatory vice-president, Larry Stone, who only hours before said benchmarking was a "completely rational and reasonable approach" given plentiful cost modelling data available around the world.

To Dr Doyle, the quick and dirty approach was anathema since it would distort price signals, potentially discouraging new investment. He avoided saying that was the case now, given the dearth of information on Kiwi share costs.

Dr Doyle saw no middle ground between accurate costing of the Kiwi share or taking the British regulatory approach and hoping losses from the Kiwi share were outweighed by the benefits of ubiquity.

Clearly, he leans toward the former, with losses met either by telcos contributing proportionately to a fund, or by taxpayers.

But that is an economist's view, and solutions such as benchmarking may be impure.

What the industry needs are practical approaches to its problems that avoid the quagmire of obscure economic arguments that have bedevilled relationships in the past.