Peter Dengate Thrush: Telecom must be forced into the light of day.

Okay, so we're going to unbundle the local loop. Does that mean our broadband problems are solved, and businesses can steamroll ahead on to the web and see great productivity increases? Sorry, not even close.

We don't really understand telco regulation in New Zealand. It took years to understand that a commissioner with regulatory powers of any sort was required, despite awareness of the importance of telecommunications to the economy.

It's not all our fault. For a long time, ministers and officials maintained the fiction of a level playing field, ignoring the fact that Telecom was so large that, like a black hole distorting space/time around it, it caused perturbations in the very field itself.

Litigation was the only remedy available, and it was brought either by the resource-constrained Commerce Commission or by private entities.

Ironically, it was TelstraClear - itself owned by an Australian monopoly - that appeared as the main hero in the New Zealand market. In the long run, litigation failed to restrain the incumbent monopolist.

It might be instructive, then, to contrast New Zealand's approach with that of the United States.

About six years ago, Telecom decided to charge for some local calls, despite being obliged to provide them free under the agreement colloquially known as the "Kiwi Share". The calls singled out were those made to an internet service provider by dialling up an internet connection. Telecom charged those calls at toll call rates.

Six years later, the commission is still proceeding with litigation against Telecom.

Contrast that with the approach in the United States in relation to contracts over the dot-com monopoly.

In 1998 the global internet community set up the Internet Corporation for Assigned Names and Numbers (Icann) to manage the dot-com registry. Responsibility for its management - a monopoly, as there can be only one registry - was transferred from the Department of Commerce to Icann. A company called Verisign was contracted to offer related services, including the selling of domain names.

Recently the Icann board of directors agreed to settle litigation brought against it by Verisign. The settlement included perpetual renewal of the contract and the removal of price controls.

The US regulator's response to this was interesting and different from what has typically been seen in New Zealand. The House of Representatives committee on small business convened a public hearing on June 7 called "Contracting the Internet: Does Icann Create a Barrier to Small Business?" Witnesses from opposing parts of the industry were called.

The hearing was public and full copies of witnesses' testimony are available on the internet.

There's another example involving Icann. The organisation was required under a memorandum of understanding with the US Government to achieve milestones to demonstrate its mandated role as the co-ordinator of the internet's technical resources. The final extension of that memorandum expires in September.

On May 23 the US National Telecommunications and Information Administration issued a global notice of inquiry to the internet community, seeking comments on Icann's performance. A public meeting will be held on July 26 and country code managers from around the world will make submissions, as will major commercial players.

This kind of regular public scrutiny of the dot-com monopoly contrasts with New Zealand's approach to date.

In particular, small businesses are not provided with this kind of inexpensive platform to make their case to a regulator. Yet most businesses in New Zealand are small, and already sufficiently occupied with regulatory compliance matters.

While one can be cynical about the US process - the choice of witnesses at hearings, the impact of conclusions, and time lags before effective implementation are other issues - at least sunlight is regularly cast on to the matter.

Telecommunications, especially genuine broadband connections, are vital to our geographically remote, confident, literate, smart South Pacific country. Unbundling the local loop will not nearly solve current problems. Watch for Telecom to resist any form of separation, so that its network company is prevented from offering services to its wholly owned ISP.

Users therefore need a combination of telecommunications law reform, effective powers placed in the hands of the commissioner, and regular public scrutiny by Parliament. Only then will the productivity benefits of the internet start to be realised.

* Peter Dengate Thrush is a New Zealand barrister specialising in internet law. He is a director of Icann, but the views expressed are personal. He may be contacted by clicking on the link below.