Loss of monopoly 'opens other doors for telcos'

By RICHARD BRADDELL

A monopoly is as good as it gets, but when incumbent telecommunications companies are forced to open their local telephone lines to new entrants, the incumbents could do worse than try to make money out of them.

The observation comes from Brian Savin, an American telecommunications consultant who has previously advised BellSouth New Zealand and whose boutique consultancy advises five incumbents among its seven client companies.

Plucked from an assignment in Australia for analysts' briefings organised by Clear Communications, Mr Savin said incumbents faced with mandatory local loop unbundling might well choose to follow the example set by Gillette, which gives away its razors and makes its money out of add-on services - the blades.

Telecommunications companies could follow suit by giving away the unbundled data lines, but charging new entrants for billing and other value-added services, as well as continuing to use the line to offer their own switched voice services.

Local loop unbundling enables new entrants to effectively take over a line from the local exchange to the customer so that it can operate higher-value data services.

Prime among them is xDSL, a fast-developing family of technologies that enable high-speed internet over ordinary copper wire.

Though the European Union is now moving to compulsory unbundling out of fear that it will fall behind the United States in broadband internet, New Zealand's telecommunications inquiry fell short of that final step.

Clear, as part of its recently concluded interconnection deal, has a wholesaling arrangement under which it can resell Telecom's ADSL service. Though that is better than nothing, Clear is limited to Telecom's technology and to areas where Telecom is prepared to offer service.

Mr Savin said that was important because of an inherent difficulty with SDSL: it loses quality over distance from the local exchange.

Telecom's ADSL technology is rapidly being overtaken by newer breeds, such as SDSL, which have a wider range, potentially overcoming some rural service problems.

Countering the argument that unbundling will discourage alternative infrastructure investment, Clear executive Rhoda Holmes said unbundling would enable the company to build a customer base sufficient to justify extending fibre into an area.

Although Mr Savin was ardent in his support of local loop unbundling as the pathway to international competitiveness, he offered indirect support to Telecom's argument that it should not be lumped with all the costs of the Kiwi share.

When told Telecom had suggested that the right to meet the Kiwi share obligation be made contestable, he said: "They [the Government] should take it."