National eye on Telecom

National telecommunications spokesman Maurice Williamson says Telecom's investment is 'quite appalling'. Picture/Dean Purcell

A National government will not think twice to regulate Telecom, the country's largest listed company, if it does not make major strides in infrastructure investment.

National's telecommunications spokesman, Maurice Williamson, signalled yesterday that if his party won the election Telecom's dealings would be watched closely.

He called Telecom's investment in local phone loop exchanges "quite appalling".

"Telecom has to realise that if they carry on the way they are, then they will force the hand of any minister to start to try to regulate outcomes that are good for consumers," he said.

In his constituency of Pakuranga, he said, the phone systems were nearly 20 years old and in desperate need of an upgrade.

But Telecom spokesman John Goulter said his company's investment was on par with telcos in the rest of the world.

"We are confident that is how we will continue to be able to deliver first-class services to customers throughout New Zealand."

Sydney-based telecommunications analyst Paul Budde said Telecom was running three to five years behind the rest of its trading partners.

"As a fully privatised company, Telecom's aim in life is to maximise profits not networks. That's why the rest of the world keeps a stake in their incumbent telco and regulates it in order to get a better balance between national asset issues and profits," said Budde.

Last week, Telecom announced what it called one of the biggest upgrades in its history. The investment, totalling $1.4 billion over 10 years, will replace its phone system with a next-generation network of voice, data and video services.

"Some of us will die of old age before we see that stuff," said Williamson.

Williamson, who was a National communications minister in the 1990s, said Telecom did not invest in infrastructure where there was no competition, and its shareholders were more important than regular New Zealanders.

In the past, Williamson has said government regulation should be a last resort and enacted only when there was complete market failure.

Goulter said Telecom was "very cognisant of the fact that government expects it to do the right thing by customers".

Williamson admitted that his experience was that government regulation of industry often had a negative impact.

"Every time I've seen a regulation try to solve the outcome, it's probably worse than leaving it to the market," he said.

"On the other hand, we can't just let the incumbent get away with blue murder."

In the past, Williamson has been in favour of market-led solutions and he refused to admit yesterday his latest comments represented an about-face.

He said that during the 1990s he had a draft set of telecommunication regulations in his bottom drawer and threatened to use them on more than one occasion.

Communications Minister David Cunliffe said his party would also think of regulation as a final step if Telecom did not meet its promised target of 250,000 residential broadband customers by the end of the year, with a third of that figure coming from the wholesale market.

Cunliffe promised if Telecom missed that target the Government would respond with "firm action".