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A technology spend-up by phone and internet companies connecting their own equipment to Telecom's exchanges looks set to benefit other players in the telco sector, as well as delivering cheaper prices and better services to customers.
Global mobile phone giant Vodafone last week detailed its plans to spend around $50 million expanding its network to take advantage of the Government's 2006 decision to force Telecom to open its lines to competitors through local loop unbundling (LLU).
Launching new broadband plans linked to its LLU-based Red Network last week, Vodafone said it had unbundled half of Auckland's phone lines and would have the whole city unbundled by October.
It then plans to extend its LLU network and has Hamilton, Tauranga, Palmerston North, Rotorua, Taupo, Wellington, Christchurch and Dunedin in its sights.
Rival internet service provider Orcon, a subsidiary of Government-owned transmission infrastructure company Kordia, has also been unbundling Auckland Telecom exchanges and plans to extend its LLU drive into Wellington late this year, and into Christchurch next year.
TelstraClear also has equipment installed at some Telecom exchanges but has yet to announce details of its LLU plans. Other telco companies, including CallPlus, also intend offering LLU services.
Blair Stewart, general manager of Digital Island, a telecommunications services company with several thousand business customers, said the increasing pace of LLU activity was good news for businesses like his, even though it was not directly involved in LLU because it did not intend installing any of its own equipment in Telecom exchanges.
Instead, Digital Island buys wholesale services from infrastructure owners and on-sells them to its own customers.
"As long as there are several companies putting infrastructure out there, as well as selling it at a retail level, it's going to increase the wholesale offerings in the market," Stewart said.
"We currently buy capacity from Telecom and TelstraClear and various other companies who have got infrastructure out there. When you've got the likes of Vodafone and Orcon getting into that game there's definitely going to be more on offer on the wholesale front for us."
While some rival telcos have argued Telecom's recently accelerated "cabinetisation" strategy - moving more of its own equipment out of its exchanges and into roadside cabinets - would thwart the competitive intentions of LLU, Stewart said this did not appear to be the case.
"If cabinetisation had knocked LLU on the head you wouldn't have Orcon and Vodafone throwing money at this type of thing."
LLU is also good news for companies that sell the switching and routing equipment at the heart of phone and broadband providers' network infrastructure.
Last week Orcon bought new routers and network control equipment from infrastructure company Juniper Networks.
Orcon's chief technology officer, Thomas Salmen, said the new equipment would allow the company to deliver "high-value differentiated services to its subscribers - beyond its current offering of internet access and VoIP (voice calling over the internet)".
While LLU means Telecom's competitors can now offer customers attractive packages combining fixed-line calling and broadband internet, Vodafone has not yet taken advantage of its status as a mobile phone heavyweight to market a merged fixed and mobile package.
Speaking at the company's Red Network launch last week, chief executive Russell Stanners said Vodafone did not believe there was sufficient demand yet from customers for such packages.
This surprised Sarah Putt, policy and communications manager for the Telecommunications Users Association (Tuanz), an industry lobby group.
"I'd have thought that Vodafone would be keen to use its enormous advantage as a mobile player in the fixed market," Putt said in a blog on the Tuanz website.
"When a consumer can put their entire telecommunications spend into one bundled package that provides them with fixed and mobile services, cost-effective high-speed broadband ... that's surely when we'll see rapid growth in the demand for broadband."
