PM defends decision not to unbundle Telecom local loop

1.00pm

The failure by Cabinet to accept a recommendation that it unbundle Telecom's local loop was today defended by Prime Minister Helen Clark.

Communications Minister Paul Swain last month announced Telecom would not be forced to open up its network to stimulate competition in high-speed internet services.

Mr Swain came under considerable industry and consumer group criticism for the decision.

But when he made recommendations to Cabinet, Mr Swain had in fact backed the Economic Development Ministry view that the network be opened.

While that advice had not been taken it was not ignored, Helen Clark told Newstalk ZB today.

"There was a very full debate at the Cabinet about it and the decision was made to take a different tack," she said.

"(Mr Swain) came with the thinking that the ministry isn't the only actor in this -- there are other government departments which also have views."

Helen Clark said it was a "fine line call".

"You could have done what the Ministry of Economic Development wanted and sent it back to the Commissioner and told him he was completely wrong," she said.

"You would then have had a period of time when he had to consider that view as to whether he was wrong or not -- he may or may not have accepted it.

"The long and the short of it was that he would have delayed the decision with no necessary better outcome."

The government decision was criticised as gutless and protective of Telecom.

The Herald today reported that cabinet papers showed it was against the advice of Mr Swain.

Cabinet colleagues had made it clear Telecom was on a good behaviour bond, Mr Swain said after making the announcement.

He said unbundling -- requiring Telecom to rent its copper lines to competitors -- was not a silver bullet and not widely used in other countries.

Australian telecommunications specialist Paul Budde said the rejection of "local loop unbundling" was essentially about the survival of Telecom.

It was a political decision the Government had made "to protect Telecom from competition that could easily lead to total annihilation".

- NZPA