KEY POINTS:
A senior executive of Telecom's technology partner, Alcatel-Lucent, is urging the Government to learn from the telecommunications regimes of other countries and regulate Telecom in a way that won't curtail its investment plans.
The newly merged company will tomorrow present submissions on the issue.
"We have one view: stability. Make a decision and stick by it," said Frederic Rose, head of Asia-Pacific business for Alcatel-Lucent from his base in Shanghai for the last year.
"You have this cacophony of people complaining that the rules are not fair, we want this and that.
"But the regulatory environment has to guarantee people can get a return."
Rose helped negotiate a major network outsourcing deal between Telecom and Alcatel in 2001, one which was viewed as unorthodox at the time because it gave control of the operator's network to an equipment vendor.
While he counts the partnership a success, Telecom has been heavily criticised for the performance of its broadband network.
Rose wouldn't comment on claims that his company last year advised Telecom against moving to unconstrained data speeds on its broadband plans. The result ironically was poorer broadband performance for many customers.
"Our advice to Telecom is confidential," he said.
Nor could Rose shed light on the nine-month delay in Telecom's plan to roll out ADSL2, a technology designed to vastly improve broadband access speeds. Telecom began deploying the service just last month.
"Nine months is a long time, but you should look at some other markets; it's been a lot longer to get started," he said.
Rose believes it is pointless to beat up Telecom for the investment decisions of the past.
"The incumbent acts in rational economic fashion and if they've the right incentives, they'll do things," he said.
"After the privatisation, what happened before the foreign investors left ... yes, a lot of cost was cut, things weren't improved, it became a cash machine. Recovering from that is not easy."
He hoped that regulatory changes would take effect quickly, giving Telecom the time it needs to plan investment for the future. Alcatel-Lucent's future business here, developing Telecom's next-generation network, depended on the outcome.
If [the next generation network] goes full steam ahead, I'll be extremely happy. If it doesn't, it'll be regrettable, but less regrettable to me than to the consumers," he said.
This week Alcatel-Lucent warned of disappointing results for a second consecutive quarter - a €260 million ($476 million) loss. In the same quarter last year, the operating profits posted by the two companies pre-merger came to €246 million.
Revenue is down 12 per cent on a year ago, something Alcatel-Lucent's chief executive Patricia Russo blamed on lower sales in traditional wire-line and wireless networks. Operators were shifting spending to the next generation of networks but investing more cautiously.
Alcatel-Lucent shed 1900 jobs in the first quarter and has increased its target for staff cuts over three years from 9000 to 12,000.
Despite the reduction, Rose said the merger in the Asia-Pacific countries he is responsible for went well. He expects double-digit growth this year.
The merged group has around 400 staff in New Zealand, spread among Auckland, Hamilton and Wellington.
"We will be bigger at the end of this year than we were the day of the merger across Australia and New Zealand. It's not true everywhere else in the world."
Australia is home to a 350-person software R&D lab, which Rose said would remain intact.
"In telecoms, it's not a case of shipping the latest Microsoft release, packaging it nicely in Seattle and shipping it worldwide. It's how to make it work in the network, and every network is fundamentally different."
Bell Labs, the powerhouse of US innovation, would be maintained but with more of a focus on telecoms R&D "Bell Labs has invented 99 per cent of what's out there, even in areas like automotive. But that's not our core competence," said Rose.
If the financial results generated by the merged group have been disappointing, it certainly has some big recent wins, most notably a US$6 billion ($8.05 billion) deal with US operator Verizon. Rose said he was "green with envy".
But he has had his own successes, including sizeable deals to build networks for China Mobile and IndoSat in Indonesia. There's even new business in New Zealand, with a deal to upgrade state owned operator Kordia's digital microwave and fibre optic networks.
Rose says winning new customers, such as mobile player Softbank in Japan, is most satisfying.
"The reason we're back in Indonesia in GSM is not because Lucent brought fantastic technology to the party," he said.
"It's because Alcatel Lucent was in mobile and is staying in mobile."
Alcatel-Lucent will also build a new 9000km-long fibre-optic cable link between Australia and Hawaii for Telstra.
Rose said the deal, and others like it soon to be signed off in Asia, are a reminder of the fibre glut of a few years ago when several major international carriers collapsed.
"Wake up everyone, [the pipes] are full," he said.
IPTV, WiMAX wireless technology and the evolution of mobile standards - dubbed "4G" were all on the cards for Alcatel-Lucent.
Fixed-to-mobile convergence, which would give consumers one device for mobile and fixed-line calling and internet access, is a major area of development.
"You have hundreds of different scenarios there. Which one is the killer one, no one is really sure," said Rose.
"But none of them will work unless you've a good supply of home devices, handsets and network boxes."
He said there was still life in CDMA technology and large operators like Korea's KDDI and China Unicom were happy to maintain national CDMA networks: "I've radio engineers who tell me CDMA is better, others tell me GSM is better."
The question isn't the technology, it's what does Telecom want to do?
For the moment, only a handful of people, Rose included, know the answer to that question.
