Telecom missive angers its rivals

A threatening letter from Telecom chief executive Theresa Gattung to the Government, made public by the Commerce Commission, has incensed telecommunications executives already worried about a perceived change in regulatory attitude.

In the confidential letter, obtained by The Dominion Post through an information request and dated May 5, 2004, Gattung threatened curbing investment in a next-generation network and suggested that Telecom's shares could drop 30c if the Government chose to allow rivals access to its internet network.

She suggested the fate of 20 per cent of New Zealand's stock market was at stake, as was a key component of the Government's superannuation fund.

Then Communications Minister Paul Swain was initially in favour of going through with allowing rivals the network access - known as local loop unbundling - but was rejected by Cabinet.

On May 19, the Government said unbundling would not take place and it would instead implement Telecom's suggestion of a wholesale scheme.

The letter's revelations angered already suspicious industry executives and observers.

"It confirmed our suspicions," said TelstraClear chief executive Allan Freeth. "What has surprised me and what is a disgrace is that these types of bully-boy tactics worked."

Freeth said that up until a month ago, the feeling he was getting from the Government was that it was finally getting ready to get tough on Telecom and open the market to competition.

But recent comments by Communications Minister David Cunliffe - who has said he's going to take his time in making decisions and look at further benchmarking - were worrying.

"That's not a good sign. We are quite concerned now," Freeth said.

Telecommunications Users Association chief executive Ernie Newman said he had coincidentally written to Cunliffe last week - with no knowledge of Gattung's letter - to express concerns over a possible lack of transparency in discussions. The letter's revelations only exacerbated those concerns, he said. "It really does show the process in a bad light."

Cunliffe responded by saying that his decisions needed to be fair and fact-based. "I think it is important that I am true to the integrity of the process and others can say what they like about that."

The results of his benchmarking studies would be released "soon".