Telecommunications inquiry to work backwards

By RICHARD BRADDELL

WELLINGTON - The Government's telecommunications inquiry will have to view the market as it will be in five years and work backwards to regulatory solutions that will enable it to get there, says Clear Communications' legal counsel, Peter Waters.

Based with Sydney law firm Gilbert and Tobin, Mr Waters has previously worked for Cable & Wireless Optus in Australia.

Mr Waters said though much was made of convergence of services in telecommunications, if the regulatory environment was unsatisfactory, the full potential of convergent telecommunications services could not be unleashed.

He envisaged a market in five years' time, in which "intelligence" would move from the centre of telecommunications networks to their edges, and into the handsets used by consumers.

A truly convergent telecommunications market would enable consumers to move between wireless and fixed services and between different network suppliers as their needs dictated.

But to achieve that, much more open and sophisticated interconnection agreements were needed, along with regulatory recognition that Telecom would remain dominant, despite arguments that technical innovations will rapidly open competition in local services.

Mr Waters said incumbents around the world were using "babble" about the rapid pace of innovation to obscure their market power, but the reality was that technical innovation was not going to erode local loop dominance nearly as fast as claimed.

Mr Waters said the past 10 to 15 years had been spent arguing about narrowband voice interconnection, whereas the market was now heading in the direction of broadband services.

But though voice's share of network traffic was rapidly being overtaken by data, it would remain the dominant revenue source, no matter how it was bundled with other services.

Mr Waters likened the incumbent's network to the Microsoft situation where its control of personal computer operating systems, the computer equivalent of a telecommunications network, resulted in yesterday's order that Microsoft be split in two.

In telecommunications, network dominance enabled the incumbent to control the speed at which new technology was introduced to the market, he said.

But Mr Waters rejected allegations that Clear wanted to export Australian-style heavy-handed regulation to New Zealand, observing that the Australian approach had resulted in a system that was "overbuilt."

He said there were two approaches to regulation; the first a behavioural one that punished improper actions, the second, structural and incentive based.

One example of the second approach would be to separate the wholesale side of Telecom's business from the retail, and force it to provide wholesale services to competitors on a non-discriminatory basis.

Though the second approach was less rule-bound and demanded a less aggressive regulator, a regulator was still needed to manage situations where the market did not work, he said.

"[Companies] like Clear don't want picture postcard agreements with exact pricing, but they do need tools to even up the regulatory balance."