KEY POINTS:
TelstraClear has come out in support of Telecom's call for a decent return on investment for faster, cheaper broadband - but has stopped short of supporting Telecom's plan to split into two companies.
TelstraClear chief executive Allan Freeth said the company was "very sympathetic" to Telecom's arguments for a competitive return.
"Government reforms may mean Telecom's copper network will soon be open to competitors, but without significant investment it won't deliver the broadband services New Zealanders need in the future."
Freeth said the telecommunications industry as a whole needed certainty, so it could be sure that any investment as a result of local loop unbundling - the opening up of Telecom's network to competitors' equipment - did not become obsolete.
It was TelstraClear's intention to take advantage of the unbundled local loop, but it needed to think carefully about the investment implications of fibre-to-the-node technology - replacing part of the copper network fibre-optic cables to increase broadband speed and capacity.
"The important issue for a challenger such as ourselves is that we don't go rushing around putting equipment into any exchange we can find, that we understand which exchanges are going to have fibre, where the investment in fibre-to-the-node is going."
Around the world, countries that have already unbundled the local loop are building new fibre-to-the-node networks that will make local loop unbundling technology outdated.
Telecom has stated there is a $1 billion investment gap needed to deliver the Government's digital strategy, which aims to see broadband speeds of 5Mbps delivered to 90 per cent of New Zealanders by 2010.
The company calculated it would need $1.5 billion to deliver that but could make available only one-third of that amount, because the Government's plan for operational separation did not give the return needed to justify large-scale investment in the broadband network.
At Telecom's third-quarter results briefing this month, chairman Wayne Boyd said any further investment in broadband would be contingent upon being able to earn a fair rate of return.
Today is the final day for feedback on Telecom's proposed plan for a two-way split, which would see the retail and wholesale units operating separately under the Telecom banner, and the network assets held in a separate company.
Telecom's proposal is in response to the Government's plan to separate the company into three operating units - retail, wholesale and network - to give competitors equal access to its network and services.
Freeth said TelstraClear was "ambivalent about the way Telecom wishes to arrange itself" as long as the company provided fair and equitable access to its network.
TelstraClear's parent, Australian telco giant Telstra, last year ditched plans for a A$4 billion fibre-optic network when talks with the Australian competition watchdog broke down over regulatory and pricing issues.
Telstra has indicated it has not completely dropped plans for the network, but wants a guarantee its investment will not be exploited by rivals at the expense of Telstra shareholders.
The company is now working on a deal with the Australian Government to spend $4.1 billion or more on an ultra-fast broadband network.
A rival group of nine (G9) Australian telcos, including Telecom-owned PowerTel, are proposing to build their own network to offer high-speed, low-cost broadband.
